DPC N.Y., Inc. v. Scottsdale Ins. Co.

• Decision Date: 19 May 2020
• Docket Number: 19 Civ. 1743 (PGG)
• Parties: DPC NEW YORK, INC., Plaintiff, v. SCOTTSDALE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

DPC NEW YORK, INC., Plaintiff, v. SCOTTSDALE INSURANCE COMPANY, Defendant.

19 Civ. 1743 (PGG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

May 19, 2020

ORDER

PAUL G. GARDEPHE, U.S.D.J.:

In this diversity action, Plaintiff DPC New York, Inc., a New York-based general contractor, sues Defendant Scottsdale Insurance Company, an Ohio-based insurance company, for indemnification and defense in connection with an insurance policy Scottsdale issued to DPC. Scottsdale has moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, Scottsdale's motion will be denied.

BACKGROUND

I. FACTS

A. Underlying Action

Si Jie Mei, Inc., Mott & Prince Management, Inc., Vera Sung, Jill Sung, Heather Sung, Chanterelle Sung, Vera Sung, and 18 Murray Street Condominium (the "Sung Plaintiffs") own a building at 18 Murray Street in Manhattan (the "Sung Building"). The Sung Building has commercial space on the first level/ground level and condominiums on the other remaining floors. (Sung Cmplt. (Dkt. No. 6-3) ¶¶ 2-12, 52-57)¹ In 2017, the Sung Plaintiffs brought anaction against DPC and approximately 20 co-defendants (the "Sung Action") alleging that negligence in construction on an adjacent property - 19 Park Place in Manhattan - had caused damage to the Sung Building. (Id. ¶¶ 64-65, 81, 125, 187, 217-28, 241-43, 251-57, 267-73, 287-89, 293-94)

The Sung Plaintiffs' complaint (the "Sung Complaint") alleges that DPC and its co-defendants are building and developing "a twenty-two stor[y] residential condominium building" at 19 Park Place. (Id. ¶ 64) The construction began in 2013. (Id.) The Sung Plaintiffs assert that the construction at 19 Park Place has caused a wide array of damage to the Sung Building.

Damage to the exterior of the elevator machine room at the Sung Building was discovered in January 2013 (id. ¶¶ 184-87), and in October 2013 the Sung Building experienced a gas leak, difficulty closing certain doors, elevator malfunctions, and cracks in interior and exterior walls. (Id. ¶¶ 217-19, 227) In November 2013, a slab in the sub-cellar of the Sung Building broke and collapsed into a hole, and the building's waste line began to leak. (Id. ¶¶ 241-42) An inspection of the Sung Building's elevator in November 2013 revealed that it was no longer safe. Accordingly, elevator service was terminated. (Id. ¶¶ 251-53) A number of residential tenants in the Sung Building terminated their leases and vacated the building. (Id. ¶ 254)

In December 2013, pieces of the brick façade and veneer of the Sung Building fell off the building. (Id. ¶ 269) And in 2014, the Sung Building experienced cracked bricks and lintel in a window façade and continuing elevator dysfunction. A window on the third floor of the Sung Building became dislodged and fell to the ground. (Id. ¶¶ 334, 337, 341)

The Sung Complaint alleges claims against seventeen defendants and John Does in 482 numbered paragraphs, but it contains few allegations against DPC. Most of the allegations address the conduct of ABN Realty LLC - the developer of the project at 19 Park Place - and the initial general contractor - BM of NY Construction. (Id. ¶¶ 64-65, 67) The damage described above appears to have occurred primarily while BM of NY was the general contractor for the project.

The Sung Complaint alleges that ABN Realty "terminated the services of BM of NY "sometime in 2014 or later" and hired DPC "to act as general contractor for the [19 Park Place] project site." (Id. ¶ 351) The Sung Complaint goes on to allege that "DPC continued work at the [19 Park Place] project site which has damaged and continues to imperil the integrity of [the Sung Building]." (Id. ¶ 352) The Sung Complaint provides no further detail as to the nature of the damage caused by DPC, and whether that damage was caused by DPC's negligence. The Sung Complaint does, however, plead, inter alia, claims of negligence and gross negligence against DPC and all the other defendants named in the Sung Complaint. (Id. ¶¶ 420-26, 452-61)

The Sung Action is pending in Supreme Court of the State of New York, New York County. (Cmplt. (Dkt. No. 6-1) ¶ 9)

B. Scottsdale Insurance Policy

DPC asserts that it maintained a commercial general liability insurance policy (the "Policy") with Scottsdale during 2014 and 2015. In the Complaint, DPC seeks a declaratory judgment that, pursuant to the Policy, Scottsdale is obligated to indemnify and defend DPC in the Sung Action, and is liable for already-incurred defense costs of more than $30,000. (Id. ¶¶ 11-17, 20-22, 24-30) The term of the Policy is February 15, 2014 to February 15, 2015.² (Tammaro Decl., Ex. 3 (Dkt. No. 15-3) (Policy) at 6)³

In the Policy, Defendant agrees to

pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that my result.

(Id. at 22)

The "Coverages" section of the Policy further provides that

[t]his insurance applies to "bodily injury" and "property damage" only if:

. . . [t]he "bodily injury" or "property damage" occurs during the policy period. . . .

[The] "[b]odily injury" or "property damage" . . . occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured . . . includes any continuation, change or resumption of that "bodily injury" or "property damage" after the end of the policy period.

(Id. at 22)

The Policy contains a "Continuing or Ongoing Damage Exclusion" which reads as follows:

This insurance does not apply to "property damage" when any of the following apply:

Continuing or Ongoing Damage

1. The "property damage" first occurred, began to occur or is alleged to have occurred or been in the process of occurring, to any degree, in whole or in part, prior to the inception date of this policy.

2. The "property damage" is indiscernible from other damage that is incremental, continuous or progressive damage arising from an "occurrence" which first occurred, began to occur or is alleged to have occurred, to any degree, in whole or in part, prior to the inception date of this policy.

(Id. at 55 (emphasis in original))

The Policy also contains a "Residential Building Project Exclusion," which reads as follows:

This insurance does not apply to damages because of "bodily injury," "property damage," "personal and advertising injury" or "error or omission" arising from "your work" on, in connection with or in any way related to a "residential project."

For those items identified below with an "x" in the corresponding box, this exclusion shall not apply to "your work":

X 1. That consists of repair, renovation, or remodeling operations on structures officially certified for occupancy prior to the commencement of "your work."

. . .X 5. In states other than AZ, CA, CO, LA, NV, TX and WA that involve the original development or original construction of, and which commences during the policy period on no more than an initial twelve (12) of[] any of the following types of individual living units: Single family homes, townhouses, townhomes, residential condominium or cooperative units, duplex units, any type of structural units converted into condominium units, or any other type of domicile unit intended for individual or collective residential ownership.

. . . .

For purposes of this endorsement:

"Residential project" shall mean any building construction project, including structural repair, renovation, or remodeling operations, involving one or more single-family homes, townhouses, townhomes, residential condominiums or cooperatives, duplexes, any type of structure converted into condominiums, or any other type of domicile intended for individual or collective residential ownerships, and shall include all buildings appurtenant [to] these structures.

"Residential project" shall also include any building construction project, including structural repair, renovation or remodeling operations, involving mixed-use buildings which contain both residential units and commercial space, and shall include all buildings appurtenant [to] these structures.

"Residential project" shall not mean apartments unless "your work" involves converting apartments into condominiums or cooperatives or into any other type of domicile intended for individual or collective residential ownership.

We shall have no duty or obligation to provide or pay for the investigation or defense of any loss, cost, expense, claim or "suit" excluded by this endorsement.

(Id. at 67-68)

II. PROCEDURAL HISTORY

The Complaint was filed on January 27, 2019, in Supreme Court of the State of New York, New York County. (Cmplt. (Dkt. No. 6-1) On February 25, 2019, Defendant removed the action to this District based on diversity of citizenship, pursuant to 28 U.S.C. §§ 1332, 1446. (Notice of Removal (Dkt. No. 6))

Defendant Scottsdale has moved to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). (Def. Mot. (Dkt. No. 14); Tammaro Decl. (Dkt. No. 15); Def. Br. (Dkt. No. 16))

DISCUSSION

I. LEGAL STANDARDS

A. Rule 12(b)(6) Motion to Dismiss

To survive a Rule 12(b)(6) motion to dismiss, a complaint must plead "factual allegations sufficient 'to raise a right to relief above the speculative level.'" ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, the complaint must allege "'enough facts to state a claim to relief that is plausible on its face.'" Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that...