Duane Reade, Inc. v. St. Paul Fire & Marine Ins.

• Decision Date: 30 April 2003
• Docket Number: No. 02 Civ. 7676(JSR).,02 Civ. 7676(JSR).
• Parties: DUANE READE, INC., Plaintiff, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

Page 293

261 F.Supp.2d 293

DUANE READE, INC., Plaintiff, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant.

No. 02 Civ. 7676(JSR).

United States District Court, S.D. New York.

April 30, 2003.

James W.B. Benkard, Davis Polk & Wardwell, New York City, for Plaintiff.

Michael S. Levine, Lon A. Berk (Admitted pro hac vice at IPC on November 26, 2002), Erik Matthew Figlio (Admitted pro hac vice December 19, 2002), John P. Malloy (Admitted pro hac vice per order dated December 26, 2002), Charles A. Cowan (Admitted pro hac vice per order dated January 30, 2003), Edward J. Grass (Admitted pro hac vice per order dated March 25, 2003), Shaw Pittman, LLP, McLean, VA, for Defendant.

MEMORANDUM ORDER

RAKOFF, District Judge.

This Memorandum Order will serve to confirm the Court's telephonic rulings of April 4, 2003 granting in part and denying in part defendant's motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure and denying in its entirety defendant's motion to compel appraisal.

Prior to September 11, 2001, plaintiff operated a drugstore in the World Trade Center in downtown Manhattan. When the World Trade Center, along with plaintiffs store, was destroyed, plaintiff sought coverage for "business interruption losses" under an insurance policy issued by defendant. It soon developed that there was a dispute between the parties as to whether plaintiff has a right under the policy to recover business interruption losses for the entire period until the World Trade Center is rebuilt (if it is) or whether plaintiffs recoverable losses are limited to those suffered within 21 months following the terrorist attacks. See Complaint and Jury Demand ("Complaint") ¶ 36; Amended Answer, Affirmative Defenses and Counterclaim ("Amended Answer") ¶¶ 19, 36. When the parties were unable to resolve this and other, related disputes, the instant lawsuit followed.

Defendant seeks dismissal of the complaint on the ground that the claims asserted therein are not yet ripe. Ripeness is jurisdictional in nature and therefore properly considered on a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules. See Fed.R.Civ.P. 12(b)(1); Auerbach v. Board of Educ, 136 F.3d 104, 108-09 (2d Cir.1998); Liberty Cable Co. v. City of New York, 893 F.Supp. 191, 199 n. 11 (S.D.N.Y.), aff'd 60 F.3d 961 (2d Cir. 1995). In resolving a Rule 12(b)(1) motion, the Court may consider matters outside the pleadings. See, e.g., Luckett v. Bure, 290 F.3d 493, 496-97 (2d Cir.2002).

Plaintiffs complaint alleges four causes of action, two of which seek damages for breach of contract (counts 1 and 3) and two of which seek declaratory relief (counts 2 and 4). With respect to the breach of contract claims, the insurance contract between the parties expressly provides that defendant's payment obligation only arises 30 days after "presentation and acceptance [by defendant] of proofs of loss," Affidavit of Erik M. Figlio, Ex. A (St. Paul Policy) ¶ 32. Here, it is undisputed that plaintiff has not yet filed a proof of loss. Accordingly, payment by defendant is not yet due, and plaintiffs claims for contractual damages are premature.

Plaintiff seeks to avoid this result by arguing that: (1) it substantially complied with the proof of loss condition by submitting to defendant a report prepared by an outside accountant (the "CAPS" report); (2) defendant waived its right to demand a proof of loss by counterclaiming for fraud and asserting a general denial of liability in its answer; and (3) defendant waived its right to demand a proof of loss by failing to assert plaintiffs failure to provide a proof of loss as an affirmative defense. None of these arguments is persuasive.

First, because of the importance to virtually every insurance dispute of a formal proof of loss, substitutes there for will not lightly be entertained under New York law (which here governs) and must, at a minimum, be signed by the insured and, preferably, be sworn. See Harris v. Allstate Ins. Co., 83 F.Supp.2d 423, 429-30 (S.D.N.Y.2000); Aryeh v. Westchester Fire Ins. Co., 138 A.D.2d 337, 525 N.Y.S.2d 628, 629 (2d Dep't 1988). Since the CAPS report is neither sworn nor even signed by the insured, it is not an adequate substitute for a proof of loss.

Second, while it is true that an insurer's repudiation of liability prior to litigation excuses the insured's further obligations under the policy, see, e.g., Lentini Bros. Moving & Storage Co., Inc. v. New York Property Ins. Underwriting Ass'n, 53 N.Y.2d 835, 836, 440 N.Y.S.2d 174, 422 N.E.2d 819 (1981); Beckley v. Otsego County Farmers Coop. Fire Ins. Co., 3 A.D.2d 190, 159 N.Y.S.2d 270, 274 (3d Dep't 1957), the same is not true when the insurer disclaims liability after the insured has filed suit. See Richardson v. Merrimack Mutual Fire Ins. Co., 2000 WL 297171, at *5 n. 3 (S.D.N.Y. Mar. 21, 2000); Lentini Bros., 53 N.Y.2d at 836, 440 N.Y.S.2d 174, 422 N.E.2d 819. Any other result would in effect be contrary to the standard and salutary rule that a party may plead in the alternative.

Third, and relatedly, defendant's assertion of an affirmative defense of failure to "satisfy conditions...