Fabozzi v. Lexington Ins. Co.

• Decision Date: 30 May 2014
• Docket Number: No. 04–CV–4835 MKB.,04–CV–4835 MKB.
• Parties: Paul FABOZZI and Annette Fabozzi, Plaintiffs, v. LEXINGTON INSURANCE COMPANY, John Does 1–10 and ABC Corps. 1–10, Defendants.
• Court: U.S. District Court — Eastern District of New York

23 F.Supp.3d 120

Paul FABOZZI and Annette Fabozzi, Plaintiffs

v.LEXINGTON INSURANCE COMPANY, John Does 1–10 and ABC Corps. 1–10, Defendants.

No. 04–CV–4835 MKB.

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

Signed May 30, 2014.

Eric R. Breslin, Melissa Samantha Geller, Duane Morris, LLP, Newark, NJ, for Plaintiffs.

Michael S. Leavy, Gennet, Kallmann, Antin & Robinson PC, New York, NY, Brian Jeffrey Bolan, Donald George Sweetman, Gennet, Kallmann, Antin & Robinson, Parsippany, NJ, for Defendants.

MEMORANDUM & ORDER

MARGO K. BRODIE, District Judge:

Plaintiffs Paul and Annette Fabozzi commenced the above-captioned action against defendant Lexington Insurance Company (“Defendant”), John Does 1–10 and ABC Corps. 1–10,¹ on October 29, 2004, alleging that Defendant breached the terms of a homeowner's insurance policy covering the Fabozzi home in Staten Island by failing to pay for property damage. Plaintiffs alleged breach of contract and breach of the implied covenant of good faith and fair dealing claims. Defendant moved for summary judgment and on January 8, 2009, 598 F.Supp.2d 279 (E.D.N.Y.2009), the Honorable Sandra Townes granted Defendant's motion for summary judgment, holding that the action was barred by the statute of limitations. On April 8, 2010, the Second Circuit vacated the decision and remanded the case to the district court. (Docket No. 39.) On November 22, 2011, Defendant again moved for summary judgment, arguing Plaintiffs failed to give “prompt” notice of the claim as required by the policy, that Plaintiffs' cause of action alleging a breach of the duty of good faith and fair dealing should be dismissed as a matter of law, and that the policy does not cover Plaintiffs' loss. On March 26, 2012, Judge Townes granted in part and denied in part Defendant's motion for summary judgment (the “March 2012 Decision”). (Docket Entry No. 60.) Judge Townes dismissed Plaintiffs' breach of the duty of good faith and fair dealing claim but denied Defendants' motion as to the breach of contract claim.²

On October 26, 2012, Defendant filed a motion in limine to preclude the testimony of Plaintiffs' experts, and to dismiss the Complaint for Plaintiffs' inability to offer prima facie proof of a covered loss or damages absent such expert testimony. At a conference on February 20, 2013, the Court precluded Plaintiffs from offering expert testimony but requested briefing as to the admissibility of lay opinion testimony by Plaintiffs' witnesses as to conclusions drawn from their observations. (Minute Entry dated February 20, 2013.) At oral argument on June 5, 2013, the Court held that Plaintiffs' witnesses would be permitted to testify regarding their personal factual knowledge based on their observations but would not be permitted to offer any conclusions or opinions. (Minute Entry dated June 5, 2013.) The Court requested additional briefing on Defendant's argument that, absent expert testimony, Plaintiffs could not establish a prima facie breach of contract claim warranting dismissal of the Complaint. (Id. ) For the reasons discussed below, Defendants' motion to dismiss the Complaint is denied.

I. Background

The Court assumes familiarity with the underlying facts, as set forth in the March 2012 Decision. Only the facts necessary for the resolution of the instant motion are included below.

a. Damage to Plaintiffs' Property

Plaintiffs own a beachfront home (the “Property”) located on the Raritan Bay of Staten Island, New York. (Pl. 56.1 ¶ 11; Def. Reply 56.1 ¶ 11.) In 2002, Plaintiffs renewed their insurance policy (the “Insurance Policy”) with Defendant for a twelve month term from April 1, 2002 to April 1, 2003 for the Property. (Insurance Policy, annexed to the declaration of Brian J. Bolan dated Aug. 30, 2012 (“Bolan Decl.”) as Ex. F.)

At some point between September 2001 and May 2002, Plaintiffs noticed that their home suffered from “serious structural problems.” (March 2012 Decision 3.) The parties dispute the date that Plaintiffs discovered these problems. (Id. ) Plaintiffs allege that in April 2002, they noticed damage to the Property, including cracks in the walls, and that the floors were pitched toward the rear of the house. (Pl. 56.1 ¶ 13.) In April 2002, the Property was “propped up for support to prevent it from collapsing.” (Id. ) In May 2002, portions of the foundation were exposed.

By mid-May 2002, the structural problems forced Plaintiffs to leave their home. (March 2012 Decision 4.) On May 13, 2002, Plaintiffs made a claim under the Insurance Policy, (Pl. 56.1 ¶ 15; Def. Reply 56.1 ¶ 15), which Defendant denied by letter sent to Plaintiffs on July 24, 2004, (March 2012 Decision 4). Defendant stated that the losses claimed by Plaintiffs were caused by “wear and tear, deterioration, inherent vice, latent defect, wet and/or dry rot, as well as earth movement, and the settlement, shrinking, bulging or expansion of [the P]roperty, leading to cracking of structural components thereof.” (Docket Entry No. 47 Ex. H.)

b. The Insurance Policy

According to Plaintiffs, Defendant used a form policy from Insurance Services Office, Inc. (“ISO”), an industry organization. (Plaintiffs' Memorandum in Opposition to Defendant's Motion to Dismiss (“Pl. Opp'n Mem.”) 2, Docket Entry No. 94.) The form policy used is the “HO–3 Special Form Policy,” available on the ISO policy forms database. (Id. ) The National Association of Insurance Commissioners (“NAIC”), a trade organization, identified the HO–3 form as the most commonly used insurance form, at the time Plaintiffs purchased the Insurance Policy. (Id. ) The New York State Department of Financial Services and the NAIC have characterized the HO–3 form as covering “all-risks of physical loss except those that are specifically excluded.” (Id. ) According to Defendant, the relevant provision of the Insurance Policy concerning collapse is properly understood as “named peril coverage.” (Defendant's Reply Memorandum in Further Support of its Motion to Dismiss (“Def. Reply Mem.”) 2, Docket Entry No. 96.)

The Insurance Policy is comprised of several schedules and endorsements. Under “Coverage A—Dwelling,” Plaintiffs' residence was insured in the amount of $1,511,200 for all direct physical loss. (Insurance Policy 2, Declarations Page.) However, Coverage A specifies that it did not cover loss “involving collapse, other than that provided in Additional Coverage 8,” loss caused by “wear and tear, marring, deterioration,” “settling, shrinking, bulging or expansion,” or loss “[e]xcluded under Section I—Exclusions.” (Id. at 6–7.) “Additional Coverage 8” states in pertinent part:

We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:

a. Perils Insured Against in COVERAGE C—PERSONAL PROPERTY. These perils apply to covered buildings and personal property for loss insured by this additional coverage;

b. Hidden decay;

c. Hidden insect or vermin damage;

d. Weight of contents, equipment, animals or people;

e. Weight of rain which collects on a roof; or

f. Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation....

Collapse does not include settling, crackling, shrinking, bulging or expansion.

This coverage does not increase the limit of liability applying to the damage covered property.

(Id. at 5.) The Insurance Policy also includes several exclusions (“Section I—Exclusions”), excluding loss resulting from, inter alia, earth movement, water damage, power failure, neglect and war. (Id. 8–9.)

II. Discussion

a. Standard of Review

Under New York law, “an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.” Parks Real Estate Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir.2006) (citation and internal quotation marks omitted); see also Goldberger v. Paul Revere Life Ins. Co., 165 F.3d 180, 182 (2d Cir.1999) (“In New York State, an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.” (citation and internal quotation marks omitted)). If the terms are unambiguous, courts should enforce the contract as written. See Parks Real Estate, 472 F.3d at 42 ; Goldberger, 165 F.3d at 182 (quoting Village of Sylvan Beach v. Travelers Indemnity Co., 55 F.3d 114, 115 (2d Cir.1995) ). However, if the contract is ambiguous, “particularly the language of an exclusion provision,” the ambiguity is interpreted in favor of the insured. See Goldberger, 165 F.3d at 182 (quoting Travelers Indemnity Co., 55 F.3d at 115 ). “[I]f the language of the policy is doubtful or uncertain in its meaning, any ambiguity must be resolved in favor of the insured and against the insurer.” Pepsico, Inc. v. Winterthur Int'l Am. Ins. Co., 13 A.D.3d 599, 788 N.Y.S.2d 142, 144 (2004) (citation and internal quotation marks omitted). “An ambiguity exists where the terms of an insurance contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.” Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir.2000) (citation and internal quotation marks omitted).

b. “All Risk” versus “Named Perils”

The parties dispute the type of policy at issue, and, thus, the corresponding evidentiary burdens.³ Defendant argues that Plaintiffs have asserted coverage under “Additional Coverage 8,” which provides for “named peril coverage” only, such that Plaintiffs have the burden of proving that the Property sustained a collapse and that the collapse resulted from a specific peril. (Def. Reply Mem. 1, 6.) Plaintiffs argue that the Insurance Policy is an ...