Jimenez v. Occidental Fire & Cas. Co. of N.C.
| Decision Date | 08 February 2023 |
| Docket Number | 20-CV-5534(EK)(PK) |
| Court | U.S. District Court — Eastern District of New York |
| Parties | JOSE JIMENEZ, Plaintiff, v. OCCIDENTAL FIRE & CASUALTY CO. OF NORTH CAROLINA, Defendant. |
A fire occurred at plaintiff Jose Jimenez's home on July 25 2020. Jimenez was not home, and the record does not reveal that anyone was injured. Jimenez does allege, however, that he suffered over $160,000 in damage to the contents of his house.
In an application of Murphy's Law, the fire occurred approximately a week after the expiration date of the insurance policy, issued by the defendant, under which Jimenez seeks coverage. But it occurred during a fifteen-day grace period mandated by New York law for late payment. Jimenez did not pay the premium during that grace period - or, it appears, ever. The question in this case is whether the coverage terminated at the end of the grace period, or whether such termination was retroactive to the end of the policy term.
I read the applicable statute and case law to permit the retroactive cancellation that the defendant - Occidental Fire and Casualty Company of North Carolina - seeks. Nevertheless I hold that the policy Occidental actually wrote did not provide for that outcome. Accordingly, I deny Occidental's motion to dismiss Jimenez's main breach-of-contract claim. However, I grant Occidental's motion to dismiss Jimenez's estoppel claim, as well as a second contract claim that is duplicative (and, in any event is predicated on an invalid legal theory).
The following facts are taken from Jimenez's Amended Complaint and other documents submitted in connection with the motion to dismiss - namely, the insurance policy that Occidental originally issued to Jimenez; the package of documents it sent inviting Jimenez to renew the policy; and Occidental's subsequent notice of cancellation. Am. Compl., ECF No. 11; Insurance Policy, ECF No. 14-5; Renewal Package, ECF No. 14-3; Notice of Cancellation, ECF No. 14-4.[1] In 2019, Jimenez purchased a homeowner's insurance policy from Occidental. That policy provided coverage through July 17, 2020. See Am. Compl. ¶ 4 (); see also Renewal Package 7; Notice of Cancellation 2.[2] Pursuant to the policy, Occidental insured the contents of Jimenez's residence in Bellrose, New York against fire damage and other types of loss. Insurance Policy 11.
On June 8, 2020 - approximately five weeks before the policy was set to expire - Occidental issued Jimenez a renewal notice for the following year and an invoice for the renewal premium. Am. Compl. ¶ 4. The renewal notice called for payment of the new premium by July 17, 2020. Renewal Package 6. Jimenez's Amended Complaint acknowledges that he did not pay the new premium by that date. Am. Compl. ¶ 8.
Occidental then mailed a Notice of Cancellation dated July 21, 2020. Am. Compl. ¶ 6; Notice of Cancellation 2. That notice specified a “Date of Cancellation” of four days prior: July 17, 2020, the last day of coverage for which Jimenez had paid. The cancellation notice also provided for a 15-day grace period, as required by New York's Insurance Law. It stated: “If payment is received and honored by a financial institution before August 06, 2020, the policy will remain in force and a notice rescinding this cancellation will be mailed to you.” Id.
As noted, the fire occurred on July 25, 2020 - four days into the grace period. Am. Compl. ¶ 5. Jimenez has indicated that he was out of town and not receiving mail during this time. Id. ¶¶ 20, 23-24; Pl.'s Mem. of Law in Opp'n to Def.'s Mot. to Dismiss (“Pl. Opp'n”) 3, ECF No. 15. He apparently learned of the fire quickly, as he alleges that he called Occidental within two days of it to lodge his claim for coverage. See Id. ¶ 24. Still, Jimenez acknowledges that he did not pay the renewal premium by the end of the grace period; indeed, he concedes that he never paid the renewal premium. See Id. ¶ 8 (); id. ¶ 16 (). But he does allege that “the policy of insurance did not provide for retroactive cancellation.” Id. He seeks $160,156 in reimbursement from Occidental for his home's contents. Id. ¶ 18.[3]
The question here, accordingly, is on what date Jimenez's coverage lapsed. Occidental argues that coverage lapsed on July 17, when the prior policy period ended; Jimenez claims coverage remained in effect until August 6 - the end-date of the grace period.
On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “the court's task is to assess the legal feasibility of the complaint.” Lynch v. City of New York, 952 F.3d 67, 75 (2d Cir. 2020).[4] In doing so, the Court “must take the facts alleged in the complaint as true, drawing all reasonable inferences in [the plaintiff's] favor.” In re NYSE Specialists Sec. Litig., 503 F.3d 89, 91 (2d Cir. 2007). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Courts “are not bound to accept as true a legal conclusion couched as a factual allegation,” and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.
The first two “Causes of Action” listed in Jimenez's Amended Complaint assert that Occidental breached its contractual obligations under the policy because it remained in force on the day of loss. The two claims assert separate theories: that Occidental sent the notice of cancellation too late, and that the terms of the policy did not provide for retroactive cancellation. Occidental's motion to dismiss Jimenez's Second Cause of Action claim is denied because I find the theory it embodies - that the provisions of the policy do not contemplate retroactive cancellation - to be viable. But Occidental's motion to dismiss Jimenez's First Cause of Action is granted because it is duplicative of his Second Cause of Action and because, in any event, it is predicated on a meritless legal theory.
Jimenez also claims that Occidental should be equitably estopped from denying coverage under the policy. But for the reasons set forth below, his complaint does not set forth sufficient factual content to sustain that claim. Occidental's motion to dismiss the estoppel claim is therefore granted.
As noted, Jimenez's “Second Cause of Action” asserts that Occidental impermissibly cancelled his policy retroactively. Occidental responds that it was permitted to cancel Jimenez's policy for nonpayment with retroactive effect. Specifically, Occidental contends that given Jimenez's failure to pay the renewal premium by the end of the grace period - August 6, 2020 - coverage lapsed on July 17. Def.'s Mem. of Law in Supp. of Its Mot. to Dismiss (“Def. Mem.”) 6-7, ECF No. 14. Whether this is true depends on a reading of both the New York Insurance Law and the language of the policy itself - specifically, the provision governing cancellation for nonpayment. Because this is the only viable theory that Jimenez has pleaded, I address it first.
The first issue is whether the New York Insurance Law permits retroactive cancellation in this context. Under Section 3425 of that law, Occidental's mailing of a renewal notice had the effect of renewing the policy.[5] The Appellate Division explained this (perhaps counterintuitive) effect in Victor v. Turner, 496 N.Y.S.2d 761, 765 (A.D.2d Dep't 1985). In Victor, the court interpreted the old Section 167-a of the Insurance Law, which was the predecessor to Section 3425 and contained functionally identical language.[6] The court explained that although “[i]t is undoubtedly correct that the plain language of the [statute] appears to condition renewal upon payment, . . . an examination of the definitions contained in Insurance Law § 167-a indicates otherwise.” Id. at 765. This indication otherwise comes from the statute's definition of “renew”:
“To renew” or “renewal” is defined as “the issuance and delivery by an insurer, at the end of the policy period, of a policy superseding a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term.
Id. at 765-66 (quoting Insurance Law § 167-a(1)(b)). As Victor goes on to explain, “[t]his language clearly contemplates a renewal (i.e., superseding) policy which is in effect upon issuance and delivery at the ‘end of the policy period.'” Id. at 766. Accordingly, the court held that “in the absence of a notice of nonrenewal in compliance with § 167-a(4)(a), renewal is automatic upon billing for the renewal term, and a notice of cancellation is required to terminate coverage.” Id. at 767 (emphasis added). Jimenez's policy was thus “renewed” by operation of law when Occidental mailed the renewal notice on June 8, 2020.
Once renewed, the policy can be canceled only as permitted by statute. Section 3425 provides that “upon the effective date if the policy is a renewal, no notice of cancellation shall be issued to become effective” unless one of several listed events transpires. N.Y. Ins. Law § 3425(c). One such event is nonpayment of premium. Id. § 3425(c)(2)(A); see also id. § 3425(a)(10) (...
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