King's Gym Complex v. Philadelphia Indem. Ins.
| Citation | 433 F.Supp.2d 256 |
| Decision Date | 16 June 2006 |
| Docket Number | No. 6:05-CV-1591.,6:05-CV-1591. |
| Parties | KING'S GYM COMPLEX, INC., doing business as, King's Athletic Club, Plaintiff, v. PHILADELPHIA INDEMNITY INSURANCE CO., Defendant. |
| Court | U.S. District Court — Northern District of New York |
Gustave J. Detraglia, Jr., Esq., Utica, NY, for Plaintiff.
Gennet, Kallmann, Antin & Robinson, P.C., Mark L. Antin, Esq., Parsippany, NJ, for Defendant.
Plaintiff King's Gym Complex, Inc. ("plaintiff" or "King's Athletic Club") brings a breach of contract action against defendant Philadelphia Indemnity Insurance Co. ("defendant" or "Philadelphia") for breaching the terms of its insurance policy. The action is maintained after removal from state court pursuant to federal diversity jurisdiction: Defendant now moves pursuant to Fed.R.Civ.P. 12(b)(1) to dismiss the complaint. Plaintiff opposes. Oral argument was heard on May 12, 2006, in Utica, New York. Decision was reserved. Thereafter, the parties were granted leave to file brief supplemental papers, which were received and considered in the disposition of the instant motion.
On November 13, 2003, a severe windstorm passed through Webster, New York causing damage to the roof of the King's Athletic Club and water damage to parts of its interior. Plaintiff hired professional loss consultants Basloe, Levin & Cuccaro, LTD./Adjuster International ("Adjuster's International") to assist it in filing a claim with its commercial insurer, Philadelphia. On October 13, 2004, Adjuster's International wrote to Mr. Eric Walter of GAB Robins, an adjuster hired by Philadelphia, on plaintiffs behalf: "Please be advised that the insured intends to make claim on replacement cost basis for the involved property in accordance with the terms and conditions of the policy contract." (Docket No. 7, Walter Aff. Ex. E.) The letter also clarified that the policy's two-year statute of limitations for filing a claim would expire on November 13, 2005. Id.
King's Athletic Club's policy provides for three types of coverage; building damage, business personal property, and loss of business income as an "extra expense." As to loss of business income, the policy provides: "We will pay for the actual loss of Business income you sustain due to the necessary `suspension' of your `operations' during the `period of restoration.'" (Walter Aff. Ex. G at 1.)
In the event of loss, the policy requires the insured to notify the police (if applicable) and Philadelphia of the loss or damage, take the appropriate actions to avoid further damage, and permit inspection of the property. Id. at 3-4. In addition, within sixty days after Philadelphia requests information in order to investigate the claim, the insured must send Philadelphia a signed, sworn "proof of loss" containing the information it requests. Id. at 4. The policy states that Philadelphia will supply the insured with the necessary forms. Id. The policy also contains a "cooperation clause" wherein the insured agrees to "cooperate with [Philadelphia] in the investigation or settlement of the claim." Id.
Philadelphia paid more than $190,000 on plaintiffs claim(s): $116,298.00 to cover damage to the building's roof, walls and partial damage to the track; 845,562.50 to cover roof insulation, interior barricades and costs of moving gym equipment; $9,846.87 to cover damage to ceiling tiles, carpeting and light fixtures; and $21,284.12 for additional damages to indoor track and adjacent floor coverings. Payments for building damage were paid by July 2, 2004. The record contains copies of the proofs of loss plaintiff submitted in support of the property damage claim(s). However, it is not disputed that plaintiff did not submit any documentation of proof of loss in relation to potential business loss during the repair of the roof.
The nature of the communication between the parties regarding a claim for loss of business income is disputed. However, it is clear that the defendant became aware that the insured's principal, Mr. Steven Barry, was concerned that the installation of the new roof would result in a loss of business income. A meeting between Mr. Barry, Mr. Walter and Mr. Dan Wright of Kriegstein, Kim & Wright ("KK & W"), an accounting firm hired by the defendant to manage the business loss claim, was arranged to discuss the matter on August 18, 2004. Mr. Barry cancelled the meeting and it was never rescheduled.
KK & W wrote a total of ten letters in an effort to obtain information and/or prompt a discussion regarding a business loss claim. Plaintiff failed to respond. The final letter dated June 29, 2005, explained that the file was to be deemed inactive. It also explains: (Walter Aff. Ex L.)
This action was commenced on November 9, 2005, four days short of the expiration of the policy's two-year statute of limitations. The complaint lists one cause of action for breach of the insurance policy. Plaintiff alleges that it performed all of the terms and conditions required under the policy: "Within 60 days of the request by the defendant, ... plaintiff delivered the sworn proof of loss to said defendant in accordance with the terms and conditions of the insurance policy." (Complaint ¶¶ 10, 11.) Plaintiff further asserts that the defendant "failed and refused to comply with the requirements of the policy of insurance with regard to business interruption, loss of use and incidental and consequential damages, ... [has] breached the policy ... without legitimate cause or reason and therefore has failed and has refused to pay the aforesaid sum to the plaintiff." Id. ¶ 12. Plaintiff claims that the payments received constitute a partial payment on its claim — a payment for building and contents, but a balance is due for business losses. Plaintiff seeks $150,000 for losses to date and additional amounts as may continue to accrue. Id. ¶ 14.
As noted, the parties disagree as to the legal categorization of the other's conduct regarding the filing of the business loss claim. Defendant disputes plaintiff's contention that an actual claim for business loss was submitted. Thus, on February 3, 2006, defendant wrote plaintiff and explained, "we have been unable to locate any indication that the insured has actually filed a specific monetary claim for loss of business income or other damages, as alleged in the complaint." (Docket No. 7, Antin Aff. Ex. C.)
Plaintiff maintains that a claim was filed and characterizes defendant's attempts to dismiss the civil complaint as a rejection of the business loss claim for failure to provide proof of loss. As plaintiff points out, under N.Y. INS. LAW § 3407, the failure to produce proof of loss will not invalidate a claim unless the insurer provides the insured with written notice and blank forms — a demand. Plaintiff argues that the defendant did not provide the plaintiff with a legally sufficient demand — specifically, no blank forms were provided. In that vein, by letter dated March 8, 2006, plaintiff replied:
You have raised the question of never having received a claim with regard to the business income and extra expense coverage ... There's nothing in the policy, other than the 2 year time frame in which to make a claim. Outline the terms of the policy that you claim the insured failed to comply with. The company has demanded proof of loss with regard to the business income and extra expense. Please forward a copy of your company's demand for proof of loss.
(Antin Aff. Ex. E.)
Philadelphia replied by letter dated March 13, 2006, that there can be no business loss without a suspension of business and explained that it was under the impression that the repairs had not been started. (Antin Aff. Ex. F.) Defendant inquired as to the progress of the restoration. Thereafter, the defendant noted the letters sent, the cancelled meeting, and pointed out that "[a]ll other efforts on behalf of Philadelphia to obtain a claim and supporting documentation have been to no avail." Id. Plaintiff responded that the action was properly filed within the two-year time limit and added that "[t]he insured needed time to get the repairs done and experienced [sic] the amount of business loss before he could commence a claim." (Antin Aff. Ex. G.)1
A. Fed. R. Civ. Pron. 12(b)(1) Standard
When assessing a motion to dismiss for lack of subject matter jurisdiction, a court must "accept as true all material factual allegations in the complaint." Shipping Fin. Serv. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998) (citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). However, the court must refrain from "drawing from the pleadings inferences favorable to the party asserting [jurisdiction]." Id. (citing Norton v. Larney, 266 U.S. 511, 515, 45 S.Ct. 145, 69 L.Ed. 413 (1925)). Courts deciding Rule 12(b)(1) motions are not limited to the face of the complaint but "may resolve the disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits." Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir.2000). As such, the Court may "decide for itself the factual issues which determine jurisdiction." Brown v. American Legion Cortland City Post, 64 F.Supp.2d 96 (N.D.N.Y.1999). The party asserting that the court has subject matter jurisdiction bears the burden of proving the court's jurisdiction. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990); Overton v. New York State Div. of Military & Naval Affairs, 373 F.3d 83, 93 (2d Cir.2004).
A. Justiciable Dispute
The defendant moves for dismissal of the complaint for lack of subject matter jurisdiction, arguing that the dispute is...
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