Mikaelian v. Liberty Mut. Ins.

• Court: U.S. District Court — Eastern District of New York
• Writing for the Court: JOSEPH F. BIANCO, District Judge
• Decision Date: 08 September 2016
• Docket Number: No. 15-CV-6182 (JFB)(AYS),15-CV-6182 (JFB)(AYS)
• Citation: Mikaelian v. Liberty Mut. Ins., No. 15-CV-6182 (JFB)(AYS) (E.D. N.Y. Sep 08, 2016)
• Parties: MIKAEL MIKAELIAN, ET AL., Plaintiffs, v. LIBERTY MUTUAL INSURANCE, Defendant.

MIKAEL MIKAELIAN, ET AL., Plaintiffs, v. LIBERTY MUTUAL INSURANCE, Defendant.

No. 15-CV-6182 (JFB)(AYS)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

September 8, 2016

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge:

Plaintiffs, Mikael Mikaelian and Horoutun ("Harry") Mikaelian (collectively, "plaintiffs"), bring this action alleging breach of contract, bad faith, fraudulent investigation, and negligent misrepresentation by defendant LM Insurance Corporation, sued herein as Liberty Mutual Insurance ("defendant" or "Liberty"). Plaintiffs also seek a declaratory judgment and specific performance.

Defendant now moves, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss plaintiffs' Complaint. For the reasons set forth herein, the Court grants defendant's motion in its entirety.

I. BACKGROUND

A. Factual Background

The Court takes the following facts from the Complaint ("Compl."). The Court assumes these facts to be true for purposes of deciding this motion and construes them in the light most favorable to plaintiffs, the non-moving party.

Plaintiffs allege that, in October 2012, Harry Mikaelian purchased and renovated the residential property located at 26310 East Williston Avenue, Floral Park, New York 11001 (the "Premises"). (Compl. ¶ 6.) Plaintiffs further allege that, on October 19, 2012, Harry Mikaelian's father, Mikael Mikaelian, purchased a homeowner's insurance policy (the "Policy") from defendant to insure the Premises, which he renewed through October 19, 2016. (Compl. ¶ 7.) Plaintiffs allege that, at all relevant times, Harry Mikaelian has resided at the Premises, whereas Mikael Mikaelian has resided at 85-05 213^th Street, Queens Village, New York 11427. (Compl. ¶¶ 2-3.)

Plaintiffs allege that, in July 2013, Harry Mikaelian installed an air conditioner and exhaust fan in the roof above the Premises' attic. (Compl. ¶ 9.) Plaintiffs allege that, "[o]ver the last year," Harry Mikaelian "noticed a musty smell and moist room conditions within certain areas of the Premises," which worsened as time progressed, prompting him to hire Leighton Associates Inc. ("Leighton"), environmental health and safety consultants, to conduct an initial mold evaluation of the Premises on July 7, 2015. (Compl. ¶ 10.) Plaintiffs allege that, after taking air and surface samples of the Premises, Leighton concluded that there was extensive mold growth in the Premises and, thus, recommended mold remediation. (Compl. ¶¶ 11-12.)

On or about July 14, 2015, Harry Mikaelian submitted a formal claim for coverage under his Policy with defendant. (Compl. ¶ 13.) On July 23, 2015, James Ruiz, an adjuster in defendant's Homeower Claims Department sent Harry Mikaelian a letter informing him that an investigation of his claim for damages due to "Constant/Repeated Seepage/Leak" had been commenced. (Compl. ¶ 14.) Plaintiffs allege that, on July 28, 2015, after reviewing Leighton's recommendations for mold removal and remediation, Harry Mikaelian hired an independent third-party contractor, Bayside Contracting, Inc. ("Bayside"), to provide an estimate of costs for mold removal. (Compl. ¶ 15.) Plaintiffs further allege that, also on July 28, 2015, defendant hired H2M Architects & Engineers ("H2M") to inspect the Premises on defendant's behalf. (Compl. ¶ 16.) On August 4, 2015, H2M sent an inspection report to Harry Mikaelian, which determined that, based upon mold air sampling, mold remediation was not required within the Premises. (Compl. ¶ 17.) Plaintiffs allege that, upon receiving this notice, they were concerned that defendant would not provide coverage for mold remediation under the Policy and, therefore, emailed Ruiz to request a follow-up inspection by H2M. (Compl. ¶ 18.)

On August 13, 2015, plaintiffs allege that Ruiz informed Harry Mikaelian that it was defendant's position that mold remediation was not necessary and, therefore, would not be covered under the policy. (Compl. ¶ 19.)¹ Plaintiffs allege that, on August 14, 2015, Leighton emailed Harry Mikaelian, opining that H2M and Leighton had conflicting reports on the need for mold remediation because H2M based its analysis and conclusion on information provided by defendant and defendant did not provide H2M with a full copy of Leighton's lab report. (Compl. ¶¶ 20-21.) Plaintiffs then demanded a second inspection by defendant, claiming that H2M's inspection was inaccurate. (Compl. ¶ 22.) On August 17, 2015, Harry Mikaelian emailed defendant to inform it that, after H2M completed the follow-up inspection scheduled for August 25, 2015, he planned to commence mold remediation based on concern of health issues to himself, his wife, and their unborn child. (Compl. ¶ 23.) Plaintiffs allege that, in reply, defendant reaffirmed that the Policy did not cover the mold remediation and thatit based this decision on H2M's report. (Compl. ¶ 24.)

Plaintiffs allege that Harry Mikaelian determined that he could not wait for the second inspection due to the health concerns and hired Bayside to perform the necessary mold remediation, which was completed on or before August 24, 2015. (Compl. ¶ 25.) Plaintiff Harry Mikaelian and his family stayed in a hotel during the remediation, and on August 25, 2015, Leighton re-inspected the Premises and determined it was safe for occupancy. (Compl. ¶¶ 26-27.)

B. Procedural Background

Plaintiffs filed their Complaint in the Supreme Court of the State of New York, County of Queens, on September 22, 2015. Defendant removed the action to this Court on October 28, 2015. On January 6, 2016, defendant moved to dismiss. Plaintiffs filed their opposition on January 15, 2016, and defendant filed its reply on February 22, 2016. The Court held oral argument on March 16, 2016. The matter is fully briefed, and the Court has considered all of the parties' submissions.

II. STANDARD OF REVIEW

In reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006); Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005). "In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must allege a plausible set of facts sufficient 'to raise a right to relief above the speculative level.'" Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). This standard does not require "heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570.

The Supreme Court clarified the appropriate pleading standard in Ashcroft v. Iqbal, setting forth a two-pronged approach for courts deciding a motion to dismiss. 556 U.S. 662 (2009). The Supreme Court instructed district courts to first "identify[ ] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679 (explaining that though "legal conclusions can provide the framework of a complaint, they must be supported by factual allegations"). Second, if a complaint contains "well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 678 (quoting and citing Twombly, 550 U.S. at 556-57 (internal citation omitted)).

The Court notes that in adjudicating a Rule 12(b)(6) motion, it is entitled to consider: "(1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents 'integral' to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant's motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission, and(5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence." In re Merrill Lynch & Co., 273 F. Supp. 2d 351, 356-57 (S.D.N.Y. 2003) (internal citations omitted), aff'd in part and reversed in part on other grounds sub nom. Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005); see also Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991) ("[T]he district court . . . could have viewed [the documents] on the motion to dismiss because there was undisputed notice to plaintiffs of their contents and they were integral to plaintiffs' claim.").

III. DISCUSSION

Defendant moves to dismiss, arguing that the breach of contract claim should be dismissed because the loss is not covered by the Policy for the following reasons: (1) Harry Mikaelian is not an insured under the Policy; (2) Mikael Mikaelian does not have an insurable interest in the Premises; and (3) the Policy does not cover loss caused by mold or seepage/leakage of water occurring over an extended period. Defendant further argues that plaintiffs' claim for bad faith should be dismissed because New York law does not recognize an independent claim for relief based upon an insurer's denial of liability coverage, and also argues that plaintiffs fail to state a claim for fraudulent inducement or negligent misrepresentation. In the alternative, defendant argues that such claims should be dismissed as duplicative of plaintiffs' breach of contract claim. Finally, defendant argues...