Newman Myers Kreines Gross Harris, P.C. v. Great N. Ins. Co.

• Decision Date: 24 April 2014
• Docket Number: No. 13 Civ. 2177(PAE).,13 Civ. 2177(PAE).
• Citation: 17 F.Supp.3d 323
• Parties: NEWMAN MYERS KREINES GROSS HARRIS, P.C., Plaintiff, v. GREAT NORTHERN INSURANCE CO., Defendant.
• Court: U.S. District Court — Southern District of New York

17 F.Supp.3d 323

NEWMAN MYERS KREINES GROSS HARRIS, P.C., Plaintiff,
v.
GREAT NORTHERN INSURANCE CO., Defendant.

No. 13 Civ. 2177(PAE).

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

Signed April 24, 2014

Insurer's motion granted.

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Charles W. Kreines, Newman, Fitch, Altheim, Myers, P.C., Richard E. Schmedake, Goodman & Jacobs LLP, New York, NY, for Plaintiff.

John P. Foudy, John A. Nocera, Scott Justin Kantor, Rosner, Nocera & Ragone, L.L.P., New York, NY, for Defendant.

OPINION & ORDER
PAUL A. ENGELMAYER, District Judge.

This diversity action arises out of the widespread power outages that occurred in and around New York City during and after Hurricane Sandy. On October 29, 2012, in anticipation of storm-related flooding, utility provider Consolidated Edison

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Co. of New York, Inc. (“Con Ed”) preemptively shut off power to certain of its service networks, to preserve the integrity of the utility system. As a result, plaintiff Newman Myers Kreines Gross & Harris P.C. (“Newman Myers”), a law firm, was without power at its lower Manhattan office for several days. Newman Myers filed a claim under its property insurance policy (the “Policy”), issued by defendant Great Northern Insurance Company (“Great Northern”), for loss of business income and extra expenses occasioned by its inability to access its office during the power outage. Great Northern denied the claim on the ground that Newman Myers did not suffer a covered loss under the Policy. Newman Myers brought suit against Great Northern in New York State Supreme Court, alleging breach of the parties' insurance contract. Great Northern removed the action to this Court.

Before the Court now are the parties' cross-motions for summary judgment. For the reasons that follow, Great Northern's motion is granted and Newman Myers's motion is denied.

I. Background ¹ A. The Parties

Newman Myers is a law firm with its office and principal place of business at 40 Wall Street, New York, New York 10005 (the “40 Wall Street Building”). Stip. Facts ¶¶ 1–2.

Great Northern is an insurance company incorporated under the laws of Indiana, with its principal place of business in New Jersey. Id. ¶ 3.

B. Facts

At all relevant times, Con Edison was responsible for supplying electrical power services to the 40 Wall Street Building. In late October 2012, as Hurricane Sandy headed toward the New York metropolitan area, Con Ed identified power supply and distribution centers that potentially could be damaged by flooding. It monitored those centers as the storm approached. See Stip. Facts Ex. X2 (Con Ed Report on Preparation and System Restoration Performance: Sandy, October 29 through November 12, 2012), at 5.

At around 6:42 p.m. on October 29, 2012, floodwaters began to rise. Before the stations could flood, Con Ed preemptively shut off the power to three utility service networks, including the Bowling Green Network, which provided service to the 40 Wall Street Building. Id. at 6–7. Con Ed did so because, were power to remain on in the event of a flood at a power distribution center, the ensuing damage to Con Ed's equipment would be much worse than if the power had been shut off. Shutting off the power thus preserved the integrity of the utility system, allowing power to be restored to affected areas more quickly following the storm. See id. at 5–7.

As a result, the 40 Wall Street Building was without full power from October 29 until November 3, 2012. During that time, there was no electricity or elevator service in the building. Stip. Facts ¶¶ 27–29, 35. Although access to the building was not formally blocked, id. ¶ 30, Newman Myers employees reported trying to enter the building on November 1 and 3, only to be informed that “the Building was closed due to a loss of power and that building management was waiting for Con Edison to

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fully restore electricity,” id. ¶ 34; see also id. ¶ 32. Accordingly, Newman Myers treated the building “as being closed to tenants.” Id. ¶ 30.

On November 3, 2012, power was partially restored to the 40 Wall Street Building, and elevator service was restored up to the eighth floor. Id. ¶ 33. Power and elevator service were fully restored to the building on November 4, 2012. Id. ¶ 35. Newman Myers resumed normal business operations on November 5, 2012. Id. ¶ 36. The 40 Wall Street Building itself did not sustain any flooding or physical damage during the storm. Id. ¶ 13.

On or about November 13, 2012, Newman Myers filed a claim under its commercial property insurance policy with Great Northern, for loss of business income and extra expenses it had incurred as a result of the loss of power to its office between October 29 and November 3, 2012.² See Stip. Facts Ex. D (Law Firms Insurance Program for Newman Myers Kreines Gross Harris PC, Policy Number 3529–50–45 ECE (“Policy”)) at CC 00057; see also Stip. Facts ¶¶ 10, 37. The Policy provides coverage, under specified circumstances, for loss of business income and extra expenses occasioned by “direct physical loss or damage.” See Policy at CC 00108–00123 (“Business Income With Extra Expense Insurance For Law Firms”). This coverage is subject to several exclusions, including for loss or damage caused by flood. By letter dated December 26, 2012, Great Northern advised Newman Myers that its claim would be denied because, in the insurer's view, Newman Meyers had not suffered a covered loss. Stip. Facts ¶ 43; Id. Ex. T.

C. Procedural History

On February 27, 2013, Newman Myers filed this action in New York State Court. See Newman Myers Kreines Gross Harris, P.C. v. Great N. Ins. Co., Index No. 151774/2013 (N.Y.Sup.Ct.) (filed Feb. 27, 2013); Dkt. 1 (“Notice of Removal”) ¶ 1. Newman Myers's Complaint alleges, inter alia, that Great Northern breached the insurance contract by refusing to pay for covered losses under the Policy, to wit, loss of business income and extra expenses resulting from Newman Myers's inability to access its office between October 29 and November 3, 2012. See Dkt. 1 Ex. 1 (“Compl.”). The Complaint seeks “a declaration that the Great Northern Policy affords coverage to Newman Myers for its loss of business income, expenses, costs and attorney's fees and interest from the date of loss which is in excess of $125,000,” id. ¶ 48, as well as damages, id. ¶ 53.

On April 2, 2013, Great Northern removed the action to this Court, based on diversity jurisdiction. Notice of Removal ¶ 3. On January 7 and 8, 2014, respectively, the parties cross-moved for summary judgment, Dkt. 18, 22, and filed supporting memoranda of law, Dkt. 21 (“Def. Br.”), 23 (“Pl. Br.”). On January 28, 2014, the parties filed memoranda of law in opposition. Dkt. 24 (“Pl. Opp. Br.”), 26 (“Def. Opp. Br.”). On February 14, 2014, the Court heard argument.

II. Legal Standard

To prevail on a motion for summary judgment, the movant must “show[ ] that there is no genuine dispute as to any material fact and the movant is entitled to

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judgment as a matter of law.” Fed.R.Civ.P. 56(a). The movant bears the burden of demonstrating the absence of a question of material fact. In making this determination, the Court must view all facts “in the light most favorable” to the non-moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir.2008).

To survive a summary judgment motion, the opposing party must establish a genuine issue of fact by “citing to particular parts of materials in the record.” Fed.R.Civ.P. 56(c)(1); see also Wright v. Goord, 554 F.3d 255, 266 (2d Cir.2009). “A party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment,” because “conclusory allegations or denials cannot by themselves create a genuine issue of material fact where none would otherwise exist.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir.2010) (citation omitted). Only disputes over “facts that might affect the outcome of the suit under the governing law” will preclude a grant of summary judgment. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether there are genuine issues of material fact, the Court is “required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Johnson v. Killian, 680 F.3d 234, 236 (2d Cir.2012) (citing Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir.2003)).

III. Discussion

The sole issue presented by the parties' cross-motions for summary judgment is whether Newman Myers suffered a covered loss under the Policy as a result of the power outage at its 40 Wall Street office. This is a pure question of law for the Court. There are no material factual disputes, as counsel for both parties agreed at argument. See Dkt. 30 (Transcript of February 14, 2014 Oral Argument (“Tr.”)) 2–5. The Court need only determine whether the Policy language permits recovery under the undisputed facts.³

The Court will address the parties' competing arguments as to this issue after reviewing the applicable principles of New York insurance law.⁴

A. New York Insurance Law

“The initial interpretation of a contract is a matter of law for the court to decide.” Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir.2000) (internal quotation marks, alteration, and citation omitted). 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) (internal quotation marks and citations

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omitted). “Where the provisions of a policy are clear and unambiguous, they must be given their plain and ordinary meaning, and courts should refrain from rewriting the agreement.” Roundabout...