Waterscape Resort LLC v. McGovern

• Decision Date: 20 June 2013
• Citation: 967 N.Y.S.2d 368,2013 N.Y. Slip Op. 04709,107 A.D.3d 571
• Parties: WATERSCAPE RESORT LLC, Plaintiff–Appellant, v. Eric McGOVERN, et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

107 A.D.3d 571

967 N.Y.S.2d 368

2013 N.Y. Slip Op. 04709

WATERSCAPE RESORT LLC, Plaintiff–Appellant,

v.Eric McGOVERN, et al., Defendants–Respondents.

Supreme Court, Appellate Division, First Department, New York.

June 20, 2013.

Holland & Knight LLP, New York (Frederick R. Rohn of counsel), for appellant.

John E, Osborn P.C., New York (Daniel H. Crow of counsel), for respondents.

MAZZARELLI, J.P., RENWICK, MANZANET–DANIELS, GISCHE, CLARK, JJ.

Order, Supreme Court, New York County (Richard F. Braun, J.), entered April 26, 2012, which granted defendants' motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.

Plaintiff project owner alleges that defendants fraudulently misrepresented that their construction management company (PMG) had obtained full subguard insurance coverage to protect plaintiff against default by the largest subcontractor on the project, which was responsible for constructing the project's superstructure. According to plaintiff, it reasonably relied on defendants' alleged misrepresentation and incurred damages when the subcontractor later defaulted and there was no subguard insurance for this default.

There is no dispute that the named insured on the subguard policy is PMG, and that plaintiff is not an insured under the policy. Accordingly, based on the policy's plain language ( see Citizens Ins. Co. of Am. v. Illinois Union Ins. Co., 105 A.D.3d 679, 964 N.Y.S.2d 131 [1st Dept. 2013] ), plaintiff cannot claim damages under the policy, as it is not an insured.

Although plaintiff maintains that it incurred substantial damages due to PMG's failure to procure insurance on behalf of the defaulting subcontractor, plaintiff's fraud claim fails, because “merely alleging that the breach of a contract duty arose from a lack of due care will not transform a simple breach of contract into a tort” ( Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 551, 583 N.Y.S.2d 957, 593 N.E.2d 1365 [1992] ). Plaintiff's “subjective claims of reliance on defendants' expertise” do not give rise to a “confidential relationship” whose “requisite high degree of dominance and reliance” existed prior to the alleged fraud ( Societe Nationale D'Exploitation Industrielle Des Tabacs Et Allumettes v. Salomon Bros. Intl., 251 A.D.2d 137, 138, 674 N.Y.S.2d 648 [1st Dept. 1998], lv. denied95 N.Y.2d 762, 715 N.Y.S.2d 215, 738 N.E.2d 363 [2000] ). Defendants had no advisory capacity as to plaintiff, and a special relationship of trust and confidence does not arise merely from an arm's-length business transaction ( EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19, 799 N.Y.S.2d 170, 832 N.E.2d 26 [2005] ).

In any event, to maintain a claim for fraud, plaintiff must show that its reliance on an alleged misrepresentation was justifiable or reasonable ( see Stuart Silver Assoc. v. Baco Dev. Corp., 245 A.D.2d 96, 98–99, 665 N.Y.S.2d 415 [1st Dept. 1997] ). Here, plaintiff neither inquired of the subcontractor nor of the subguard provider...