WE OFFER NO FEE INITIAL CONSULTATIONS
§3404
NEW YORK INSURANCE LAW §3404 THE NEW YORK STANDARD FORM FIRE POLICY
Fire insurance contracts; standard policy provisions; permissible variations (a) The printed form of a policy of fire insurance, as set forth in subsection (e) hereof, shall be known and designated as the " standard fire insurance policy of the state of New York ." (b)(1) No policy or contract of fire insurance shall be made, issued or delivered by any insurer or by any agent or representative thereof, on any property in this state, unless it shall conform as to all provisions, stipulations, agreements and conditions with such form of policy, except policies subject to the provisions of section three thousand one hundred two of this chapter which shall be required to comply with the provisions of paragraph one of subsection (f) of this section. (2) There shall be printed or typewritten at the head of such policy the name and home office address of the insurer or insurers issuing the policy and a statement whether such insurer or insurers are stock or mutual corporations or are reciprocal insurers or Lloyds underwriters. In lieu of such statement a corporation organized under a special act of the legislature of any state may so indicate upon its policy. The head of the policy may also have such devices as the insurer or insurers issuing it desire. (3) The standard fire insurance policy need not be used for effecting reinsurance between insurers. (4) If the policy is issued by a mutual, cooperative or reciprocal insurer having special regulations with respect to the payment by the policyholder of assessments, such regulations shall be printed upon the policy, and any such insurer may print upon the policy such regulations as may be appropriate to or required by its form of organization. (c) Two or more insurers authorized to do the business of fire insurance in this state may, with the approval of the superintendent, issue a combination standard form of fire insurance policy which shall contain the following provisions: (1) A provision substantially to the effect that the insurers executing such policy shall be severally liable for the full amount of any loss or damage, according to the terms of the policy, or for specified percentages or amounts thereof, aggregating the full amount of such insurance under such policy. (2) A provision substantially to the effect that service of process, or of any notice or proof of loss required by such policy, upon any of the insurers executing such policy, shall be deemed to be service upon all such insurers. (d)(1) Appropriate forms of a supplemental contract or contracts or extended coverage endorsements insuring against one or more of the perils which the insurer is empowered to insure, in addition to the perils covered by such standard fire insurance policy, may be approved by the superintendent, who may authorize their use in connection with a standard fire insurance policy. (2) The first page of the policy, in a form approved by the superintendent, may be rearranged to provide space for the listing of amounts of insurance, rates and premiums for the basic coverages insured under the standard form of policy and for additional coverages or perils insured under attached endorsements, and such other data as may be conveniently included for duplication on daily reports for office records. (e) The form of the standard fire insurance policy of the state of New York (with permission to substitute for the word "company" a more accurate descriptive term for the type of insurer) shall be as follows:
165 Lines Standard Form Fire PolicyThe Standard Fire Insurance Policy of the State of New York
SECOND PAGE OF STANDARD FIRE POLICY
1 Concealment, This entire policy shall be void if, whether
2 fraud. before or after a loss, the insured has wil-
3 fully concealed or misrepresented any ma-
4 terial fact or circumstance concerning this insurance or the
5 subject thereof, or the interest of the insured therein, or in case
6 of any fraud or false swearing by the insured relating thereto.
7 Uninsurable This policy shall not cover accounts, bills,
8 and currency, deeds, evidences of debt, money or
9 excepted property. securities; nor, unless specifically named
10 hereon in writing, bullion or manuscripts.
11 Perils not This Company shall not be liable for loss by
12 included. fire or other perils insured against in this
13 policy caused, directly or indirectly, by: (a)
14 enemy attack by armed forces, including action taken by mili-
15 tary, naval or air forces in resisting an actual or an immediately
16 impending enemy attack; (b) invasion; (c) insurrection; (d)
17 rebellion; (e) revolution; (f) civil war; (g) usurped power; (h)
18 order of any civil authority except acts of destruction at the time
19 of and for the purpose of preventing the spread of fire, provided
20 that such fire did not originate from any of the perils excluded
21 by this policy; (i) neglect of the insured to use all reasonable
22 means to save and preserve the property at and after a loss, or
23 when the property is endangered by fire in neighboring prem-
24 ises; (j) nor shall this Company be liable for loss by theft.
25 Other Insurance. Other insurance may be prohibited or the
26 amount of insurance may be limited by en-
27 dorsement attached hereto.
28 Conditions suspending or restricting insurance. Unless other-
29 wise provided in writing added hereto this Company shall not
30 be liable for loss occurring
31 (a) while the hazard is increased by any means within the con-
32 trol or knowledge of the insured; or
33 (b) while a described building, whether intended for occupancy
34 by owner or tenant, is vacant or unoccupied beyond a period of
35 sixty consecutive days; or
36 (c) as a result of explosion or riot, unless fire ensue, and in
37 that event for loss by fire only.
38 Other perils Any other peril to be insured against or sub-
39 or subjects. ject of insurance to be covered in this policy
40 shall be by endorsement in writing hereon or
41 added hereto.
42 Added provisions. The extent of the application of insurance
43 under this policy and of the contribution to
44 be made by this Company in case of loss, and any other pro-
45 vision or agreement not inconsistent with the provisions of this
46 policy, may be provided for in writing added hereto, but no pro-
47 vision may be waived except such as by the terms of this policy
48 is subject to change.
49 Waiver No permission affecting this insurance shall
50 provisions. exist, or waiver of any provision be valid,
51 unless granted herein or expressed in writing
52 added hereto. No provision, stipulation or forfeiture shall be
53 held to be waived by any requirement or proceeding on the part
54 of this Company relating to appraisal or to any examination
55 provided for herein.
56 Cancellation This policy shall be cancelled at any time
57 of policy. at the request of the insured, in which case
58 this Company shall, upon demand and sur-
59 render of this policy, refund the excess of paid premium above
60 the customary short rates for the expired time. This pol-
61 icy may be cancelled at any time by this Company by giving
62 to the insured a five days’ written notice of cancellation with
63 or without tender of the excess of paid premium above the pro
64 rata premium for the expired time, which excess, if not ten-
65 dered, shall be refunded on demand. Notice of cancellation shall
66 state that said excess premium (if not tendered) will be re-
67 funded on demand.
68 Mortgagee If loss hereunder is made payable, in whole
69 interests and or in part, to a designated mortgagee not
70 obligations. named herein as the insured, such interest in
71 this policy may be cancelled by giving to such
72 mortgagee a ten days’ written notice of can-
73 cellation.
74 If the insured fails to render proof of loss such mortgagee, upon
75 notice, shall render proof of loss in the form herein specified
76 within sixty (60) days thereafter and shall be subject to the pro-
77 visions hereof relating to appraisal and time of payment and of
78 bringing suit. If this Company shall claim that no liability ex-
79 isted as to the mortgagor or owner, it shall, to the extent of pay-
80 ment of loss to the mortgagee, be subrogated to all the mort-
81 gagee’s rights of recovery, but without impairing mortgagee’s
82 right to sue; or it may pay off the mortgage debt and require
83 an assignment thereof and of the mortgage. Other provisions
84 relating to the interests and obligations of such mortgagee may
85 be added hereto by agreement in writing.
86 Pro rata liability. This Company shall not be liable for a greater
87 proportion of any loss than the amount
88 hereby insured shall bear to the whole insurance covering the
89 property against the peril involved, whether collectible or not.
90 Requirements in The insured shall give immediate written
91 case loss occurs. notice to this Company of any loss, protect
92 the property from further damage, forthwith
93 separate the damaged and undamaged personal property, put
94 it in the best possible order, furnish a complete inventory of
95 the destroyed, damaged and undamaged property, showing in
96 detail quantities, costs, actual cash value and amount of loss
97 claimed; and within sixty days after the loss, unless such time
98 is extended in writing by this Company, the insured shall render
99 to this Company a proof of loss, signed and sworn to by the
100 insured, stating the knowledge and belief of the insured as to
101 the following: the time and origin of the loss, the interest of the
102 insured and of all others in the property, the actual cash value of
103 each item thereof and the amount of loss thereto, all encum-
104 brances thereon, all other contracts of insurance, whether valid
105 or not, covering any of said property, any changes in the title,
106 use, occupation, location, possession or exposures of said prop-
107 erty since the issuing of this policy, by whom and for what
108 purpose any building herein described and the several parts
109 thereof were occupied at the time of loss and whether or not it
110 then stood on leased ground, and shall furnish a copy of all the
111 descriptions and schedules in all policies and, if required, verified
112 plans and specifications of any building, fixtures or machinery
113 destroyed or damaged. The insured, as often as may be reason-
114 ably required, shall exhibit to any person designated by this
115 Company all that remains of any property herein described, and
116 submit to examinations under oath by any person named by this
117 Company, and subscribe the same; and, as often as may be
118 reasonably required, shall produce for examination all books of
119 account, bills, invoices and other vouchers, or certified copies
120 thereof if originals be lost, at such reasonable time and place as
121 may be designated by this Company or its representative, and
122 shall permit extracts and copies thereof to be made.
123 Appraisal. In case the insured and this Company shall
124 fail to agree as to the actual cash value or
125 the amount of loss, then, on the written demand of either, each
126 shall select a competent and disinterested appraiser and notify
127 the other of the appraiser selected within twenty days of such
128 demand. The appraisers shall first select a competent and dis-
129 interested umpire; and failing for fifteen days to agree upon
130 such umpire, then, on request of the insured or this Company,
131 such umpire shall be selected by a judge of a court of record in
132 the state in which the property covered is located. The ap-
133 praisers shall then appraise the loss, stating separately actual
134 cash value and loss to each item; and, failing to agree, shall
135 submit their differences, only, to the umpire. An award in writ-
136 ing, so itemized, of any two when filed with this Company shall
137 determine the amount of actual cash value and loss. Each
138 appraiser shall be paid by the party selecting him and the ex-
139 penses of appraisal and umpire shall be paid by the parties
140 equally.
141 Company’s It shall be optional with this Company to
142 options. take all, or any part, of the property at the
143 agreed or appraised value, and also to re-
144 pair, rebuild or replace the property destroyed or damaged with
145 other of like kind and quality within a reasonable time, on giv-
146 ing notice of its intention so to do within thirty days after the
147 receipt of the proof of loss herein required.
148 Abandonment. There can be no abandonment to this Com-
149 pany of any property.
150 When loss The amount of loss for which this Company
151 payable. may be liable shall be payable sixty days
152 after proof of loss, as herein provided, is
153 received by this Company and ascertainment of the loss is made
154 either by agreement between the insured and this Company ex-
155 pressed in writing or by the filing with this Company of an
156 award as herein provided.
157 Suit. No suit or action on this policy for the recov-
158 ery of any claim shall be sustainable in any
159 court of law or equity unless all the requirements of this policy
160 shall have been complied with, and unless commenced within
161 twenty-four months next after inception of the loss.
162 Subrogation. This Company may require from the insured
163 an assignment of all right of recovery against
164 any party for loss to the extent that payment therefor is made
165 by this Company.Opinion
20-CV-3191 (MKB)
08-15-2022
FRED LEE and ANN LEE, Plaintiffs, v. UNION MUTUAL FIRE INSURANCE COMPANY, Defendant.
MARGO K. BRODIE, UNITED STATES DISTRICT JUDGE
MEMORANDUM & ORDER
MARGO K. BRODIE, UNITED STATES DISTRICT JUDGE
Plaintiffs Fred and Aim Lee commenced this action against Defendant Union Mutual Fire Insurance Company on June 5, 2020, bringing claims for breach of contract and violation of section 349 of the New York General Business Law (“GBL”). (Compl. ¶¶ 61-81, annexed to Notice of Removal as Ex. A, Docket Entry No. 1-1.) Plaintiffs allege that Defendant wrongfully refused to cover fire damage at Plaintiffs' property after concluding from a “sham investigation!]” of the property that Plaintiffs had lied in their application for insurance. (Id. at ¶¶ 10, 14, 74.)
Plaintiffs move for summary judgment on their breach of contract claimand Defendant moves for summary judgment as to both claims. For the reasons set forth below, the Court grants Plaintiffs' motion for summary judgment on their breach of contract claim and denies Defendant's motion for summary judgment on Plaintiffs' breach of contract claim. The Court also grants Defendant's motion for summary judgment as to Plaintiffs' claim under section 349 of the GBL.
(Pls.' Mot. for Summ. J. (“Pls.' Mot.”), Docket Entry No. 34; Pls.' Mem. in Supp. of Pls.' Mot. (“Pls.' Mem.”), annexed to Pls.' Mot. as Ex. 3, Docket Entry No. 34-3; Def.'s Mem. in Opp'n to Pls.' Mot. (“Def.'s Opp'n”), annexed to Pls.' Mot. as Ex. 18, Docket Entry No. 3418; Pls.' Reply in Supp. of Pls.' Mot. (“Pls.' Reply”), Docket Entry No. 34-19.)
(Def.'s Mot. for Summ. J. (“Def.'s Mot.”), Docket Entry No. 36; Def.'s Mem. in Supp. of Def.'s Mot. (“Def.'s Mem.”), annexed to Def.'s Mot., Docket Entry No. 36-19; Pls.' Mem. in Opp'n to Def.'s Mot. (“Pls.' Opp'n”), annexed to Def.'s Mot., Docket Entry No. 34-22; Def.'s Reply in Supp. of Def.'s Mot. (“Def.'s Reply”), annexed to Def.'s Mot., Docket Entry No. 3623.)
I. Background
Plaintiff Fred Lee has owned the property located at 39-11 27th Sheet, Long Island City, New York (“the Property”) since July of 2013 and at all times pertinent to this action. (Pls.' Resp. to Def,s 56.1 Stmt. (“Pls.' 56.1 Resp.”) ¶ 15, annexed to Def.'s Mot., Docket Entry No. 36-20.) The Property has a two-bedroom apartment on the first floor, a two-bedroom apartment on the second floor, and a finished basement. (Id. at ¶¶ 14, 16-17.) The basement can be accessed directly from outside the building. (Id. at ¶ 22.)
a. Relevant insurance policies
On June 27, 2017, Plaintiffs completed an application for commercial insurance and submitted the application to Defendant. (Id. at ¶¶ 23-24; Def.'s Resp. to Pls.' 56.1 Stmt. (“Def.'s 56.1 Resp.”) ¶ 4, annexed to Pls.' Mot. as Ex. 17, Docket Entry No. 34-17.) Plaintiffs indicated on the application that the Property contained only two apartment units. (Pls.' 56.1 Resp. ¶¶ 25-26; Def.'s 56.1 Resp. ¶¶ 5-6.) Defendant issued the requested policy, covering the period from July 8, 2017 to July 8, 2018 (the “First Policy”). (Pls.' 56.1 Resp. ¶ 23.) It later issued a renewal insurance policy to Plaintiffs for the period from July 8, 2018 to July 8, 2019 (the “Second Policy”), (id.at ¶ 28), and a second renewal policy covering the period from July 8, 2019 to July 8, 2020 (“the Third Policy”), (id. at ¶ 30). Plaintiffs again represented on the second renewal application that the Property only contained two apartment units. (Id. at ¶ 31.) All three policies include the following language:
Defendant claims that Plaintiffs applied for renewal and that, on the renewal application, “[P]laintiffs again represented that [the Property] contained only two apartment units.” (Def's Stmt, of Undisputed Material Facts (“Def's 56.1”) ¶ 29, Docket Entry No. 3618.) Plaintiffs dispute this, claiming that they “did not complete a renewal application, presumed the renewal to be automatic, took no action in connection with the renewal, and did not execute any additional documentation in connection with the renewal.” (Pls.' 56.1 Resp. ¶ 29.)
By accepting this policy, you agree:
a. The statements in the Declarations are accurate and complete;
b. Those statements are based upon representations you made to us; and
c. We have issued this policy in reliance upon your representations.
(First Policy 78, annexed to Aff. of James Lambert (“Lambert Aff”) as Ex. 1, Docket Entry No. 36-9; Second Policy 76, annexed to Lambert Aff. as Ex. 2, Docket Entry No. 36-10; Third Policy 76, annexed to Lambert Aff. as Ex. 3, Docket Entry No. 36-11.) Roundhill Express, LLC (“Roundhill”), “acting as an agent of [Defendant], binds insurance policies on behalf of' Defendant. (Defs.' 56.1 Resp. ¶ 3.) Roundhill's underwriting guidelines state that “[e]ach new policy will undergo an inspection within [sixty] days of its effective date.” (Underwriting Guidelines 2, annexed to Pls.' Mot. as Ex. M, Docket Entry No. 34-16.) On July 11, 2017, Frederick Harper inspected the Property. (Def's 56.1 Resp. ¶¶ 1415; Lambert Aff. ¶ 77, annexed to Def's Mot., Docket Entry No. 36-8; Def's 56.1 ¶ 51.) Harper's report from the inspection includes photos of the outside of the building; the stairway; the electric and gas meters; and the building's heating source. (Inspection Report, annexed to Pls.' Mot. as Ex. F, Docket Entry No. 34-9; Lambert Aff. ¶¶ 81-82; Pls.' 56.1 Resp. ¶ 49; Defs.' 56.1 Resp. ¶ 17.)
Because the three policies, the Beltrani Report, the Second Beltrani Report, the Rescission Letter, and Plaintiffs' Reply are not consecutively paginated, the Court refers to the page numbers assigned by the electronic case filing system.
b. Fire notification, inspection and cancellation of policies
On March 2, 2020, Plaintiffs' agent notified Defendant through Roundhill that a fire had occurred and a claim was being made under the Third Policy. (Pls.' 56.1 Resp. ¶ 6.) Roundhill hired Beltrani Consultants, Inc. (“BCI”) to assist in its investigation of the fire. (Id. at ¶¶ 7-8.) BCI produced a report signed by Harry Beltrani that stated that in addition to the apartments occupied by tenants on the first and second floors, the Property also had “a full finished basement [with] a separate entrance” that included “a living area, bedroom with a full bath and kitchen area.” (BCI Preliminary Report (“Beltrani Report”) 3, annexed to Lambert Aff. as Ex. 5, Docket Entry No. 36-13.) On April 15, 2020, BCI again inspected the Property. (Pls.' 56.1 Resp. ¶ 12.) hi the report it produced after this second inspection, BCI stated that it had established after its first inspection that there was “a full furnished apartment located in the basement area.” (BCI Proposed Adjustment Report (“Second Beltrani Report”) 3, annexed to Lambert Aff. as Ex. 6, Docket Entry No. 36-14.) The basement apartment was “not occupied at this time” but it was “clear that at minimal cost, the apartment can be tenant[-]occupied at any time.” (Id.) The report included a signed statement by Fred Lee, stating that he had owned the building for seven years, that no one had ever lived in the basement, and that he had “never made a structural change to the building or basement.” (Id. at 4.)
Plaintiffs object to the report and its contents as inadmissible hearsay. (Pls.' 56.1 Resp. ¶¶9-11)
By correspondence dated May 19, 2020, Roundhill, on behalf of Defendant, disclaimed coverage for the March 2, 2020 fire loss and rescinded Plaintiffs' policy. (Disclaimer of Coverage/Notice of Rescission (“Rescission Letter”), annexed to Lambert Aff. as Ex. 8, Docket Entry No. 36-16.) The Rescission Letter stated that Plaintiffs had represented on their insurance application and both renewal applications that the Property “contained only two apartment units.” (Id. at 3.) However, the investigator had determined that there was also “a frill basement apartment that has a bedroom, living room, kitchen, bathroom, and separate entrance.” (Id.) Thus, Plaintiffs' statement that the Property only had two apartment units was “false and constitute[d] a material misrepresentation, which [was] a violation of [Plaintiffs'] policy terms.” (Id. at 3-4.) Tire letter further stated that Defendant “would not have issued this same policy to [Plaintiffs] had it known that the [Property] had three apartment units and not two.” (Id.at 4.) Defendant therefore “rescind[ed] the current policy of insurance and [Plaintiffs'] two prior policies ab initio.” (Id.)
c. Supreme court action and removal to the Eastern District of New York
On June 5, 2020, Plaintiffs fried suit in the Supreme Court of the State of New York, Queens County, alleging that Defendant had “wrongfully denied coverage, refused to make payment and rescinded the commercial policy in bad faith.” (Compl. ¶ 14.) Plaintiffs brought two causes of action, breach of contract and violation of section 349 of the GBL, and sought damages “believed to be in excess of five hundred thousand dollars ... along with consequential damages” for each cause of action. (Id. at ¶¶ 61-81.) On July 16, 2020, Defendant removed the action to the Eastern District of New York under diversity jurisdiction. (Notice of Removal, Docket Entry No. 1.)
d. James Lambert's deposition and subsequent affidavit Plaintiffs deposed James Lambert, President of Roundhill Express, LLC, (Lambert Aff. ¶ 1), on May 4, 2021, (Dep. of James Lambert (“Lambert Dep.”), annexed to Pls.' Mot. as Ex. D,
Docket Entry No. 34-7). He testified that Defendant and Roundhill do not have “guidelines ... which relate to the definition of an apartment unit as the term is utilized in an application for insurance” and that Roundhill does “not draw a distinction between legal or illegal units.” (Id. at 33:15-34:11.) Mr. Lambert was asked what “constitutes the definition of an apartment.” (Id. at 34:12-13.) He replied: “Do you want my definition; do you want the most recent court decision definition? I mean my definition doesn't really matter here.” (Id. at 34:15-17.) He testified that Roundhill “do[es not] have a definition” of “apartment” but rather “ask[s] how many apartments are there.” (Id. at 34:21-22.) Mr. Lambert stated that he personally “considers] places in which people reside to be apartments,” but added that his “personal definition is not material here, it's how courts define apartments.” (Id. at 34:25-35:4.) He then clarified that “[i]f it's capable of someone residing there, it's an apartment.” (Id. at 35:8-11.) Mr. Lambert testified that Roundhill does not “interpret the question” about apartment units, “we simply ask the question,” (id. at 36:13-14), and added that he believed that the number of apartment units in the building is “a fairly clear question,” (id. at 37:4-6).
In a subsequent affidavit dated October 22, 2021, Mr. Lambert claimed that “[h]ad Roundhill been accurately advised on the [Plaintiffs' applications that the [Property]... actually contained three apartment units, rather than two apartment units. Roundhill would not have issued” the policies that it did to Plaintiffs. (Lambert Aff. ¶ 69.) Instead, “[h]igher premiums would have been charged to insure a three-apartment building than the premiums that were assessed.” (Id. at ¶ 70.)
On December 3, 2021, Plaintiff moved for summary judgment on its breach of contract claim. (Pls.' Mot.) On December 8, 2021, Defendant moved for summary judgment on the entire action. (Def.'s Mot.)
IL Discussion
a. Standard of review
Summary judgment is proper only when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Borley v. United States, 22 F.4th 75, 78 (2d Cir. 2021); Windward Bora, LLC v. Wilmington Sav. Fund Socy, 982 F.3d 139, 142 (2d Cir. 2020). Tire court must “constru[e] the evidence in the light most favorable to the non-moving party” and “resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Lenzi v. Systemax, Inc., 944 F.3d 97, 107 (2d Cir. 2019) (first quoting VKK Corp. v. Nat 1 Football League, 244 F.3d 114, 118 (2d Cir. 2001); and then quoting Johnson v. Goord, 445 F.3d 532, 534 (2d Cir. 2006)). The role of the court “is not to resolve disputed questions of fact but only to determine whether, as to any material issue, a genuine factual dispute exists.” Rogoz v. City of Hartford, 796 F.3d 236, 245 (2d Cir. 2015) (first quoting Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010); and then citing Anderson v. Liberty' Lobby, Inc., 477 U.S. 242, 249-50 (1986)). A genuine issue of fact exists when there is sufficient “evidence on which the jury could reasonably find for the [nonmoving party].” Anderson, 477 U.S. at 252. Tire “mere existence of a scintilla of evidence” is not sufficient to defeat summary judgment. Id. Tire court's function is to decide “whether, after resolving all ambiguities and drawing all inferences in favor of the non-moving party, a rational juror could find in favor of that party.” Pinto v. Allstate Ins. Co., 221 F.3d 394, 398 (2d Cir. 2000).
b. Plaintiffs' motion for summary judgment on their breach of contract claim
i. Defendant's underwriting guidelines
Plaintiffs argue that to establish its right to rescind, an insurer must present (1) “[a]n affidavit or testimony from the insurer's underwriter who testifies that the insurer would not have issued the particular contract if the facts had been disclosed” and (2) “the insurer's underwriting manual, guidelines, or rules.” (Pls.' Mem. 3-4.) Plaintiffs argue that Defendant has not fulfilled the second requirement because it has not presented any “underwriting manuals, guidelines, set of rules, or [] other documentation establishing what [Defendant] would consider an apartment.” (Id. at 4.) Rather, Defendant's underwriting agent, James Lambert, “conceded that [Defendant] did not have a definition for ‘apartment' or ‘apartment unit' for purposes of applying for insurance.” (Id.)
Defendant argues that “the Program Manager's Agreement entered into between [Defendant] and [Roundhill]... provides the underwriting guidelines utilized by Roundhill when issuing commercial package insurance policies through [Defendant].” (Def.'s Opp'n 11.) These guidelines “clearly provide that ‘[t]he apartment and dwelling liability classes listed above base their premium on the number of living units; with a higher premium being charged for each additional unit.'” (Id.) Defendant argues that this is consistent with Mr. Lambert's testimony that “[i]f it's capable of someone residing there, it's an apartment,” regardless of the legality of the space in question. (Id. at 10-11.)
“Under New York law, an insurer may rescind an insurance policy if it was issued in reliance on material misrepresentations.” U.S. Liab. Ins. Co. v. WW Trading Co., 813 F. App'x 636, 638-39 (2d Cir. 2020) (quoting Fid. & Guar. Ins. Underwriters, Inc. v. Jasani Realty Corp., 540 F.3d 133, 139 (2d Cir. 2008)); Dukes Bridge LLC v. Sec. Life of Denver Ins. Co., No. 20-CV-2687, 2021 WL 5986871, at *2 (2d Cir. Dec. 17, 2021) (“Under New York law, ‘an insurance policy issued in reliance on material misrepresentations is void from its inception.'” (quoting Republic Ins. Co. v. Masters, Mates & Pilots Pension Plan,77 F.3d 48, 52 (2d Cir. 1996))). New York law defines a misrepresentation as a false “statement as to past or present fact, made to the insurer by ... the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof.” N.Y. his. Law § 3105(a); Fid. & Guar. Ins. Underwriters, Inc., 540 F.3d at 139; Jackson v. Travelers Ins. Co., 113 F.3d 367, 370 (2d Cir. 1997). “The concept of misrepresentation encompasses both false affirmative statements and the failure to disclose where a duty to disclose exists.” Scottsdale Ins. Co. v. Priscilla Props., LLC, 254 F.Supp.3d 476, 481 (E.D.N.Y. 2017) (quoting Chi. Ins. Co. v. Kreitzer & Vogehnan, No. 97-CV-8619, 2000 WL 16949, at *5 (S.D.N.Y. 2000)) “An applicant for insurance is under no duty to volunteer information where no question plainly and directly requires it to be furnished,” Vella v. Equitable Life Assurance Soc'y, 887 F.2d 388, 393 (2d Cir. 1989), and “[a]n answer to an ambiguous question on an application for insurance cannot be the basis of a claim of misrepresentation .. . where ... a reasonable person in the insured's position could rationally have interpreted the question as he did,” Fanger v. Manhattan Life Ins. Co., 709 N.Y.S.2d 622, 624 (App. Div. 2000) (citations omitted); see also Berger v. Manhattan Life Ins. Co., 805 F.Supp. 1097, 1104 (S.D.N.Y. 1992). However, “where the nondisclosure, as to a matter which the insured has not been directly asked, constitutes fraud, the policy may be voided,” Aetna Cas. & Sur. Co. v. Retail Loc. 906 of AFL-CIO Welfare Fund, 921 F.Supp. 122, 132(E.D.N.Y. 1996) (citing Sebring v. Fidelity-Phenix Fire Ins. Co., 255 N.Y. 382, 386 (1931)); see also First Fin. Ins. Co. v. Allstate Interior Demolition Corp., 193 F.3d 109, 117 (2d Cir. 1999) (“[N]ondisclosure of a fact concerning which the applicant has not been asked does not ordinarily void an insurance policy absent an intent to defraud.” (quoting H.B. Singer, Inc. v. Mission Nat 1 Ins. Co., 636 N.Y.S.2d 316, 316 (App. Div. 1996))).
“An insurer may ‘avoid any contract of insurance or defeat recovery thereunder' only if a misrepresentation is ‘material.'” Principal Life Ins. Co. v. Locker Grp., 869 F.Supp.2d 359, 363 (E.D.N.Y. 2012) (quoting N.Y. Ins. L. § 3105(b)(1)). “A misrepresentation is ‘material' if ‘knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract.'” Id. (quoting N.Y. hrs. L. § 3105(b)(1)); Vella, 887 F.2d at 391 (“[W]here there has been a misrepresentation by an insured, the insurance company can avoid liability on the policy by showing that had it known the truth it would not have issued the exact same policy it did issue.” (collecting cases)); Varshavskaya v. Metro. Life Ins. Co., 890 N.Y.S.2d 643 (App. Div. 2009). “A single material misrepresentation may suffice,” Scottsdale Ins. Co. v. Bo Steel Grp., No. 14-CV-7318, 2018 WL 7223724, at *3 (E.D.N.Y. July 2, 2018), and “[e]ven an innocent misrepresentation, if material, will support rescission,” Admiral Ins. Co. v. Brookwood Mgmt. #10, LLC, No. 16-CV-437, 2018 WL 5622595, at *19 (E.D.N.Y. Mar. 30, 2018) (quoting Cont'l Cas. Co. v. Marshall Granger & Co., 6 F.Supp.3d 380, 389(S.D.N.Y. 2014)); see also Vella, 887 F.2d at 391 (“So long as a misrepresentation is material, it is no defense to an action for rescission that the misrepresentation was innocently made.” (citing Process Plants Corp. v. Ben. Nat'1 Life Ins. Co., 385 N.Y.S.2d 308, 310 (App. Div. 1976))).
The materiality determination normally presents an issue of fact for the jury, but “where the evidence concerning the materiality is clear and substantially uncontradicted, the matter is one of law for the court to determine.” Mut. Ben. Life Ins. Co. v. JMR Elecs. Corp., 848 F.2d 30, 32 (2d Cir. 1988) (quoting Process Plants Corp., 385 N.Y.S.2d at 310-11); Gemini Ins. Co. v. Integrity Contr., Inc., No. 17-CV-1151, 2019 WL 1099705, at *3 (S.D.N.Y. Mar. 8, 2019) (same). “To establish materiality as a matter of law, ‘the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show it would not have issued the same policy if the correct information had been disclosed in the application.'” Gemini Ins. Co., 2019 WL 1099705, at *3 (quoting Interboro Ins. Co. v. Fatmir, N.Y.S.2d 343, 345 (App. Div. 2011)). hi addition, “the insurer need not produce evidence of its underwriting policies in order to demonstrate materiality” in “cases where ‘ [c]ommon sense dictates that it is simply impossible to believe that, had the frill facts .. . been disclosed,' [the] insurer would have nonetheless issued the same policy, on the same terms.” Travelers Cas. & Sur. Co. of Am.,2018 WL 1508573, at *9 (first alteration in original) (quoting Cont 1 Cas. Co. v. Marshall Granger & Co., 6 F.Supp.3d 380, 390 (S.D.N.Y. 2014), affd sub nom. Conti Cas. Co. v. Boughton, 695 Fed.Appx. 596 (2d Cir. 2017)); see also Christiania Gen. Ins. Corp. v. Great Am. Ins. Co., 979 F.2d 268, 280 (2d Cir. 1992) (“Where the insurer specifically inquires as to a fact, the insured is thereby on notice that the insurer considers it material....”).
The affidavit and underwriting guidelines produced by Defendant do not establish its right to rescind because, as discussed below, the meaning of “apartment unit” in Defendant's insurance application is ambiguous. Since “[a]n answer to an ambiguous question cannot be the basis of a claim of misrepresentation where a reasonable person in the position of the insured could have rationally interpreted the question as the insured did,” the Court does not consider whether - in the absence of this ambiguity - Lambert's affidavit and Defendant's underwriting guidelines would be sufficient to establish Defendant's right to rescission. GuideOne Specialty Mut. Ins. Co. v. Congregation Bais Yisroel, 381 F.Supp. 267, 274 (S.D.N.Y. 2005).
That is, because a reasonable answer to an ambiguous question cannot constitute a material misrepresentation, it is irrelevant whether Defendant's underwriting guidelines and Lambert's affidavit otherwise establish that Defendant would not have issued the policy that it did to Plaintiffs if it knew about the basement of the Property.
ii. Ambiguity of the term “apartment”
Plaintiffs argue that “the term ‘apartment' or ‘apartment unit,' as used in the application for insurance, is ambiguous.” (Pls.' Mem. 5.) They cite to Lambert's testimony that an apartment is a “place[] in which people reside,” arguing that “there is no dispute that no one resided in the basement of the Property” and claiming that no one could live in the basement because it is “not legally habitable as an apartment or dwelling unit.” (Id. at 6-8.) Plaintiffs also cite to Defendants' underwriting guidelines, which state that “the premium is based upon the number of ‘living units,”' noting that no one lives or lawfully could live in the basement. (Pls.' Reply 9-10.) Because case law holds that “when there is no defined term, that ambiguity must be interpreted in favor of the insured,” and because a term in an insurance policy is ambiguous if it is “susceptible to more than one reasonable interpretation,” Plaintiffs argue that summary judgment is proper on their breach of contract claim. (Pls.' Mem. 7-9.)
Defendant argues that “[t]he term ‘apartment unit' as used in the policy unambiguously refers to any portion of a property where a person can reside.” (Def.'s Opp'n 11.) It claims that because the insurance application “seeks information related to the physical property to be insured” rather than the legal status of the property, Plaintiffs' argument about the legal habitability of the basement is irrelevant. (Id.) Defendant cites to Merriam-Webster's definition of an apartment as “a room or set of rooms fitted especially with housekeeping facilities and usually leased as a dwelling.” (Id. at 12). It also points to the photos taken as part of the BCI investigation, showing “a kitchen area with a stove, a bathroom and partitioned living spaces,” as well as the repair estimate showing “numerous basement repairs needed” after the fire. (Id.) Defendant further argues that the term “apartment” would not be ambiguous to “a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.” (Id. at 13.)
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.” 10012 Holdings, Inc. v. Sentinel Ins. Co., Ltd., 21 F.4th 216, 220 (2d Cir. 2021) (quoting Parks Real Estate Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., M2 F.3d 33, 42 (2d Cir. 2006)); Goldberger v. Paid Revere Life Ins. Co., 165 F.3d 180, 182 (2d Cir. 1999) (same). If the terms are unambiguous, courts should enforce the contract as written. See Parks Real Estate, 472 F.3d at 42; Goldberger, 165 F.3d at 182 (quoting Village of Sylvan Beach v. Travelers Indemnity Co., 55 F.3d 114, 115 (2d Cir. 1995)). However, if the contract is ambiguous, “particularly the language of an exclusion provision,” the ambiguity is interpreted in favor of the insured. See Goldberger, 165 F.3d at 182 (quoting Travelers Indemnity Co., 55 F.3d at 115); see also Olin Corp. v. Certain Underwriters at Lloyd s London, 347 Fed.Appx. 622, 627 (2d Cir. 2009) (same); Pepsico, Inc. v. Winterthur Int'l Am. Ins. Co., 788 N.Y.S.2d 142, 144(App. Div. 2004) (citations omitted) (“[I]f the language of the policy is doubtfill or uncertain in its meaning, any ambiguity must be resolved in favor of the insured and against the insurer.”); see also Dean v. Tower Ins. Co.,19 N.Y.3d 704, 708 (N.Y. 2012) (“[A]mbiguities in an insurance policy are to be construed against the insurer.” (alteration in original)). An ambiguity exists where “the terms of an insurance contract could suggest ‘more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integr ated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.'” Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir.2000); see Glob. Resinsurance Corp, of Am. v. Century' Indemnity Co., 22 F.4th 83, 94 (2d Cir. 2021) (same).
The insurance application's question about the number of apartment units is ambiguous. “An answer to an ambiguous question cannot be the basis of a claim of misrepresentation where a reasonable person in the position of the insured could have rationally interpreted the question as the insured did.” GuideOne, 381 F.Supp.2d at 274 (citing Fanger, 709 N.Y.S.2d at 624); see also Vella, 887 F.2d at 391-92 (holding that if “any ambiguity exists” in questions on insurance applications, “the construction will obtain most favorable to the insured”); Sec. Mut. Ins. Co. v. Perkins, 921 N.Y.S.2d 189, 190 (App. Div. 2011) (“[A] response to a particular application question will only be held to be a material misrepresentation if the question is ‘so plain and intelligible that any applicant can readily comprehend [it],' and any ambiguity will be construed against the insurer.”); Fanger v., 709 N.Y.S.2d at 624; Garcia v. Am. Gen. Life Ins. Co., 695 N.Y.S.2d 420, 421 (App. Div. 1999) (holding that the lower court had “properly granted summary judgment to the plaintiff upon its determination that the question was ambiguous and the [insured's] answer was truthful under a reasonable construction thereof'). The insurance application completed by Plaintiffs and subsequently incorporated in Plaintiffs' insurance policies asks only “How many apartment units are there?” (See First Policy 5; Second Policy 3; Third Policy 3.) The Court finds that “a reasonable person in the position of [Plaintiffs] could have rationally interpreted the question as [Plaintiffs] did,” i.e., as referring only to units that are either occupied or could legally be occupied as apartments. GuideOne, 381 F.Supp.2d at 274; see also Admiral Ins. Co. v. Brookwood Mgmt. #10, LLC, No. 16-CV-437, 2018 WL 5622595, at *21 (E.D.N.Y. Mar. 30, 2018) (finding ambiguous questions on an insurance application about prior losses, suits or claims since a reasonably intelligent person in the position of the insured “could rationally have interpreted those inquiries to pertain only to losses sustained, and claims or suits against it, related to” a specific project); Brondon v. Prudential Ins. Co. of Am.,No. 09-CV-6166, 2010 WL 4486333, at *7 (W.D.N.Y. Nov. 9, 2010) (finding ambiguous a question about whether insurance applicant suffered from heart trouble “because the term ‘heart trouble' is nowhere defined in the application, insurance plan, or summary or plan provisions”).
Defendant's arguments to the contrary are unavailing. Defendant argues that “[t]he term ‘apartment unit' as used in the policy unambiguously refers to any portion of a property where a person can reside.” (Def.'s Opp'n 11.) It insists, however, that “can reside” bears no relation to whether a person could legally reside in the space and that therefore “Plaintiffs' arguments that the basement apartment... is not ‘legally habitable as an apartment or a dwelling unit in the City of New York' has no bearing on the meaning of the term ‘apartment.'” (Id.) Defendant instead seeks to define “apartment” in terms of “the physical layout of the [Property]” and the amenities it contains, (Def.'s 56.1 Resp. ¶ 28), pointing to the fact that the basement includes “a kitchen area with a stove, a bathroom, and partitioned living spaces,” (Def.'s Opp'n 12), as well as “its own independent means of ingress and egress,” (id. at 7). Tire Court finds, however, that “a reasonable person in the position of [Plaintiffs]” could conclude that a basement where no one resides, no one apparently has ever resided, (see Second Beltrani Report 4), and no one legally could reside, (seeDef.'s 56.1 Resp. ¶ 28), is not an apartment unit solely because of its physical amenities. GuideOne, 381 F.Supp.2d at 274. Indeed, this would seem to undermine Defendant's own definitions of “apartment unit” as “any portion of a property where a person can reside" and “a living space within a building that can be occupied by one or more persons.” (Def.'s Opp'n 11, 14 (emphasis added).)
§3404
NEW YORK INSURANCE LAW §3404 THE NEW YORK STANDARD FORM FIRE POLICY
Fire insurance contracts; standard policy provisions; permissible variations (a) The printed form of a policy of fire insurance, as set forth in subsection (e) hereof, shall be known and designated as the " standard fire insurance policy of the state of New York ." (b)(1) No policy or contract of fire insurance shall be made, issued or delivered by any insurer or by any agent or representative thereof, on any property in this state, unless it shall conform as to all provisions, stipulations, agreements and conditions with such form of policy, except policies subject to the provisions of section three thousand one hundred two of this chapter which shall be required to comply with the provisions of paragraph one of subsection (f) of this section. (2) There shall be printed or typewritten at the head of such policy the name and home office address of the insurer or insurers issuing the policy and a statement whether such insurer or insurers are stock or mutual corporations or are reciprocal insurers or Lloyds underwriters. In lieu of such statement a corporation organized under a special act of the legislature of any state may so indicate upon its policy. The head of the policy may also have such devices as the insurer or insurers issuing it desire. (3) The standard fire insurance policy need not be used for effecting reinsurance between insurers. (4) If the policy is issued by a mutual, cooperative or reciprocal insurer having special regulations with respect to the payment by th
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