Augeri v Fidelity Natl. Title Ins. Co.
2011 NY Slip Op 33206(U)
December 5, 2011
Supreme Court, Nassau County
Docket Number: 5919/11
Judge: Ute W. Lally
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[* 1]
SHORT FORM ORDER
SUPREME COURT - STATE OF NEW YORK
COUNTY OF NASSAU - PART 3
Present:
HON. UTE WOLFF LALLY
Justice
H t?()
JOSEPH AUGERI and MARJORIE AUGERI,
Motion Sequence #1
Submitted September 6, 2011
Plaintiffs,
INDEX NO: 5919/11
-againstFIDELITY NATIONAL TITLE INSURANCE
COMPANY
Defendant.
The following papers were read on this motion:
Notice of Motion and Affs....................................... ...........
Affs in Opposition................................... ....... ....
Affs in Reply...................................... ............................................. 7 &8
Memoranda of Law ........................................................................ 11 a
Upon the foregoing, it is ordered that this motion by defendant Fidelity National Title
Insurance Company (Fidelity) for an order
pursuant to
CPLR 3211 (a)1. and (a)7.
dismissing the plaintiffs ' complaint is granted to the extent that the first , third , fourth , fifth
and sixth causes of actions of the complaint are dismissed. The second cause of action
remains and the action shall continue.
[* 2]
In this action , plaintiffs , the owners since on or about July 27 , 2007 , of premises
known as 4 Kathy Court , Locust Valley, New York seek to recover money damages
predicated on defendant Fidelity s alleged breach of a title insurance policy issued to
plaintiffs , bearing policy number 27- 031- 0633- 16898. Plaintiffs allege that defendant failed
to provide them with a proper defense in accordance with the policy in an action brought
by adjoining property owners who claim ownership, by adverse possession , of certain real
property along a common boundary line between their property and plaintiff' s
property.
That action brought by Carole A. And John A. Martinelli , and Delcha Tufano as
Trustee of the Testamentary Trust created in the Last Will and Testament of John. J.
Martinelli Index No. 7517/2010 is presently pending in this Court before the Hon. F. Dana
Winslow. The plaintiffs claim that they timely provided notice to defendant of the Martinelli
claims and tendered their defense in that action to defendant Fidelity requesting that the
insurer provide them with a defense without a reservation of rights. In the event defendant
Fidelity did not withdraw its reservation Qf rights , plaintiffs requested that defendant permit
plaintiffs to be defended by counsel of their own choice at defendant Fidelity s expense.
By letter dated June 11 , 2010 , defendant Fidelity s
claims counsel , David M.
Buddingh accepted the tender of coverage , i.e. , defense of plaintiffs in the Martinelli action
subject to certain reservation of rights. In this regard , the letter states as follows:
The Company specifically reserves its rights pursuant to
from Coverage
Exclusions
section of the Policy which reads in pertinent part:
liens , encumbrances , adverse claims , or
other matters (a) created , suffered , assumed , or
agreed to by the Insured Claimant;
3. Defects ,
The Company reserves all rights and defenses it has under Exclusion
3(a), including its right to terminate its defense of the Insured and to
[* 3]
deny indemnification under the Policy based on
the Insured'
knowledge of the boundary dispute with Plaintiffs as evidenced in the
purchase agreement , or a court of competent jurisdiction determines
that the insured prevented ,
obstructed or otherwise
disallowed the
adjustment , pursuant to the purchase agreement with the Riccardis , of
the boundary with the Plaintiff,
Plaintiffs allege that , from the outset , they requested that defendant Fidelity provide
a defense without a reservation of rights or , if it did not do so , authorize plaintiffs to employ
counsel of their choice at the insurer s expense. They contend that defendant Fidelity has
failed to provide a proper defense in the underlying action causing them to incur thousands
of dollars in costs and legal fees to protect their interests for which defendant refuses to
reimburse them.
Because defendant Fidelity refused to accede to plaintiffs ' request , despite repeated
demands to do so , plaintiffs commenced' this action seeking a declaration
inter alia
that
insurer must waive its reservation of rig hts. Plaintiffs also request consequential and
punitive damages arising from defendant Fidelity s alleged breach of contract; bad faith
claims handling practices; and fraud.
Defendant Fidelity seeks to dismiss the complaint pursuant to CPLR 3211 (a)1. and
(a)7. , on the grounds that plaintiffs ' claims are legally deficient in that it has provided
plaintiffs with a legal defense at its own expense in the underlying adverse possession
action in accordance with ,- 5(a) of the title insurance policy which allows the insurer to
select counsel of its own choice to represent the insured.
Said paragraph 5(a) of the title insurance policy provides as follows:
Upon written request by the Insured. . . the Company (Fidelity), as its own
cost and without unreasonable delay, shall provide for the defense of the
Insured in litigation in which any third party asserts a claim covered by this
policy adverse to the Insured. . . The Company shall have the right to select
[* 4]
counsel of its choice (subject to the right of the Insured to object for
reasonable cause) to represent the Insured as to those stated causes of
action, It shall not be liable for and will not pay the fees of any other
counsel. "
In addition , defendant asserts that plaintiffs ' erroneously argue that they are entitled
to be represented by counsel of their own choosing because counsel selected to represent
plaintiffs in the Martinelli action is affected by a conflct of interest due to defendant
Fidelity s reservation of rights. Defendant Fidelity contends that insurance companies are
not required to pay for counsel of the insured' s
choice in every reservation of rights
situation, Rather , they are only required to do so where the insurer s interest is to win the
insured' s lawsuit only on grounds that negate coverage.
Plaintiffs maintain that defendant Fidelity failed to raise the very provision on which
it bases its reservation of rights , as an exception to title either before , during or after closing
which occurred nearly three years ago, The provision at issue which is contained i the
second rider to the contract of sale between plaintiffs as purchasers , and Joseph and
Debra Riccardi as sellers , reads as follows:
Sellers agree , at their own expense , to resolve a boundary line issue
with the adjoining landowner by entering into a boundary line
agreement whereby the Purchasers shall deed a small strip of property
on the northwest
side of the property
beyond the bushes to the
adjoining landowner and the adjoining landowner shall deed a small
strip of property within the fence on the northeast side of the property
to the Purchasers. In orderto secure this obligation , Sellers shall place
500 in escrow with their attorney to be released to Sellers once the
respective deeds are duly recorded with the County Clerk or released
to Purchasers if this transaction is not completed within (1) year of
closing,
Plaintiffs further maintain that defendant Fidelity s reservation of rights is improper
and , given the conflict between defendant insurer s interest and plaintiffs ' interest , plaintiffs
[* 5]
must be represented by counsel of their own choosing at defendant Fidelity s expense in
the underlying action,
On a motion to dismiss pursuant to CPLR 3211(a)7. , the court' s function is to
determine whether the plaintiff's actual allegations fit within any cognizable legal theory
(Nonnon
City of New York 9 NY3d 825 , 827), without regard to whether these allegations
Robert E. Lawrence Real Estate 68 AD3d
(Colasacco
can ultimately be established,
706 , 708). The court must afford the pleading a liberal construction and give the plaintiff
(Hallwell
the benefit of every possible legal inference,
Gordon 61 AD3d 932 , 933), On
such a motion , however , the court will not accept as true bare legal conclusions and factual
Herrick, Feinstein , LLP
(Palazzolo
claims which are flatly contradicted by the evidence.
298 AD2d 372).
A motion to dismiss pursuant to CPLR 3211 (a)7. will be denied" ' unless it has been
shown that a material fact as claimed by the pleader to be one is not a fact at all and
(Sokol
unless it can be said that no significant dispute exists regarding it.' "
AD3d 1180 , 1182
, quoting
Guggenheimerv
Ginzburg,
Leader, 74
43 NY2d 268 , 275), Where a party
offers evidentiary proof on a CPLR 3211 (a)7, motion , the focus of the inquiry turns from
whether the plaintiff has stated a cause of action to whether the plaintiff actually has one,
(Guggenheimer
Ginzburg, supra at 275).
To succeed on a motion to dismiss pursuant to CPLR. 3211 (a)1. , the documentary
evidence that forms the basis of the defense must be such that it resolves all factual issues
(Kopelowitz
as a matter of law and conclusively disposes of the plaintiff's claim,
Mann 83 AD 3d 793 , 796;
Reid
Gateway Sherman ,
Inc.
Co. , Inc.
60 AD3d 836 ,
837),
[* 6]
Furthermore , in order for evidence to qualify as documentary, it must be unambiguous
Doe 73 AD3d 78 , 85). Affidavits submitted by
(Fontanetta
authentic and undeniable.
defendant do not quality as documentary evidence upon which a proponent of dismissal
59 AD3d 837 , 838).
Fogarty,
(Crepin
can rely,
Viewing the complaint
Associates
, Inc.
in the light most favorable
to
(Kaplan- Bello
plaintiffs
Angelo 57 AD3d 948), and assuming the factual allegations contained
Weiss 584 , 585), the
(Union State Bank
therein to be true for the purpose of this motion
complaint adequately states a cause of action for breach of contract (second cause of
action).
As a general rule , an insurer has the right to control the defense of underlying
litigation against its insured based on the right of the insurer tc?
(Staats
interests.
Wegmans Food Mkts. , Inc"
48 AD 3d 1115). A
protect its financial
fiduciary relationship
existsbetween an insurer and its insured requiring good faith by the carrier in its dealings
with the insured, In defending a claim , an insurer is obligated to act with undivided loyalty.
(Hartford Acc.
Indem. Co.
It may not place its own interests above those of the insured.
Michigan Mut. Ins. Co"
93 AD2d 337 , 340-41).
It is well settled that where a conflict of interest is probable , such as here , where the
insurer offers to defend a suit against its insured only under a reservation of rights , the
interests of the insured and insurer are best accommodated by permitting the insureds to
choose their own counsel and by requiring the insurer to pay the reasonable fees of that
(Public Serv, Mut.
counsel.
Stores
, Inc.
Twin City Fire Ins.
Ins.
Co. v
Goldfarb 53 NY2d 392
Co. , 28 AD3d 32;
City of New York
, 401;
Federated Dept.
Clarendon Natl. Ins,
[* 7]
Street and 2
Co. , 309 AD2d 779;
Ave. Garage Assoc.
Tieor Tit. Guar"
207 AD2d
225 227 Iv den. 87 NY2d 802), Where there is a potential conflict of interest between an
insured and an insurance provider, the insured should be permitted to select his own
attorney with the reasonable value of such services , both past and future , to be paid by the
(Prashker
insurance provider,
Limited States Guarantee Co. 1 NY2d 584 , 593).
Notwithstanding defendant Fidelity s assertions to the contrary, its reservation of
rights based on a provision of the contract which was not raised as an exception to the
policy herein , and of which the insurer was aware prior to closing, raises an issue as to
whether the insurer breached its contract of insurance with plaintiffs by refusing to withdraw
its reservation of rights or , alternatively, by refusing to afford plaintiffs the opportunity to
retain c
unsel of their own choice to represent them in the underlying action at the insurer
expense. Given that factual issues exists as to whether defendant breached its duties
under the policy herein , the second cause of action must be sustained.
Plaintiffs ' request set forth in the fifth cause of action for consequential damage
(legal fees and litigation costs) must be dismissed. An insured may not recover
the
expenses incurred in bringing an affirmative action against an insurerto settle his/her rights
under a policy.
(Silva
F.R. Real Estate Oevelopment Corp. 58 AD3d 449 , 450 (citations
and quotation marks omitted)). While attorney s fees may be recovered where the insurer
acts in bad faith
(Bi- Economy Market, Inc.
Harleysvilole 10 NY3d 187), such a claim is
not viable under the facts at bar.
Since no private cause of action can be maintained for unfair insurance settement
practice , the first and third causes of action wherein plaintiffs seek monetary damages and
[* 8]
a declaration that defendant Fidelity acted in bad faith in dealing with plaintiffs in violation
of Insurance Law
Allstate Indem, Co"
(Kantrowitz
2601 must be dismissed.
48 AD3d
753),
As a further reason to dismiss the third cause of action , the court notes that a claim
predicated on a breach of the implied covenant of good faith is duplicative of the breach
2601 provides
of contract claim set forth in the second cause of action. Insurance law
that insurers must deal fairly with its insureds and the public at large. It does not give rise
to a private cause of action and cannot be construed to impose a tort duty of care to the
insured separate and apart from the insurance contract.
Ins,
(New York Univ.
Continental
Co. , 87 NY2d 308 , 317).
Similarly, the fourth cause of action for fraud is deficient in that a course of action
(Hylan
for fraud does not lie where the only fraud alleged relates to a breach of contract.
Elec. Contr. ,
Inc. v MasTec N, Am. Inc. 74 AD3d 1148 , 1149),
A demand for punitive damages as asserted in the sixth cause of action does not
constitute a separate cause of action for pleading purposes and must be dismissed,
(Rocanova
Equitable Life Assur. Socy.
of U.S.
87 NY2d 603 , 613). Moreover ,
the
complaint neither alleges conduct of such an egregious nature directed at plaintiffs , nor a
pattern of such conduct directed at the public in general , sufficient to sustain a demand for
punitive damages.
(Denenberg
Rosen 71 AD3d 1876
, 196;
Johnson
Allstate Ins. Co.
33 AD3d 665 , 666), Punitive damages are recoverable where a defendant's conduct
evinces a high degree of moral turpitude and demonstrates such wanton dishonesty as to
imply a criminal indifference to civil obligations.
(Dowlings, Inc.
Homestead Davies , Inc.
[* 9]
88 AD3d 1226 (internal quotation marks and citations omitted)). The complaint is devoid
of allegations sufficient to support a claim for punitive damages.
Dated:
DEl; 0 5 lUlt
J(1
UTE WOLFF LAL
TO:
Fidelity National Law Group
Attorneys for Defendant
350 Fifth Avenue , Suite 3000
New York , NY 10118
Sahn Ward Coschignano & Baker PLLC
Attorneys for Plaintiffs
333 Earle Ovington Boulevard , Suite 601
Uniondale , NY 11553
augeri- fidelitynationaltitle , # 1/cplr
ENTERED
DEC
08
2011
NASSAU COUNTY
COUNTY CLERK' S OFFICE
