99 Wall Development Inc. v. Allied World Specialty Insurance Company, No. 1:2018cv00126 - Document 128 (S.D.N.Y. 2019)
Court Description: OPINION AND ORDER re: 108 FIRST MOTION to Amend/Correct For Leave to File Amended Intervenor-Complaint. filed by T.G. Nickel & Associates LLC. For the reasons set forth above, Defendants Motion to Amend is GRANTED. The Clerk is respectfully requested to terminate the motion at ECF 40. SO ORDERED. (Signed by Magistrate Judge Katharine H. Parker on 5/17/2019) (ks)
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99 Wall Development Inc. v. Allied World Specialty Insurance Company Doc. 128 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 05/17/2019 99 WALL DEVELOPMENT INC., Plaintiff, OPINION AND ORDER -and— 18-CV-126 (RA) (KHP) T.G. NICKEL & ASSOCIATES, LLC., Plaintiff-Intervenor, – against – ALLIED WORLD SPECIALTY INSURANCE COMPANY (f/k/a DARWIN NATIONAL ASSURANCE COMPANY), Defendant. KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE This case involves a dispute over insurance benefits under a Commercial Inland Marine Policy the Poli issued by Defendant Allied Wo ld “pe ialt I su a e Co pa Allied to Plai tiff 99 Wall De elop e t I . 99 Wall a d I te e o -Plaintiff T.G. Nickel & Asso iates, LLC TGNA . TGNA has moved to amend its Intervenor Complaint.1 For the reasons discussed below, the motion (See Doc No. 108) is granted. BACKGROUND 99 Wall owns a building at 99-101 Wall Street. (IC ¶ 6.) The building was a 29-story office building that has since been converted into residential condominiums. (IC ¶ 8.) In February 2015, 99 Wall and TGNA entered into a construction management agreement The Inter e o Co plai t is efe ed to he ei as IC. (See Doc No. 51.) The proposed amended Intervenor Complaint is referred to he ei as AIC. (See Doc No. 109-1.) The Fi st A e ded Co plai t filed 99 Wall agai st Allied is efe ed to he ei as the FAC. (See Doc No. 28.) 1 1 Dockets.Justia.com pursuant to which TGNA agreed to manage the conversion of the office building into residential space and provide the necessary labor, material, equipment, and supervision the P oje t . (IC ¶ 7.) Construction on the Project started in December 2014 and continued through September 2017. (IC ¶ 10.) Several problems occurred during the course of the Project. On July 29, 2016 and October 6, 2016, the building suffered water damage (collectively referred to as the Wate Losses . (IC ¶ 11. I Jul , ate aused da ages to the uildi g s ele ato s. IC ¶ 13.) In October, water caused damage to various condominium units and common areas in the building. (IC ¶ 15.) The water damage required extensive remediation and caused significant delays to the Project. (IC ¶ 16.) 99 Wall timely submitted claims to Allied for damages caused by the Water Losses. (FAC ¶ 40.) 99 Wall alleges that Allied ignored its payment obligations and delayed paying benefits by asking for documents unnecessary for purposes of evaluating the insurance claim and documents already produced to it by 99 Wall. (FAC ¶¶ 41-45. 99 Wall lai s that Allied s delay in paying benefits under the Policy had a substantial negative impact on the viability and profitability of the Project, including causing some condominium buyers to refuse to close on units and canceling their purchase agreements and causing 99 Wall losses in buyer concessions and discounts. (FAC ¶¶ 46-47.) 99 Wall claims that it fully complied with the terms of the Policy and that Allied owes substantial amounts under the Policy. 99 Wall also sued TGNA in New York State Supreme Court seeking damages for the same losses as those alleged in its action against Allied. (IC ¶ 51.) TGNA likewise claims that it suffered compensable losses under the Policy. It claims that 2 it incurred additional construction costs and expenses, additional soft costs to reduce losses, and costs associated with delay of the Project. (IC ¶¶ 39, 41, 49-50.) It also claims that as a esult of Allied s dela a d de ial of 99 Wall s i su a e lai s, it is o fa i g a d i u i g the costs of defending the action by Allied in New York State court. (IC ¶¶ 51-53.) In the IC, TGNA asserted a claim for breach of contract and also sought interest, consequential damages, a d easo a le atto e s fees a d osts. (See generally IC.) Although Plaintiff 99 Wall and Intervenor Plaintiff TGNA asserted only breach of contract claims, Allied moved to dismiss the claims filed by 99 Wall to the extent they could be read to assert claims for breach of the covenant of good faith and fair dealing and for common-law or statutory bad faith. (See Doc No. 33 at 1, 7-8.) On January 28, 2019, the Honorable Ronnie A a s issued a o al uli g de i g Allied s otio agai st 99 Wall a d g a ti g i pa t a d denying in part the motion against TGNA. (Doc No. 102, Transcript of January 17, 2019 Co fe e e T . .) Judge Abrams recognized that New York does not recognize a separate cause of action for bad faith but that courts have permitted a bad faith allegation to be included in a complaint as part of a breach of contract cause of action. See Tr. at 4-5 (citing Woodhams v. Allstate Fire and Casualty Co., 748 F. Supp. 2d 211, 223 (S.D.N.Y. 2010); Rockville Center v. General Reinsurance Corp., 2016 WL 5793996, at *3-4 (S.D.N.Y. Sept. 23, 2016)). Judge Abrams also pe itted 99 Wall s p a e fo o se ue tial da ages to e ai e ause under New York law, consequential damages may be recoverable in an insurance breach of contract action he e the o se ue tial da ages esult f o deali g , a d the da ages e e of a a ea h of the covenant of good faith and fair ithi the o te platio of the pa ties as the p o a le esult ea h at the ti e of o p io to o t a ti g. Id. at 5-6 (quoting Panasia Estates, Inc. v. Hudson Ins. Co., 10 N.Y.3d 200, 203 (2011)). Judge Abrams noted that 99 Wall adequately 3 alleged consequential damages insofar as it asserted the Allied repeatedly required it to produce unreasonable and duplicate documents causing inordinate delay in the adjustment and review of the claim for the Water Losses and other damages. Id. at 6 (citing Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York, 10 N.Y.3d 187, 195 (2008)). Judge Abrams also noted that 99 Wall adequately pleaded that the damages were within the contemplation of the parties given that the Poli s Dela i Co pletio Pa t p o ides o e age fo some of the consequential damages 99 Wall seeks. Id. at 6-7. The Cou t eje ted Allied s a gument that consequential damages are precluded by the Policy. Id. at 7. Finally, Judge Abrams deferred uli g o Allied s e uest to dis iss 99 Wall s lai ould ake out a lai fo atto e s fees i the e e t 99 Wall u de Ne Yo k s a o e eption to the general rule prohibiting lai s fo atto e s fees i the i su a e o te t.2 Id. at 8 (citing Sukup v. State of New York, 19 N.Y.2d 519, 522 (1967)). “he like ise defe ed uli g o Allied s e uest to dis iss 99 Wall s claim for interest, finding that interest would be determined if 99 Wall eventually obtains a judgment. Id. at 9. I o t ast to he uli g ith espe t to 99 Wall, Judge A a s g a ted Allied s to dis iss TGNA s e uest fo otio o se ue tial da ages e ause TGNA failed to plead that Allied s delay and failure to pay was done in breach of its duty of good faith and fair dealing. Id. at . Fo the sa e easo , Judge A a s g a ted the atto e s fees. Id. She de ied Allied s otio to dis iss TGNA s e uest fo otio to dis iss TGNA s e uest fo i te est fo the same reason she denied the motion against 99 Wall. Id. And, finally, she dismissed TGNA s e uest fo a de la ato judg e t that it is a a ed i su ed o the poli , that Defendant In Sukup, the Court held that an insured ould e o e atto e s fees if it ould ake a sho i g of su h ad faith i de i g o e age that no reasonable carrier would, under the given facts, be expected to asse t it. 19 N.Y.2d at 522. 2 4 ust p o ide i su a e o e age to Plai tiff-Intervenor, and that Defendant owes coverage for various damages including construction costs to repair physical loss; additional construction costs and expenses; additional soft costs to reduce loss; and costs associated with delay on the grounds that a declaratory judgment was duplicative of the breach of contract claim and would not serve the purpose of a declaratory judgment action. Id. at 11-12 (citing Intellectual Partner v. Inst. Credit Partners LLC, 2009 WL 1974392, at *6 (S.D.N.Y. July 8, 2009)). Judge Abrams gave TGNA leave to replead. Id. at 12-13. TGNA s p oposed AIC, filed pursuant to the schedule set by the Court, provides greater specificity as to its requests for consequential da ages a d atto e s fees ut othe ise contains the same and singular breach of contract claim. LEGAL STANDARD Under Rule 15(a)(1) of the Federal Rules of Civil Procedure: [A] party may amend its pleading once as a matter of course within . . . 21 days after serving it, or . . . if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier. I all other cases, a party may amend its pleading only with the opposing pa t s written consent o the ou t s lea e. The ou t should f eel gi e lea e he justi e so e ui es. Fed. R. Civ. P. 15(a)(2). The United States Court of Appeals for the Second Circuit has stated that [t]his permissive standard is consistent with our strong preference for resolving disputes on the e its. Williams v. Citigroup Inc., 659 F.3d 208, 212–13 (2d Cir. 2011) (citation and internal quotation marks omitted). Under Rule 15, leave to amend should be given a se t evidence of undue delay, bad faith or dilatory motive on the part of the movant, undue prejudice to the 5 opposing party, or futility. Monahan v. N.Y.C. Dep’t of Corrs., 214 F.3d 275, 283 (2d Cir. 2000) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). DISCUSSION In this case, there has been no undue delay. TGNA timely moved to amend in response to Judge A a s uli g o Allied s otio to dis iss. See Local 802 Associated Musicians of Greater New York v. Parker Meridien Hotel, 145 F.3d 85, 89-90 (2d Cir. 1998) (holding that District Court abused discretion when refusing to permit movant to amend answer shortly after a ruling regarding an error in the pleadings). There also is no prejudice to Allied insofar as no additional discovery is needed by allowing the amendment—the parties are already exploring discovery elated to Allied s alleged ad faith i o e tio ith 99 Wall s e uest fo o se ue tial da ages a d atto e s fees. Thus, permitting the amendment will not result in significant, if any, additional costs to Allied. Nor will permitting the amendment result in delay, as discovery is o goi g. Fi all , o siste t ith Judge A a s p io uli g, the a e d e t is ot futile e ause the AIC now includes sufficient allegations of a breach by Allied of its implied covenant of good faith and fair dealing, which in some instances can justify consequential damages and an award of attorneys fees and costs. (See Tr. at 9-12.) Allied s p i ipal issue with the proposed amended pleading is that TGNA has largely pa oted the allegatio s i 99 Wall s o plai t with respect to the allegations supporting its e uest fo o se ue tial da ages a d atto e s fees. (AIC ¶¶ 23-38 (describing Policy provisions that cover the losses sought by TGNA); AIC ¶¶ 41, 44-5 e og ize TGNA s lai des i i g Allied s efusal to a d da ages i ludi g additio al o st u tio osts, uildi g ate ials costs, soft costs, claim preparation expenses, and costs associated with delay); AIC ¶¶ 64-69 (describing bad faith and damages flowing therefrom).) However, this is unsurprising given that 6 TGNA s lai a ises f o the e sa e Poli , Wate Losses, and conduct by Allied. Allied s a gu e t that no contract claim can be asserted because it has no record of TGNA submitting a claim is inappropriate at this stage of the litigation; TGNA asserts that it filed a claim under the Policy and whether that is the case goes to the ultimate merits of the claim. (See AIC ¶ 42.) For this reason, the Court does not consider the affidavit of Ronald Keleman submitted by Allied i oppositio to TGNA s otio . Friedl v. City of New York, 210 F.3d 79, 83-84 (2d Cir. 2000) (holding that a district court must exclude additional material outside are presented in response to a 12(b)(6) motion or convert the motion to one for summary judgment); see White v. Fein, Such and Crane, LLP, 2016 WL 6493415, *2 (W.D.N.Y. Nov. 1, 2016) (holding that documents or affidavits submitted in opposition to a motion to amend that are beyond the scope of plaintiff s complaint and amended complaint are properly excluded as outside the procedural confines of a motion to dismiss). Finally, Allied s a gu e t that TGNA s allegatio s of ad faith a e less o ust tha those plead by 99 Wall and the amendments are thereby unwarranted is also without merit. TGNA s allegations satisfy the notice pleading requirements of Federal Rule of Civil Procedure 8. See Fed. R. Civ. P. 8(a). Indeed, courts in this Circuit have found similar allegations sufficient at the pleading stage. See Sikarevich Family L.P. v. Nationwide Ins. Co., 30 F. Supp. 3d 166, 173 (E.D.N.Y. 2014) (holding that allegatio that plai tiff suffe ed loss of usi ess i o e due to defe da t s failu e to pa its lai a d alue its lai a d that defe da t de ied its i su a e lai suffi ie t to suppo t e uest fo i ad faith faili g to i estigate o se uential damages); see also Young Men's Christian Association of Plattsburgh v. Philadelphia Indemnity Insurance Company, 18-CV0565(LEK/DJS), 2018 WL 6267923, *6-7 (N.D.N.Y. Nov. 30, 2018) (finding that a prayer for consequential damages requires "an allegation suggesting" that the parties contemplated 7 consequential damages at the time of contracting); Harriprashad v. Metropolitan Propety and Casualty Ins. Co., 09-CV-3105(ENV)(ALC), 2011 WL 6337699, *2 (E.D.N.Y. Nov. 17, 2011) ("Here plaintiff makes the argument that [defendant] denied the coverage in bad faith, accordingly, at this liberal pleading stage, plaintiff should be permitted to assert a claim for special damages."); Woodworth v. Erie Ins. Co., 05-CV-6344, 2009 WL 1652258, *5 (W.D.N.Y. Jun. 12, 2009) (granting in part leave to amend complaint to assert demand for consequential damages). CONCLUSION For the reasons set forth above, Defe da ts Motion to Amend is GRANTED. The Clerk is respectfully requested to terminate the motion at ECF 40. SO ORDERED. Dated: May 17, 2019 New York, New York KATHARINE H. PARKER United States Magistrate Judge 8
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