Greater N.Y. Mut. Ins. Co. v Nahir Intl. Trading Corp.

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Greater N.Y. Mut. Ins. Co. v Nahir Intl. Trading Corp. 2017 NY Slip Op 31344(U) June 19, 2017 Supreme Court, New York County Docket Number: 151493/2014 Judge: Kelly A. O'Neill Levy Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 1] 7 • NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 19 -----------------------------------------------------------------------------------X GREATER NEW YORK MUTUAL INSURANCE COMPANY AS SUBROGEE OF DERFNER MANAGEMENT, INC. AND ALL OTHER NAMED INSUREDS UNDER POLICY NUMBER 1131M90608 INDEX NO. 151493/2014 MOTION DATE Plaintiff, MOTION SEQ. NO. 002 -vNAHIR INTERNATIONAL TRADING CORP., DECISION AND ORDER Defendant. -----------------------------------------------------------------------------------X The following e-filed documents, listed by NYSCEF document number ·were read on this application to/for HON. KELLY O'NEILL LEVY: Defendant Nahir International Trading Corp. moves, pursuant to CPLR 3212, for an order granting summary judgment against plaintiff Greater New York Mutual Insurance . Company, as subrogee ofDerfner Management, Inc. (Derfner), dismissing the complaint and all . cross-claims against it. Plaintiff opposes and cross-moves, pursuant to CPLR 3212, for an order granting summary judgment against Defendant on the issue of liability. BRIEF BACKGROUND This action arises from an incident in which a fire allegedly erupted in Defendant's premises at 234 West 39th Street, Manhattan on June 6, 2012, causing damages. Derfner owns the building located at 234 West 39th Street, and Defendant was a tenant in the building at the time of the incident. Plaintiff, an insurance company, brings this subrogation action on behalf of 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 2 of 8 Page 1 of7 [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 2] NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 Derfner againstDefendant, seeking the sum of$175,139.34, together with costs and disbursements and statutory interest. 1 The controversy centers on whether the waiver of subrogation contained in paragraph 9(e) of the Standard Form of Store Lease entered into by Harold Derfner Co. LLC and Defendant entitled "Destruction, Fire and Other Casualty" is limited to the demised premises or includes all losses. Plaintiff argues that the waiver of subrogation provision in paragraph 9( e) specifically refers to the "demised premises" and therefore applies only to the destruction of Defendant's demised premises. Defendant argues that any language in 9( e) referencing the demised premises is "explanatory" in nature and thus the waiver of subrogation clause includes all losses. Both· parties rely on the Court of Appeals decision Kaf-Kaf, Inc. v. Rodless Decorations, Inc., 90 N.Y.2d 654 (1997) for support. ANALYSIS Subrogation is the equitable doctrine that "allows an insurer to stand in the shoes of its insured and seek indemnification from third parties whose wrongdoing has caused loss for which the insurer is bound to reimburse." Id: at 660. A waiver of subrogation provision therefore allocates the risk of liability to the insurer, and "[w]hile parties to an agreement may waive their insurer's right of subrogation, a waiver of subrogation clause cannot be enforced beyond the scope of the specific context in which it appears." Id.; see also Gap. Inc: v. Red Apple Companies, Inc., 282 A.D.2d 119, 124 (1st Dep't 2001); State Farm Ins. Co. v. JP. Spano Const., Inc., 55 A.D.3d 824, 825 (2d Dep't 2008). 1 The complaint states that "[u]pon information and belief, plaintiff adjusted the claim of its insured in the amount of $175, 139.34 and paid its insureds $170, 139.34 after application of a $5,000.00 deductible, with plaintiff thereby becoming subrogated to the claim of its insureds herein." if 8. I 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 3 of 8 Page 2 of 7 [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 3] NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 Paragraph 9(e) of the Standard Form Loft Lease at issue in Kaf-Kaf, entitled "Destruction, Fire and Other Casualty" states, in pertinent part: "[E]ach party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Landlord and Tenant each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance and also, provided that such a policy can be obtai.ped without additional premiums. Tenant acknowledges that Landlord will not carry insurance on Tenant 'sfurniture andlorfurnishings or any.fixtures or equipment, improvements or appurtenances removable by Tenant and agrees that Landlord will not be obligated to repair any damage thereto or replace the same" (emphasis in original). The Kqf-Kaf court concluded that the landlord's and the tenant's waiver of subrogation regarding "any claim against the other party for loss or damage resulting from fire or other casualty" was not limited to demised premises, but also encompassed the landlord's claims for loss ofrent and the tenant's claims for personal property damage and business interruption losses. Id. at 660. The Court of Appeals further reasoned that "[a]lthough subsections (a) through (d) in [paragraph 9] specify the 'demised premises,' the waiver of subrogation clause in subsection (e) is conspicuously devoid of any mention of the 'demised premises."' Additionally, "subsection (e) makes explicit reference to items which clearly do not fall within the definition of' demised premises,'' such as 'furniture and/or furnishings or any fixtures and equipment, improvements or appurtenances removable by" the tenant "indicating that the application of the waiver clause was not intended to be limited to the 'demised premises."' Id. In the case at bar, paragraph 9(e) of the lease between Harold Derfner Co. LLC and Defendant states, in relevant part: 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 4 of 8 Page 3 of 7 [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 4] NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 "[E]ach party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible, and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other, or anyone claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade.fixtures, goods and merchandise located therein" (emphasis added). Unlike in the lease analyzed in Kaf-Kaf, paragraph 9(e) of the instant lease specifically mentions the "demised premises." However, in The Travelers Property v. A& R Kalimian Realty, L.P., 2007 WL 4307389 (Sup. Ct. N.Y. County 2007), citing Kaf-Kaf, a case with a lease provision like the one at bar, the court found that the waiver of subrogation clause was broad and encompassed loss of rent, personal property damage and business interruption losses. Paragraph 9(e) of the lease in Travelers states, in relevant part: "[E]ach party shall look first to any insurance in its favor before making any claim against the other party/or recovery/or loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and tenant each herby releases and waives all right of recovery with respect to subparagraphs (b), (d), and (e) above, against the other or anyone claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein" (emphasis added). The pertinent lease language in Travelers is identical to that of the lease here. Plaintiff contends that the court in Travelers held contrary to the Court of Appeals in Kaf-Kaf, and argues that the explicit inclusion of the term "demised premises" in paragraph 9(e) necessarily limits the scope of the waiver of subrogation provision to apply to the "demised premises" only. A deeper analysis shows why both Travelers and Kaf-Kaf reach the same result despite differences in lease language and thus the waiver provision in the instant case bars Plaintiffs subrogation claim. 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 5 of 8 Page 4 of 7 [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 5] NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 As discussed above and reiterated in Travelers, the Court of Appeals held that the waiver of subrogation clause set forth in the lease regarding "any claim against the other party for recovery for loss or other damage resulting from fire or other casualty" was broad and encompassed loss of rent, personal property damage and business interruption losses. The Court of Appeals noted that paragraph 9(e) explicitly included "personal property, equipment, trade fixtures, goods and merchandise located therein," in addition to damage to the demised premises. In Cresvale Intern. Inc. v. Reuters America. Inc., a property insurer sought to recover amounts it paid for tenant's fire-related property and business interruption losses. 257 A.D.2d 502 (1st Dep't 1999). The First Department held that the waiver of subrogation provision in the commercial lease regarding claims for any loss or damage to the tenant's property resulting from fire or other hazards covered by fire and extended coverage insurance was not limited to claims for property damage, but also encompassed any loss covered under tenant's property policy, including business interruption losses. Specifically, "the waiver clause applied to 'any loss or damage to [tenant's] property ... resulting from fire or other hazards covered by such fire and extended insurance coverage."' Id. at 505. The Cresvale court concluded "that the use of the words 'any loss,' followed by the disjunctive 'or,' requires a much broader reading" beyond "limiting the waiver to claims for property damages." The court cited the Third Department case Coutu v. Exchange Ins. Co., 174 A.D.2d 241, 243 (3d Dep't 1992), noting that, "where two words in [an] exclusion clause [are] stated in disjunctive, they must be separately considered." Id. It necessarily follows that, here, the disjunctives in the lease must require a much broader construction. As with the waiver of subrogation provisions in Kaf-Kaf and Cresvale, this court must construe the waiver of subrogation clause as extending to "any" loss. Furthermore, this 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 6 of 8 Page 5 of 7 [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 6] •• ,. I' .. NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 court must construe the waiver of subrogation clause as extending beyond the demised premises as it also uses the disjunctive "or" to make explicit reference to removable items which clearly do not fall within the definition of "demised premises," such as, "any personal property, equipment, trade fixtures, goods and merchandise." Accordingly, the subrogation claim is barred and Plaintiffs complaint is dismissed. See Ins. Co. ofN. Am. v. Borsdorff Servs., Inc., 225 A.D.2d 494, 494 (1st Dep't 1996) ("waiver of subrogation provisions barring one party's insurer from bringing a subrogation action against the other party to recover amounts paid out under the insurance policy, is valid and enforceable, as an allocation of risk provision, and thereby precludes this subrogation"). As mentioned above, a waiver of subrogation allocates the .risk of li~bility to the insurer. See Gap, Inc. v. Red Apple Companies. Inc." at 124 (1st Dep't 2001); State Farm Ins. Co. v. JP. Spano Const., Inc., at 825 (2d Dep't 2008). Nevertheless, a waiver clause in an agreement does not preclude "one party from suing the other to recover for a lo~s to the extent that such loss is not required by the parties' agreement to be covered-and, in fact, is not covered-by insurance." Reade v. Reva Holding Corp., 30 A.D.3d 229, 233 (1st Dep't 2006). Here, however, plaintiff insurer seeks the amount covered by it and paid out. In affording the parties freedom of contract, the waiver bars Plaintiffs claim ofliability. See Great American Ins. Co. of New York v. Simplexgrinnell LP, 60 A.D.3d 456 (1st Dep't 2009) (holding that waiver of subrogation provision established defense to gross negligence claim); see also Tower Risk Mgt. v. Ni Chunp Hu, 84 A.D.3d 616 (1st Dep't 2011). CONCLUSION AND ORDER For the reasons stated above, the court finds that the waiver of subrogation provision covers all loses and Plaintiffs liability claim is necessarily precluded. Accordingly, it is hereby 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 7 of 8 Page 6 of 7 [*FILED: NEW YORK COUNTY CLERK 06/21/2017 04:13 PM 7] NYSCEF DOC. NO. 60 INDEX NO. 151493/2014 RECEIVED NYSCEF: 06/21/2017 ORDERED that defendant Nahir International Trading Corp.'s motion for an order granting summary judgment dismissing the complaint is granted; and it is further ORDERED that plaintiff Greater New York Mutual Insurance Company's cross-motion for an order granting summary judgment on the issue of liability is denied. The clerk is directed to enter judgment accordingly. This constitutes the decision and order of the court. 6/19/2017 DATE CHECK ONE: § CASE DISPOSED GRANTED APPLICATION: CHECK IF APPROPRIATE: D NON-FINAL DISPOSITION DENIED GRANTED IN PART SETTLE ORDER SUBMIT ORDER DO NOT POST FIDUCIARY APPOINTMENT 151493/2014 GREATER NEW YORK MUTUAL vs. NAHIR INTERNATIONAL TRADING 8 of 8 0 D OTHER REFERENCE Page 7 of 7

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