Fabozzi et al v. Lexington Insurance Company et al
Filing
101
MEMORANDUM & ORDER. For the reasons set forth in the attached memorandum and order, Defendants' motion in limine seeking dismissal of the Complaint is denied. The parties shall contact the Court to schedule a pre-trial conference. Ordered by Judge Margo K. Brodie on 5/30/2014. (Ramos, Christopher)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------------PAUL FABOZZI and ANNETTE FABOZZI,
Plaintiffs,
MEMORANDUM & ORDER
04-CV-4835 (MKB)
v.
LEXINGTON INSURANCE COMPANY, JOHN
DOES 1–10 and ABC CORPS. 1–10,
Defendants.
---------------------------------------------------------------MARGO K. BRODIE, United States District Judge:
Plaintiffs Paul and Annette Fabozzi commenced the above-captioned action against
defendant Lexington Insurance Company (“Defendant”), John Does 1–10 and ABC Corps. 1–
10, 1 on October 29, 2004, alleging that Defendant breached the terms of a homeowner’s
insurance policy covering the Fabozzi home in Staten Island by failing to pay for property
damage. Plaintiffs alleged breach of contract and breach of the implied covenant of good faith
and fair dealing claims. Defendant moved for summary judgment and on January 8, 2009, the
Honorable Sandra Townes granted Defendant’s motion for summary judgment, holding that the
action was barred by the statute of limitations. On April 8, 2010, the Second Circuit vacated the
decision and remanded the case to the district court. (Docket No. 39.) On November 22, 2011,
Defendant again moved for summary judgment, arguing Plaintiffs failed to give “prompt” notice
of the claim as required by the policy, that Plaintiffs’ cause of action alleging a breach of the
1
Because discovery has closed and Plaintiffs have not identified any other party, each
unnamed party is dismissed from this action. Vega-Santana v. Nat’l R.R. Passenger Corp., 956
F. Supp. 2d 556, 563 (S.D.N.Y. 2013); see also Kemper Ins. Companies, Inc. v. Fed. Exp. Corp.,
115 F. Supp. 2d 116, 125 (D. Mass. 2000) (“Fictitious parties must eventually be dismissed, if
discovery yields no identities.”), aff’d, 252 F.3d 509 (1st Cir. 2001).
duty of good faith and fair dealing should be dismissed as a matter of law, and that the policy
does not cover Plaintiffs’ loss. On March 26, 2012, Judge Townes granted in part and denied in
part Defendant’s motion for summary judgment (the “March 2012 Decision”). (Docket Entry
No. 60.) Judge Townes dismissed Plaintiffs’ breach of the duty of good faith and fair dealing
claim but denied Defendants’ motion as to the breach of contract claim. 2
On October 26, 2012, Defendant filed a motion in limine to preclude the testimony of
Plaintiffs’ experts, and to dismiss the Complaint for Plaintiffs’ inability to offer prima facie
proof of a covered loss or damages absent such expert testimony. At a conference on February
20, 2013, the Court precluded Plaintiffs from offering expert testimony but requested briefing as
to the admissibility of lay opinion testimony by Plaintiffs’ witnesses as to conclusions drawn
from their observations. (Minute Entry dated February 20, 2013.) At oral argument on June 5,
2013, the Court held that Plaintiffs’ witnesses would be permitted to testify regarding their
personal factual knowledge based on their observations but would not be permitted to offer any
conclusions or opinions. (Minute Entry dated June 5, 2013.) The Court requested additional
briefing on Defendant’s argument that, absent expert testimony, Plaintiffs could not establish a
prima facie breach of contract claim warranting dismissal of the Complaint. (Id.) For the
reasons discussed below, Defendants’ motion to dismiss the Complaint is denied.
I.
Background
The Court assumes familiarity with the underlying facts, as set forth in the March 2012
Decision. Only the facts necessary for the resolution of the instant motion are included below.
2
This action was reassigned to the undersigned on March 28, 2012.
2
a.
Damage to Plaintiffs’ Property
Plaintiffs own a beachfront home (the “Property”) located on the Raritan Bay of Staten
Island, New York. (Pl. 56.1 ¶ 11; Def. Reply 56.1 ¶ 11.) In 2002, Plaintiffs renewed their
insurance policy (the “Insurance Policy”) with Defendant for a twelve month term from April 1,
2002 to April 1, 2003 for the Property. (Insurance Policy, annexed to the declaration of Brian J.
Bolan dated Aug. 30, 2012 (“Bolan Decl.”) as Ex. F.)
At some point between September 2001 and May 2002, Plaintiffs noticed that their home
suffered from “serious structural problems.” (March 2012 Decision 3.) The parties dispute the
date that Plaintiffs discovered these problems. (Id.) Plaintiffs allege that in April 2002, they
noticed damage to the Property, including cracks in the walls, and that the floors were pitched
toward the rear of the house. (Pl. 56.1 ¶ 13.) In April 2002, the Property was “propped up for
support to prevent it from collapsing.” (Id.) In May 2002, portions of the foundation were
exposed.
By mid-May 2002, the structural problems forced Plaintiffs to leave their home. (March
2012 Decision 4.) On May 13, 2002, Plaintiffs made a claim under the Insurance Policy, (Pl.
56.1 ¶ 15; Def. Reply 56.1 ¶ 15), which Defendant denied by letter sent to Plaintiffs on July 24,
2004, (March 2012 Decision 4). Defendant stated that the losses claimed by Plaintiffs were
caused by “wear and tear, deterioration, inherent vice, latent defect, wet and/or dry rot, as well as
earth movement, and the settlement, shrinking, bulging or expansion of [the P]roperty, leading to
cracking of structural components thereof.” (Docket Entry No. 47 Ex. H.)
b.
The Insurance Policy
According to Plaintiffs, Defendant used a form policy from Insurance Services Office,
Inc. (“ISO”), an industry organization. (Plaintiffs’ Memorandum in Opposition to Defendant’s
3
Motion to Dismiss (“Pl. Opp’n Mem.”) 2, Docket Entry No. 94.) The form policy used is the
“HO-3 Special Form Policy,” available on the ISO policy forms database. (Id.) The National
Association of Insurance Commissioners (“NAIC”), a trade organization, identified the HO-3
form as the most commonly used insurance form, at the time Plaintiffs purchased the Insurance
Policy. (Id.) The New York State Department of Financial Services and the NAIC have
characterized the HO-3 form as covering “all-risks of physical loss except those that are
specifically excluded.” (Id.) According to Defendant, the relevant provision of the Insurance
Policy concerning collapse is properly understood as “named peril coverage.” (Defendant’s
Reply Memorandum in Further Support of its Motion to Dismiss (“Def. Reply Mem.”) 2, Docket
Entry No. 96.)
The Insurance Policy is comprised of several schedules and endorsements. Under
“Coverage A — Dwelling,” Plaintiffs’ residence was insured in the amount of $1,511,200 for all
direct physical loss. (Insurance Policy 2, Declarations Page.) However, Coverage A specifies
that it did not cover loss “involving collapse, other than that provided in Additional Coverage 8,”
loss caused by “wear and tear, marring, deterioration,” “settling, shrinking, bulging or
expansion,” or loss “[e]xcluded under Section I — Exclusions.” (Id. at 6–7.) “Additional
Coverage 8” states in pertinent part:
We insure for direct physical loss to covered property involving
collapse of a building or any part of a building caused only by one
or more of the following:
a. Perils Insured Against in COVERAGE C – PERSONAL
PROPERTY. These perils apply to covered buildings and personal
property for loss insured by this additional coverage;
b. Hidden decay;
c. Hidden insect or vermin damage;
d. Weight of contents, equipment, animals or people;
e. Weight of rain which collects on a roof; or
4
f. Use of defective material or methods in construction, remodeling
or renovation if the collapse occurs during the course of the
construction, remodeling or renovation . . . .
Collapse does not include settling, crackling, shrinking, bulging or
expansion.
This coverage does not increase the limit of liability applying to
the damage covered property.
(Id. at 5.) The Insurance Policy also includes several exclusions (“Section I — Exclusions”),
excluding loss resulting from, inter alia, earth movement, water damage, power failure, neglect
and war. (Id. 8–9.)
II. Discussion
a.
Standard of Review
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.” Parks Real Estate Purchasing
Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir. 2006) (citation and internal
quotation marks omitted); see also Goldberger v. Paul Revere Life Ins. Co., 165 F.3d 180, 182
(2d Cir. 1999) (“In New York State, an insurance contract is interpreted to give effect to the
intent of the parties as expressed in the clear language of the contract.” (citation and internal
quotation marks omitted)). 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). “[I]f the language of the policy is doubtful or uncertain in its
meaning, any ambiguity must be resolved in favor of the insured and against the insurer.”
5
Pepsico, Inc. v. Winterthur Int’l Am. Ins. Co., 788 N.Y.S.2d 142, 144 (App. Div. 2004) (citation
and internal quotation marks omitted). “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 integrated 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) (citation and internal quotation marks omitted).
b.
“All Risk” versus “Named Perils”
The parties dispute the type of policy at issue, and, thus, the corresponding evidentiary
burdens. 3 Defendant argues that Plaintiffs have asserted coverage under “Additional Coverage
8,” which provides for “named peril coverage” only, such that Plaintiffs have the burden of
proving that the Property sustained a collapse and that the collapse resulted from a specific peril.
(Def. Reply Mem. 1, 6.) Plaintiffs argue that the Insurance Policy is an “all risk policy,” and,
consequently, Defendant has the burden to show that the loss at issue is excluded under the
Insurance Policy. (Plaintiffs Sur-Reply Memorandum in Opposition to Defendant’s Motion to
Dismiss (“Pl. Sur-Reply Mem.”) 1–5.) The Court finds that the parties’ efforts at categorizing
3
The Second Circuit has addressed the differences between “all risk” and “named peril”
insurance policies. “Under an all-risk policy, losses caused by any fortuitous peril not
specifically excluded under the policy will be covered.” Parks Real Estate Purchasing Grp. v.
St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 41 (2d Cir. 2006) (citation and internal quotation
marks omitted). Under an “all-risk” policy, the burden is on the insurer to show by a
preponderance of the evidence that an exception to coverage applies. Miller Marine Servs., Inc.
v. Travelers Prop. Cas. Ins. Co., No. 04-CV-5679, 2005 WL 2334385, at *4 (E.D.N.Y. Sept. 23,
2005), aff’d, 197 F. App’x 62 (2d Cir. 2006). “By contrast a ‘named perils’ policy covers only
losses suffered from an enumerated peril.” Parks Real Estate, 472 F.3d at 41 (citation and
internal quotation marks omitted). Under a “named perils” policy, the burden is on the insured
to show by a preponderance of the evidence that loss was caused by a covered peril. Miller
Marine, 2005 WL 2334385, at *4.
6
the Insurance Policy as a whole to be misplaced as the Insurance Policy provides for both “all
risk” and “named peril” coverage. 4
Coverage A insures against risk of direct loss to the Property excluding, inter alia, loss
resulting from “collapse,” “wear and tear” and “bulging or expansion.” (Insurance Policy 6–7.)
Coverage A is a quintessential “all-risk” policy. 5 See City of Burlington v. Indem. Ins. Co. of N.
Am., 332 F.3d 38, 47 (2d Cir. 2003) (“All-risk policies . . . cover all risks except those that are
specifically excluded.”). If Plaintiffs were asserting a claim under Coverage A, it would be
Defendant’s burden to show that the claim was based on an exclusionary provision, such as wear
4
Contrary to Plaintiffs’ position, it is not “unsupportable” that a single insurance
contract may include both “all-risk” and “named perils” coverage. See Costabile v. Metro. Prop.
& Cas. Ins. Co., 193 F. Supp. 2d 465, 474 (D. Conn. 2002) (applying Connecticut law and
finding “that the policy provides both all-risk and named perils type coverage, depending on the
property coverage at issue.”); see also Battishill v. Farmers Alliance Ins. Co., 127 P.3d 1111,
1115 (N.M. 2006) (“In this case, separate sections of the policy do not conflict with one another
because the all-risk dwelling coverage and the named-perils coverage are separate and distinct
coverages, each providing separate coverage for different risks to different property under
different terms.”). However, Costabile and Battishill are factually distinguishable as, in both
cases, there was no ambiguity that the “all risk” coverage applied to a dwelling and the “named
perils” coverage applied to personal property.
The Court is aware of one other case within this Circuit that has recognized a “hybrid”
policy. In N. Am. Foreign Trading Corp. v. Mitsui Sumitomo Ins. USA, Inc., the court
recognized, in the “marine insurance policy” context, that “[a] policy may provide both all-risks
and named-perils coverage, depending on the type of shipment at issue.” Mitsui Sumitomo, 413
F. Supp. 2d 295, 300 (S.D.N.Y. 2006). The plaintiff, an importer of consumer goods
manufactured in Asia, purchased an insurance policy from the defendant, covering shipments of
goods leaving Asia. Id. at 297. The standard terms of the insurance policy only covered goods
while in transit. Id. at 302. The insurance policy also included a “shore clause” which limited
loss coverage of goods “while on docks, wharves or elsewhere on shore” to certain named perils.
Id. Thus, the insurance policy at issue in N. Am. Foreign Trading Corp. provided for “all risk”
coverage while the goods were in transit but only “named peril” coverage while the goods were
on shore.
5
Defendants have already admitted that the Insurance Policy provides “all risk”
coverage. (Pl. Opp’n 56.1 21; Def. Reply 56.1 21; see also Def. Reply Mem. 3. (“There is not
mystery about the fact that, in general, the policy of insurance issued to the Fabozzis affords ‘allrisk’ coverage, subject to specific enumerated exclusions.”).)
7
and tear, settlement or collapse. See Channel Fabrics, Inc. v. Hartford Fire Ins. Co., No. 11-CV3483, 2012 WL 3283484, at *10 (S.D.N.Y. Aug. 13, 2012) (“In order to establish that a claim is
subject to an exclusion, ‘the insurer must show that the loss was proximately caused by the
excluded peril.’” (quoting Great Neck Ins. Co. v. Dayco Corp., 637 F. Supp. 765, 777 (S.D.N.Y.
1986))). Once this burden has been satisfied, Plaintiff’s only hope of coverage would be under a
coverage-restoring exception to Coverage A’s exclusions, such as the Insurance Policy’s
“ensuing loss” or “Additional Coverages 8” provisions.
“Additional Coverages 8” covers direct physical loss caused by collapse only if the
collapse was caused “by one or more” of several enumerated perils, including hidden decay.
(Insurance Policy 5.) By its clear and unambiguous terms, “Additional Coverages 8” provides
“named perils” coverage. See TAG 380, LLC v. ComMet 380, Inc., 10 N.Y.3d 507, 513 (2008)
(“‘Named-perils’ covers only specifically enumerated risks.”) Under “Additional Coverages 8,”
it is Plaintiffs’ burden to show not only a covered loss — collapse — but also that the covered
loss was caused by a covered peril — such as hidden decay. See Rapid Park Indus. v. Great N.
Ins. Co., No. 09-CV-8292, 2010 WL 4456856, at *2 (S.D.N.Y. Oct. 15, 2010) (“Under a ‘named
perils’ policy, it is the insured’s burden to show that its loss was caused by a covered peril.”),
aff’d, 502 F. App’x 40 (2d Cir. 2012). Here, it is undisputed that Plaintiffs claim that the
Property “collapsed,” 6 thus their sole means of coverage is “Additional Coverages 8.” (See
Compl. ¶ 17 (“plaintiffs were making a claim for the damage sustained by the residence due to
collapse”).) Stated otherwise, by Plaintiffs’ own assertion, the Property suffered a loss not
protected under Coverage A. It follows that Plaintiffs therefore “bear[] the initial burden of
6
As noted earlier, Defendants dispute that the Property collapsed. (Docket Entry No. 47
Ex. H.)
8
showing that the insurance contract covers the loss, i.e., that the loss resulted from a covered
peril.” Potoff v. Chubb Indem. Ins. Co., 874 N.Y.S.2d 124, 125 (App. Div. 2009) (citation and
internal quotation marks omitted). 7
In Residential Mgmt. (N.Y.) Inc. v. Fed. Ins. Co., evaluating similar policy language, the
court, in granting summary judgment to the defendant-insurer, stated that the plaintiff-insured
“offered no evidence the alleged collapse was caused by ‘[d]ecay that is hidden from view’ or
any other causes of loss as provided under the Additional Coverage for Collapse section.”
Residential Mgmt., 884 F. Supp. 2d 3, 10 (E.D.N.Y. 2012). Although, as Plaintiffs note, the
court in Residential Mgmt. did not state whether it was the plaintiff-insured’s initial or ultimate
burden, the court did hold that the plaintiff-insured failed “to meet the requirements under the
7
The burden-shifting within the Insurance Policy at issue here is not unlike how New
York courts have evaluated “comprehensive general liability insurance” policies. The New York
Court of Appeals has made clear that “[o]nce an insurer has satisfied its burden of . . . satisfying
the basic requirement for application of . . . [a] coverage exclusion provision, the burden shifts to
the insured to demonstrate a reasonable interpretation of the underlying complaint potentially
bringing the claims within . . . [an] exception to exclusion.” Northville Indus. Corp. v. Nat’l
Union Fire Ins. Co. of Pittsburgh, Pa., 89 N.Y.2d 621, 634 (1997); see also State v. U.W. Marx
Inc., 618 N.Y.S.2d 135, 137 (App. Div. 1994) (“It is well settled that where, as here, the
existence of coverage depends entirely on the applicability of an exception to an exclusion, the
insured has the duty of demonstrating that the exception governs.”). In justifying this approach,
the New York Court of Appeals stated, inter alia, that “[s]hifting the burden to establish the
exception conforms with an insured’s general duty to establish coverage where it would
otherwise not exist.” Northville Indus. Corp., 89 N.Y.2d at 634. Although the comprehensive
general liability insurance at issue in Northville provided “named perils” coverage only, the
reasoning is applicable to the facts before the Court. By the Insurance Policy’s clear and
unambiguous language, the “Additional Coverage 8” provision restored coverage to Plaintiff’s
Property where it would not otherwise exist. In reviewing similar policy language, the court in
Residential Mgmt. (N.Y.) Inc. v. Fed. Ins. Co., came to the same conclusion. See Residential
Mgmt., 884 F. Supp. 2d 3, 7 (E.D.N.Y. 2012) (“The Additional Coverage for Collapse section
adds back coverage for collapse, but only to the extent the Policy defines ‘collapse’ and only
when due to one of the causes specified . . . .” (emphasis added)).
9
Additional Coverage” provision of the insurance policy. Id. 8 The Court is aware of at least one
court in this Circuit that has placed the burden on the plaintiff-insured to show that the insurance
policy covered the claimed loss, notwithstanding the existence of an “all risk” policy. See
8
In support of their respective arguments, the parties cite to Seward Park Housing Corp.
v. Greater New York Mutual Insurance Co., 836 N.Y.S.2d 99 (App. Div. 2007). Seward
involved a residential cooperative apartment complex, which included four high-rise apartment
buildings, dozens of commercial stores and a two-level garage. Id. at 101. One evening, the
northern portion of the garage collapsed. Id. The plaintiff then made a claim against the
defendant-insurer, under its “all-risk, first-party property policy.” Id. The defendant denied
coverage, partially on the basis of “collapse.” Id. A jury trial followed and Plaintiff was
awarded over $12 million dollars. Id. Although unclear, it appears that the jury found that an
“exception to the collapse exclusion,” applied where the collapse was caused in part by weight of
rain. Id. at 102. On appeal, Defendants argued that the exception to the collapse exclusion
required that the weight of rain be the dominant cause of the collapse, rather than simply a cause,
and that the loss sustained was excludable because it resulted from a hidden or latent defect. Id.
The First Department, Appellate Division, found that there was no such requirement that the
weight of rain be the dominant cause of the collapse, and stated that the trial court “correctly
determined the issue of causation.” Id. With respect to the defendant-insurer’s hidden or latent
defect argument, the court found that the defendant-insurer “failed to satisfy its burden of
establishing that the claimed policy exclusion defeats the insured’s claim to coverage.” Id. The
parties dispute the significance of this case. Defendant argues that this case supports its position
because the plaintiff-insured established a prima facie case by presenting proof of actual collapse
and proof that the collapse had been caused by the weight of rain before the burden shifted to the
defendant-insurer. (Def. Reply Mem. 7.) However, there is no language in the First
Department’s decision to suggest that the plaintiff-insured’s prima facie case required proof of
the cause of the collapse. On remand, the trial court noted that it had instructed the jury “that if
the weight of rain was a partial cause of collapse of the garage, then the plaintiff was entitled to
the full replacement cost in accordance with the contract of, insurance.” Seward Park Housing
Corp. v. Greater New York Mut. Ins. Co., slip op. at 1, 2008 N.Y. Misc. LEXIS 8095 (Sup. Ct.
2008). If anything, this language suggests that it was the plaintiff-insured’s ultimate burden to
prove that the weight of rain was, at least, a partial cause of the collapse. However, given the
lack of explicitness concerning the burdens at play, this case is of minimal value.
Plaintiffs argue that the burden to show causation was the defendant-insurer’s because the
First Department stated that the applicability of the latent defect exclusion would not have been
established even if there were no coverage for collapse caused by the weight of rain as the
defendant-insurer “utterly failed to support its claims.” (Pl. Sur-Reply Mem. 4. (quoting Seward
Park, 836 N.Y.S. at 102–03).) However, the First Department language cited to by Plaintiff only
stands for the unremarkable proposition that under an all-risk policy, a defendant-insurer must
show that the excluded peril proximately caused the loss at issue. See Channel Fabrics, 2012
WL 3283484, at *10. Without more information concerning the prima facie burdens applied,
this case is of little help in assessing whether the initial burden of causation is Plaintiffs’ or
Defendant’s in the instant action.
10
Montefiore Med. Ctr. v. Am. Prot. Ins. Co., 226 F. Supp. 2d 470, 479 (S.D.N.Y. 2002) (rejecting
the plaintiff-insured’s motion for summary judgment and stating that “[u]nder New York law,
Plaintiff would be entitled to coverage under an exception for ensuing loss only if and to the
extent that it could prove that ‘collateral or subsequent’ damage occurred to other insured
property as a result of the collapse” (emphasis added)); see also Wider v. Heritage Maint., Inc.,
827 N.Y.S.2d 837, 849 (Sup. Ct. 2007) (finding that once the defendant had shown that the
“faulty workmanship exclusion” provision of an “all risk” policy applied to the plaintiff’s
insurance claim, it was then plaintiff’s burden to submit admissible evidence raising material
issues of fact requiring trial, such as the possible application of the “ensuing loss” exception to
the “faulty workmanship exclusion”). 9 Moreover, at least two jurisdictions evaluating similar
9
Two other district court cases in this Circuit suggest, although indirectly, that burden
shifting is appropriate here. In Five Star Hotels, LLC v. Insurance Co. of Greater New York, the
court noted that the “ensuing loss” exception to the “faulty maintenance or faulty design”
exclusion, operated to “restore coverage” to the insurer. Five Star Hotels, No. 09-CV-8717,
2011 WL 1216022, at *10 (S.D.N.Y. Mar. 24, 2011). The court did not discuss which party’s
burden it was to show that the ensuing loss exception applied. However, the court approvingly
cited to Smith v. Westfield Ins. Co., No. 06-CV-3077, 2007 WL 1740816 (E.D. Pa. June 15,
2007). In Smith, the court assessed the burdens involved in an “all risk” policy which contained
both exclusions and exceptions to those exclusions. Id. at *2. In finding that the “windstorm or
hail” exception to the “mold or wet rot” exclusion did not apply, the court stated that the
plaintiffs-insured did not present any evidence that wind or hail damaged their home. Id. The
court understood that it was the plaintiffs-insured’s burden to show the applicability of an
exception to an exclusion within an “all risk” policy. In Rapid Park Indus. v. Great N. Ins. Co.,
the plaintiff-insured argued that the ensuing loss exception to certain identified policy exclusions
covered its loss. Rapid Park Indus., No. 09-CV-8292, 2010 WL 4456856, at *4 (S.D.N.Y. Oct.
15, 2010), aff’d, 502 F. App’x 40 (2d Cir. 2012). In finding that the exception to the exclusion
did not apply, the court stated that “plaintiffs fail to identify an exception to otherwise applicable
exclusions to coverage under the Policy.” Id. This language suggests to the Court that, after the
defendant-insurer met its burden of showing that the plaintiff-insured’s loss resulted from a
policy exclusion, the burden shifted to the plaintiff-insured to show an applicable exception to
the exclusion. See also Allianz Ins. Co. v. RJR Nabisco Holdings Corp., 96 F. Supp. 2d 253, 255
(S.D.N.Y. 2000) (recognizing “the doctrine that places on the insured the burden of
demonstrating that an exception to an exclusion applies,” but not finding it necessary to decide
which party had the burden in that instance); but see Klockner Stadler Hurter Ltd. v. Ins. Co. of
11
insurance policy language have found that it is Plaintiff’s initial burden to show the cause of
collapse as part of a plaintiff-insured’s ordinary burden of showing that the real property at issue
is covered under the insurance policy. See Tripodi v. Universal N. Am. Ins. Co., No. 12-CV1828, 2013 WL 6903944, at *4 n.6 (D.N.J. Dec. 31, 2013) (“Plaintiffs, as the insureds, bear the
burden of proving that the damage sustained to their basement is covered under the Policy as a
‘collapse.’” (citing Wurst v. State Farm Fire and Cas. Co., 431 F. Supp. 2d 501, 504 (D.N.J.
2006))); Mount Zion Baptist Church of Marietta v. GuideOne Elite Ins. Co., 808 F. Supp. 2d
1322, 1324–35 (N.D. Ga. 2011) (“Plaintiff has the burden to prove that the damage to its
sanctuary is covered by the Additional Coverage for Collapse provision of its insurance policy
with GuideOne.”); Wurst, 431 F. Supp. 2d at 504 (“State Farm asserts that Wurst’s claim is not
covered by the ‘hidden decay’ clause of the policy and in any event, his claim is expressly
excluded by the policy. We will address each argument separately, as Wurst bears the burden of
persuasion at trial with respect to the first issue but not the second.”). If the Court were to accept
Plaintiffs’ interpretation of the burdens, the Court would be required to place the burden on
Defendant to prove that a covered peril (such as hidden decay) was not the cause of a loss
resulting from the alleged collapse, an otherwise coverage-excluding peril, of Plaintiffs’ home.
The Court is not aware of any case, nor have Plaintiffs identified any such case, that has done so.
The Court finds that Plaintiffs bear the burden of persuasion at trial to prove that a collapse
occurred and that the collapse was caused by a covered peril.
State of Penn., 780 F. Supp. 148, 159 (S.D.N.Y. 1991) (suggesting that it is only the plaintiffinsured’s burden to “offer evidence that creates a genuine issue of fact” in response to the
defendant-insurer’s showing of an applicable policy exclusion).
12
c.
Necessity of expert testimony
i.
Collapse
Defendant argues that Plaintiffs cannot establish collapse or collapse by a particular cause
without expert testimony. (Def. Reply Mem. 10.) Plaintiffs contend that expert testimony is not
required. (Pl. Opp’n Mem. 6.)
Defendant argues that under New York Law, expert testimony is required where the
information to be presented is beyond the ken of lay witnesses. (Def. Reply. Mem. 12.)
However, Defendant draws this principle from caselaw involving medical testimony. See
Amorgianos v. National R. R. Passenger Corp., 137 F. Supp. 2d 147, 160 (Under New York law,
when the determination of whether an illness or injury was caused by some event or conduct is
‘presumed not to be within common knowledge and experience,’ a plaintiff must produce expert
opinion evidence ‘based on suitable hypotheses’ in order to support a finding of causation.” (quoting
Meiselman v. Crown Heights Hosp., 285 N.Y. 389, 396 (1941)); Meiselman, 34 N.E.2d at 370
(“Ordinarily, expert medical opinion evidence, based on suitable hypotheses, is required, when
the subject-matter to be inquired about is presumed not to be within common knowledge and
experience and when legal inference predominates over statement of fact, to furnish the basis for
a determination by a jury of unskillful practice and medical treatment by physicians.” (emphasis
added)).
Defendants cite to only two New York state cases involving real property. In Holy Name
of Jesus Roman Catholic Church v. New York City Transit Authority, the plaintiff sued the
defendant claiming that vibrations from the defendant’s subway lines caused damage to the
sidewalk abutting the plaintiff’s real property. Holy Name of Jesus Roman Catholic Church,
N.Y.S.2d 197, 198 (App. Div. 2006). The defendant produced expert testimony showing that the
subway vibrations could not have caused the damage while the plaintiff only presented
13
deposition testimony from a reverend and the affirmation of its counsel. Id. The Second
Department, Appellate Division found the plaintiff’s evidence “merely offered speculation” and
granted the defendant’s motion for summary judgment. Id. While this case may stand for the
proposition that mere speculation cannot defend against competent expert testimony, it does not
support Defendant’s argument that collapse or the cause of the collapse of real property can only
be proven by expert testimony. In Spoiled Trucks and Cars Corp. v. C&N Realty Development
LLC, the court had before it a spoliation motion by the defendant seeking dismissal of the
plaintiff’s claim alleging property damage to his premises due to plaintiff’s demolition of the
property in question. Spoiled Trucks, No. 22404/06, 2011 WL 6738859 (Sup. Ct. Sept. 28,
2011). The court found that the defendant had established a prima facie case that spoliation
sanctions were appropriate as the subject building was “critical physical proof.” Id. at *3. The
court held that the plaintiff failed to “proffer other suitable evidence” establishing the “cause of
the damage” and further noted that “[e]vidence that defendant’s construction work caused
property damage or injury must be supported by more than observations of a lay witness and
where there is no expert evidence submitted in support, plaintiff’s assertion that the building was
unsafe amount[s] to no more than mere speculation.” Id. at *4 (citing Holy Name of Jesus
Roman Catholic Church, 813 N.Y.S.2d at 197). Defendants also cite to foreign authority
directly supporting their position. See Guyther v. Nationwide Mut. Fire Ins. Co., 428 S.E.2d 238,
243 (N.C. Ct. App. 1993) (“Because a lay person does not possess the technical knowledge and
skill required to form an opinion concerning the cause of the collapse of a building, lay opinion
testimony on the subject is not admissible.”)
Although expert testimony may normally be preferred in cases involving the cause of
property damage, absent any binding authority stating otherwise, the Court is unwilling to
14
conclude that such testimony is required as a matter of law. It is not difficult to imagine that in
some instances the cause of a building’s collapse may be so apparent that no special knowledge
is required, allowing a jury to decide the specific cause based on testimony from lay
observations. Plaintiffs argue that such is the case here. (Pl. Opp’n Mem. (“This is a case where
the collapse was observable and documentable by an everyday, average person.”)); see
Meiselman, 34 N.E.2d at 370 (“but where the matters are within the experience and observation
of the ordinary jurymen from which they may draw their own conclusions and the facts are of
such a nature as to require no special knowledge or skill, the opinion of experts is unnecessary”);
see also Qualls v. State Farm Lloyds, 226 F.R.D. 551, 558 (N.D. Tex. 2005) (finding that expert
testimony on the issue of causation to the plaintiff’s property was required in the instant case but
noting that it was “not holding that expert testimony is always required to show the cause of
mold; some circumstances may be clear enough to fall within the common experience of
jurors”). Here, the details of the testimony to be offered by Plaintiffs are not before the Court on
this motion and the Court therefore cannot conclude that Plaintiffs are incorrect.
ii.
Damages
Defendant argues that Plaintiffs cannot establish damages without expert testimony.
(Def. Mem. 8–9.) Plaintiffs concede that expert testimony may be required for property damage
resulting in “partial loss,” but argue that where a “total loss” is alleged, an insurer must pay the
full amount owed as a result of the loss. (Pl. Opp’n Mem. 10–11.) Plaintiffs believe they have
suffered a total loss and that they can prove the value of their loss without expert testimony. (Id.
at 11.) Plaintiffs concede that, after presenting their case, if Defendant believes that Plaintiffs
have not met their burden, Defendant will be free to move for a directed verdict. (Id.)
15
The Court finds no binding authority, nor does Defendant cite to any, supporting its
position. The cases Defendant does cite are unhelpful. See Wantanabe Realty Corp. v. City of
New York, No. 01-CV-10137, 2004 WL 27720, at *4 (S.D.N.Y. Jan. 5, 2004) (finding the
proposed testimony of an “expert” to be inadmissible but making no claim that expert testimony
is required to show damages); Gass v. Agate Ice Cream, 264 N.Y. 141, 143 (1934) (stating that
“damages sustained by an automobile in a collision may be established by showing the
reasonable cost of the repairs necessary to restore it to its former condition” but not stating
whether expert testimony is required to do so); Farrell v. Klapach, 262 N.Y.S.2d 203 (App. Div.
1965) (overturning a jury verdict as to nominal damages but not stating whether expert testimony
was required to prove said damages).
Defendant does identify two cases from district courts in Wisconsin, which are more on
point. See Wickman v. State Farm Fire & Cas. Co., 616 F. Supp. 2d 909, 920 (E.D. Wis. 2009)
(holding that an assessment of the feasibility and cost of repairing real property “require[s]
technical or other specialized knowledge beyond that of the ordinary layperson”); Talmage v.
Harris, No. 03-CV-0658, 2005 WL 696976, at *2 (W.D. Wis. Mar. 25, 2005) (noting, in a fire
loss damage case, that the “claimant must show that rebuilding or replacing a specific part or
fixture of the building was necessitated by the fire and that the new structure does not represent a
larger or improved structure or, if it does, what portion of the cost of the new structure is fairly
attributable to the loss,” and finding it “unlikely that a plaintiff could make such a showing
without an expert witness”). However, here, Plaintiffs are attempting to recover for the total loss
of the Property, rather than a partial loss, undercutting the need for expert testimony. See Kates
Grp. v. New York Prop. Ins. Underwriting Ass’n, 839, 513 N.Y.S.2d 757 (App. Div. 1987)
(finding that the plaintiff had presented a prima facie case for total loss based on lay witness
16
testimony and a New York Fire Department report of the fire). Defendant argues that Plaintiffs
cannot merely allege a total loss without supporting evidence. (Def. Reply. Mem. 17.) The
sufficiency of Plaintiffs’ evidence is not currently before the Court. 10 Absent any binding
authority mandating otherwise, the Court is not willing to hold that, as a matter of law, prima
facie damages requires expert testimony.
III. Conclusion
For the foregoing reasons, the Court denies Defendants’ motion in limine seeking
dismissal of the Complaint.
SO ORDERED:
s/ MKB
MARGO K. BRODIE
United States District Judge
Dated: May 30, 2014
Brooklyn, New York
10
Plaintiffs argue that without a statement of material facts setting forth those matters for
which no genuine issues exists to be tried, no basis exists to rule on the sufficiency of the
evidence Plaintiffs plan to present at trial. (Pl. Opp’n Mem. 11.)
17
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