Spandex House, Inc. et al v. Travelers Property Casualty Company of America, Inc.
Filing
42
OPINION & ORDER re: 26 For the foregoing reasons, Travlers' motion to dismiss Plaintiffs' claim for breach of the implied duty of good faith and fair dealing is granted. (SO ORDERED by Judge Paul A. Crotty on 2-6-15) (mov)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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SPANDE)( HOUSE, INC. and SABUDH
CHANDRA NATH,
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2. - Ct,- 1s_
Plaintiffs,
14 Civ. 4251 (PAC)
-againstTRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA, INC.,
OPINION & ORDER
Defendant.
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HONORABLE PAUL A . CROTTY, United States District Judge:
Plaintiffs Spandex House, Inc. and the president of Spandex House, Sabudh Chandra
Nath (collectively, "Spandex House" or "Plaintiffs") bring this action against Defendant
Travelers Property Casualty Company of America, Inc. ("Travelers" or "Defendant") for breach
of contract and breach of the implied duty of good faith and fair dealing. Plaintiffs also seek a
declaratory judgment in their favor regarding Travelers' duty to defend Plaintiffs in connection
with the matter Elastic Wonder, Inc. v. ldil Doguoglu-Posey, 13 Civ. 5603 (JGK) (the
"Underlying Action"). Travelers moves to dismiss Plaintiffs' claim for breach of the implied
duty of good faith and fair dealing. For the following reasons, this motion is granted.
BACKGROUND
This action arises out of an insurance contract between Spandex House and Travelers.
Am. Compl. ~ 1. In 2011 , Spandex House obtained a commercial general liability insurance
policy (the "Policy") from Travelers, which covered occurrences arising between September
1
2011 and September 2014. Id.
~~
12-13. Spandex House alleges that it has met every condition
required by the Policy, so that the Policy remains in full force and effect. Id.
~~
15.
On January 31,2014, Idil Doguoglu-Posey ("Posey"), the defendant in the Underlying
Action, filed a Third Party Complaint against Spandex House in the Underlying Action. !d.
~
19.
On February 17, 2014, Spandex House provided Travelers with timely notice ofPosey's claims
and tendered the claims for coverage and defense. Id.
~~ 20,
27. On April3, 2014, more than
six weeks after the claim was filed, Travelers issued a denial letter. !d.
~
31. On April 10, 2014,
Spandex House's counsel responded, explaining that both grounds Travelers provided for denial
were without merit. Id.
~~
32-36.
Following Posey' s filing of an Amended Third Party Complaint on April 4, 2014, id.
~
25, Travelers issued a second denial letter on May 12, 2014, which "took an incorrect position"
on whether coverage was required.
!d.~~
again disputed the denial of coverage. Id.
Spandex House in the Underlying Action.
37-38. On May 22, 2014, Spandex House's counsel
~
39. Travelers has continued to refuse to defend
!d.~ 40.
DISCUSSION
I.
Applicable Law
When considering a motion to dismiss for failure to state a claim under Fed. R. Civ. P.
12(b)(6), the Court "must accept as true all ofthe factual allegations contained in the complaint"
and construe the complaint in the light most favorable to the plaintiff. Bell At!. Corp. v.
Twombly, 550 U.S. 544, 572 (2007) (internal quotation marks omitted). At this stage, the Court
only " assess[ es] the legal feasibility of the complaint"; it does not "assay the weight of the
evidence which might be offered in support thereof." Lopez v. J et Blue Airways, 662 F.3d 593,
596 (2d Cir. 2011) (internal quotation marks omitted).
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Under New York law, there is an implied duty of good faith and fair dealing in all
contracts. See Sec. Plans, Inc. v. CUNA Mut. Ins. Soc., 769 F.3d 807, 817 (2d Cir. 2014); Kings
Infiniti Inc. v. Zurich Am. Ins. Co., 990 N.Y.S.2d 437, at *7 (N.Y. Sup. Ct. Apr. 3, 2014). This
duty " is breached when a party to a contract acts in a manner that, although not expressly
forbidden by any contractual provision, would deprive the other party of the right to receive the
benefits under their agreement." PCVST Mezzco 4, LLC v. Wachovia Bank Comm. Mortg. Trust
2007-C30, 2015 WL 153048, at *5 (S.D.N.Y. Jan. 12, 2015) (citing Aventine Inv. Mgmt., Inc. v.
Canadian Imperial Bank of Commerce, 697 N.Y.S.2d 128, 130 (N.Y. App. Div. 2d Dep't 1999)).
II.
Analysis
Travelers moves to dismiss Plaintiffs' claim for breach of the implied covenant of good
faith and fair dealing because it is wholly duplicative of the breach of contract claim and
therefore not legally cognizable under New York law. Def. Mot. at 6-9. 1 Plaintiffs oppose this
motion, arguing that such a claim is cognizable under existing precedent, and that an insured is
"at least entitled to try to prove bad faith in such circumstances." Pl. Mot. at 3-5.
Plaintiffs ' argument is rejected. New York law does not provide an independent claim
for breach of the implied covenant of good faith and fair dealing. See Netologic, Inc. v. Goldman
Sachs Grp., 972 N.Y.S.2d 33, 34-35 (N.Y. App. Div. 1st Dep't 2013); accord Harris v.
Provident Lif and Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002). Breach of the duty of good
e
faith and fair dealing "is merely a breach of the underlying contract, and a claim for breach of the
implied covenant will be dismissed as redundant where the conduct allegedly violating the
1
The Court does not address Travelers' claim, made fo r the first time in its Reply Brief, regarding the dismissal of
Spandex House's request for attorneys' fees. Travelers' argument on this point is sparse and conclusory, and
Spandex House was not given an opportunity to respond. See Bradley v. Burge, 2007 WL 1225550, at *7 (S.D.N.Y.
Apr. 19, 2007).
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implied covenant is also the predicate for breach of covenant of an express provision of the
underlying contract." Nat'! Gear & Piston, Inc. v. Cummins Power Sys., LLC, 861 F. Supp. 2d
344, 365 (S.D.N.Y. 2012) (internal citations omitted). A claim for breach of the duty of good
faith "can only survive a motion to dismiss if it is based on allegations that differ from those
underlying an accompanying breach of contract claim." Palmer Kane LLC v. Scholastic Corp.,
2014 WL 1303135, at *6 (S.D.N.Y. Mar. 31 , 2014). Here, Plaintiffs have not identified conduct,
beyond that which allegedly constituted a breach of the contract, in support of its claim for
breach of the implied duty of good faith and fair dealing.
Plaintiffs argue that the Second Circuit's holding in Hugo Boss Fashions, Inc. v. Fed. Ins.
Co. , 252 F.3d 608 (2d Cir. 2001) found cognizable a claim for breach of the duty of good faith
and fair dealing for failure to defend and that there is merely a strong presumption against a
finding of bad faith. Pl. Mot. at 3-5. But Hugo Boss did not address whether a claim for breach
of the duty of good faith and fair dealing was duplicative of a breach of contract claim based on
the same factual predicate. Nor do the other cases cited by Plaintiffs. See Nouveau Elevator
Indus. v. Cont'l Cas. Ins. Co. , 2006 WL 1720429 (E.D.N.Y. June 21, 2006) (granting summary
judgment on claim forbad faith denial of coverage); Sukup v. State ofNY., 281 N.Y.S.2d 28
(N.Y. 1967) (reversing grant of attorneys' fees for bad faith denial of coverage).
Plaintiffs make much of the fact that Travelers relies on cases that do not specifically
address claims for breach of the duty of good faith and fair dealing based on the failure of an
insurer to honor its duty to defend. Pl. Mot. at 5-6. First, this is incorrect, as Travelers has cited
two cases addressing this principle in the context of an insurer's duty to defend, see Pl. Mot. at 9
(citing Bettan v. Geico Gen. Ins. Co., 745 N.Y.S.2d 545, 546 (N.Y. App. Div. 2d Dep't 2002);
Johnson v. Allstate Ins. Co., 823 N.Y.S.2d 415, 416 (N.Y. App. Div. 2d Dep't 2006)).
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Moreover, Plaintiffs fail to provide any explanation for why the established holding
under New York law, that a breach of the duty of good faith and fair dealing claim is duplicative
of a breach of contract claim, somehow does not apply to insurance contracts. The Court
assumes that this is because there is no such explanation and, under New York law, this approach
must be applied to the insurance context. See, e.g., Sikarevich Family L.P. v. Nationwide Mut.
Ins. Co., 30 F. Supp. 3d 166, 171 (E.D.N.Y. 2014) ("Plaintiff argues that its good faith and fair
dealing claim is somehow distinct from its breach of contract claim, but, as with that claim,
defendant's decision to deny plaintiff coverage is the crux of plaintiffs bad faith allegations.").
CONCLUSION
For the foregoing reasons, Travelers' motion to dismiss Plaintiffs' claim for breach of the
implied duty of good faith and fair dealing is granted.
SO ORDERED
Dated: New York, New York
February 6, 2015
PAULA. CROTTY
United States District Judge
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