Northway Medical Center Condo v. The Hartford Financial Services Group, Inc.
ORDER granting 12 Motion to Dismiss. For the foregoing reasons, Hartford Financial Services Group, Inc.'s partial motion to dismiss is GRANTED. Northway Medical Center Condo's breach of contract claim is its only surviving claim. Har tford Financial Services Group, Inc. is dismissed as the defendant and substituted with Sentinel Insurance Company, Limited. Sentinel is directed to answer the complaint on or by February 1, 2022. The Clerk of Court is respectfully directed to terminate the motion at ECF No. 12. (Signed by Judge Nelson Stephen Roman on 1/10/2022) (ate)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
NORTHWAY MEDICAL CENTER CONDO,
20 CV 09864 (NSR)
OPINION & ORDER
THE HARTFORD FINANCIAL SERVICES
NELSON S. ROMÁN, United States District Judge:
Plaintiff Northway Medical Center Condo (“Northway”) brings this action against the
Hartford Financial Services Group, Inc. (“Hartford”), alleging violation of New York General
Business Law §349 (“Section 349”) and a common law claim for breach of contract for Hartford’s
alleged refusal to cover the costs of rainwater damage pursuant to an insurance policy. Presently
before the Court is Hartford’s partial motion to dismiss the Complaint. (ECF No. 12.) For the
following reasons, the motion is GRANTED.
The following facts are taken from Northway’s Complaint (ECF No. 1) and are accepted
as true and construed in the light most favorable to Northway for purposes of this motion.
Northway is a condominium association located in Yonkers, New York. (Compl. ¶ 1.) In
2019, Northway had an insurance policy with Hartford (the “Policy”) that covered direct physical
loss or physical damage for one of Northway’s properties (the “Property”). (Id. ¶ 4.) In or about
July of 2019, Northway discovered the brick on the rear portion of the Property had pulled away
from the rest of the structure due to rainwater. (Id. ¶ 5.) The cost to repair the damage is around
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$1.2 million. (Id. ¶ 6.) The damage was caused by an event-based occurrence, which is covered
by the Policy. (Id. ¶ 7.) Hartford has refused coverage under the Policy. (Id. ¶ 8.)
Northway initiated this action on September 14, 2020 in the Supreme Court of the State of
New York, County of New York. (ECF No. 1.) Hartford removed the action on November 23,
2020 based on diversity jurisdiction and filed a motion to dismiss on March 24, 2021. (ECF No.
Under Federal Rule of Civil Procedure 12(b)(6), dismissal is proper unless the complaint
“contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). When there are well-pled factual allegations in the complaint, “a court
should assume their veracity and then determine whether they plausibly give rise to an entitlement
to relief.” Id. at 679.
While the Court must take all material factual allegations as true and draw reasonable
inferences in the non-moving party’s favor, the Court is “not bound to accept as true a legal
conclusion couched as a factual allegation,” or to credit “mere conclusory statements” or
“[t]hreadbare recitals of the elements of a cause of action.” Iqbal, 556 U.S. at 662, 678 (quoting
Twombly, 550 U.S. at 555). The critical inquiry is whether the plaintiff has pled sufficient facts to
nudge the claims “across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. A
motion to dismiss will be denied where the allegations “allow the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
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In its motion, Hartford avers that (i) the Complaint fails to plead a Section 349 claim; (ii)
Northway’s claim for punitive damages must be dismissed; (iii) Northway’s claim for attorneys’
fees must be dismissed; and (iv) Sentinel Insurance Company, Limited (“Sentinel”) should be
substituted as the proper defendant. 1 The Court will examine each claim in turn.
Northway alleges Hartford violated Section 349 by “categorically denying coverage and
refusing to attempt to settle the matter,” and therefore “den[ying] the very service for which
[Northway] contracted” and “[u]pon information and belief” this conduct is “not unique to
[Northway], but rather  a pattern of behavior.” (Compl. ¶¶ 30-31.) Section 349 prohibits
“[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing
of any service in this state[.]” N.Y. Gen. Bus. Law § 349(a). A plaintiff asserting a cause of action
under Section 349 “must prove three elements: first, that the challenged act or practice was
consumer-oriented; second, that it was misleading in a material way; and third, that the plaintiff
suffered injury as a result of the deceptive act.” Rephen v. Gen. Motors Corp., No. 15-cv-5206
(NSR), 2016 WL 4051869, at *4 (S.D.N.Y. July 26, 2016) (internal quotation marks and citations
omitted). Hartford alleges Northway’s claim must be dismissed as it fails to adequately plead all
three elements. (Mem. at 6-11.) The Court holds that Northway’s claim fails at the first element.
In New York, consumer-oriented conduct has “a broader impact on consumers at large.”
Shapiro v. Berkshire Life Ins. Co., 212 F.3d 121, 126 (2d Cir. 2000) (quoting Oswego Laborers’
Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25 (N.Y. 1995)). Though a
Hartford also includes in its memorandum an argument that if Northway is alleging an independent cause
of action for breach of the implied covenant of good faith and fair dealing, it must be dismissed. (Defendant’s
Memorandum of Law in Support of Motion to Dismiss (“Mem.”) ECF No. 14, at 4.) As Northway responded it is
not alleging an independent cause of action, (Plaintiff’s Memorandum of Law in Opposition to Hartford’s Partial
Motion to Dismiss (“Opp.”) ECF No. 17, at 3), the Court will not address these arguments.
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plaintiff need not demonstrate a pattern of deceptive conduct, “New York courts have recognized
that ‘private contract disputes’ between the parties do not ‘fall within the ambit of the statute.’”
WorldHomeCenter.com, Inc. v. PLC Lighting, Inc., 851 F. Supp. 2d 494, 498 (S.D.N.Y. 2011)
(quoting Oswego, 85 N.Y.2d at 25).
Hartford avers that courts in this Circuit have “uniformly” held that disputes between
policy holders and insurance companies concerning the scope of coverage lack the consumer
impact necessary for a Section 349 claim. (Mem. at 7.) The Court agrees. See, e.g., Fishberg v.
State Farm Fire & Cas. Co., No. 20-cv-6664 (LJL), 2021 WL 3077478, at *4 (S.D.N.Y. July 20,
2021) (“[T]he numerous courts that have considered whether disputes between policy holders and
insurance companies concerning the scope of coverage can amount to conduct falling within
Section 349 have almost ‘uniformly . . . held that such disputes are nothing more than private
contractual disputes that lack the consumer impact necessary to state a claim pursuant to Section
349.’”) (citing DePasquale v. Allstate Ins. Co., 179 F. Supp. 2d 51, 62 (E.D.N.Y. 2002)).
Northway’s argument focuses on a Second Circuit case that it argues allowed a Section
349 claim against an insurer who was alleged to pay labor rates below the required amount in its
insurance policy as a matter of practice. (Opp. at 5-8 (citing Nick’s Garage, Inc. v. Progressive
Cas. Ins. Co., 875 F.3d 107 (2d Cir. 2017)). In Nick’s Garage, the plaintiff, an automobile repair
shop, brought claims against the insurer after various vehicle owners assigned their insurance
claims to the plaintiff after it repaired their vehicles and submitted damage claims to the insurer.
(Id. at 111.) The plaintiff brought the Section 349 claim on behalf of the assignees, alleging the
insurer failed to pay sufficient funds to fulfill its obligation to repair the damaged vehicles and
engaged in deceptive claims processing. (Id.) Nick’s Garage is clearly distinguishable from the
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instant case, where Northway is alleging deceptive business practices related to its own individual
insurance policy only. 2
While Northway does allege, upon information and belief, that the alleged practice has
been used with other consumers, this is insufficient under Section 349. See Fishberg, 2021 WL
3077478, at *5 (“Nor has Plaintiff alleged that there is anything universal or general about its
dispute with Defendant. It merely makes the conclusory and insufficient ‘information and belief’
allegation that Defendant’s ‘offending practice is not an isolated incident, but a consumer-oriented
and routine practice that has affected many similarly situated insureds, and does, or has the
potential to, affect the public at large.’ . . . The same generalized statement, lacking any factual
support, could be made in any insurance dispute.”); YMCA of Plattsburgh v. Phila. Indem. Ins.
Co., No. 8:18-CV-0565 (LEK/DJS), 2018 WL 6267923, at *8 (N.D.N.Y. Nov. 30, 2018)
(“Plaintiff alleges simply that Defendant violated § 349 by ‘knowingly misrepresenting to
[Plaintiff] and, on information and belief, its other New York insured, the provision relating to the
coverage at issue,’ and claims that Defendant’s ‘unreasonable and arbitrary interpretation of its
policy provisions could result in many small business and not-for-profits being held individually
liable for amounts that they cannot afford, and that they reasonably believed were covered.’ . . .
Such conclusory allegations are insufficient to support the ‘consumer oriented’ prong of § 349.”).
Therefore, Northway’s Section 349 claim fails.
Northway also references Sentinel’s last-available quarterly filing and Financial Statement
to show that Hartford has engaged “in the practice of wholesale denial of claims.” (Opp. at 6.)
This is also true of Northway’s other cited case, Endemann v. Liberty Ins. Corp., 390 F. Supp. 3d 362,
380 (N.D.N.Y. 2019), which involved an insurance policy that consisted of “a consumer-oriented standard form
product” that was “offered and  available to consumers at large,” and “regularly used by [the insurer] in the
inducement of individual consumers in the market . . . .” Even with these allegations, the court held the plaintiff’s
claim was only “nudge[d] . . . across the line from conceivable to plausible.” Id.
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However, “[a] plaintiff cannot oppose a motion to dismiss through assertions of facts and
references to documents not reflected in the complaint at issue[.]” Harris v. N.Y. State Dep’t of
Health, 202 F. Supp. 2d 143, 175 (S.D.N.Y. 2002). Further, in deciding a motion to dismiss, a
court “may review only a narrow universe of materials” without converting the motion into one
for summary judgment. Goel v. Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016). This generally
includes “any written instrument attached to the complaint, statements or documents incorporated
into the complaint by reference, legally required public disclosure documents filed with the SEC,
and documents possessed by or known to the plaintiff and upon which it relied in bringing the
suit.” ATSI Communs, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). As Northway has
not shown that the two Sentinel documents fall into any of these categories, the Court will not
consider Northway’s allegations regarding them.
Accordingly, Northway’s Section 349 claim is dismissed with prejudice.
Hartford next argues that Northway’s request for punitive damages must be dismissed as
punitive damages are not recoverable for breach of contract claims. (Mem. at 11.) As Northway’s
Section 349 claim has been dismissed, it may only be awarded damages under its breach of contract
claim. Under New York law, “damages arising from the breach of a contract will ordinarily be
limited to the contract damages necessary to redress the private wrong,” however, “punitive
damages may be recoverable if necessary to vindicate a public right.” New York Univ. v. Cont’l
Ins. Co., 87 N.Y.2d 308, 315 (1995). To recover punitive damages on a breach of contract claim,
“(1) defendant’s conduct must be actionable as an independent tort; (2) the tortious conduct must
be of [an] egregious nature . . .; (3) the egregious conduct must be directed to plaintiff; and (4) it
must be part of a pattern directed at the public.” Scottsdale Ins. Co. v. McGrath, No. 19-cv-07477
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(LJL), 2021 WL 3077578, at *13 (S.D.N.Y. July 19, 2021) (citing Matter of Part 60 Put-Back
Litig., 141 N.Y.S.3d 410, 422 (2020)).
Here, Northway alleges that “punitive damages can be awarded in bad faith insurance
claims even between individual insureds and insurers.” (Opp. at 9.) However, Northway is
bringing a breach of contract action, and it fails to show why it believes it can seek punitive
damages under the alleged facts. The two cases Northway cites are not helpful. 25 Bay Terrace
Assocs., L.P. v. Pub. Serv. Mut. Ins. Co., 144 A.D.3d 665, 667–68 (2d Dep’t 2016) (allowing
plaintiff to pursue punitive damages where plaintiff alleged a cause of action for breach of contract
and an independent cause of action for the breach of the implied covenant of good faith and fair
dealing); Wilner v. Allstate Ins. Co., 71 A.D.3d 155, 167 (2d Dep’t 2010) (refusing to dismiss
claim for punitive damages where they were sought pursuant to a Section 349 claim). As
Northway has failed to show how the Complaint alleges an independent tort, egregious nature, or
a pattern directed at the public, Northway cannot be awarded punitive damages.
Accordingly, Northway’s claim for punitive damages is dismissed.
Hartford next alleges that it is “well-settled that an insured may not recover the expenses
incurred in bringing an affirmative action against an insurer to settle its rights under the policy.”
(Mem. at 13 (citing Globecon Group, LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 170 (2d Cir.
2006)). In response, Northway argues that “an insured can seek a recovery of attorney’s fees as
consequential damages in cases involving first party bad faith.” (Opp. at 10-11). Northway cites
to two decisions from the New York Court of Appeals for this proposition, Panasia Estates, Inc.
v. Hudson Ins. Co., 10 N.Y.3d 200, 203 (2008) and Bi-Econ. Mkt., Inc. v. Harleysville Ins. Co. of
New York 10 N.Y.3d 187, 192 (2008). However, “New York courts have held that the background
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principle that an insured may not recover fees incurred when it brings an action against an insurer
for breach of contract has not been altered by the opinions of the New York Court of Appeals in
[these two cases].” Fishberg, 2021 WL 3077478, at *7 n.2 (collecting cases).
Northway also appears to be asserting that its claim fails under the exception discussed in
Sukup v. State, 19 N.Y.2d 519, 522 (1967). In this case, the Court of Appeals suggested that an
exception may exist when the insured can make “a showing of such bad faith in denying coverage
that no reasonable carrier would, under the given facts, be expected to assert it.” Id. There is “a
strong presumption in New York against a finding of bad faith liability by an insurer” which “can
be rebutted only by evidence establishing that the insurer’s refusal to defend was based on ‘more
than an arguable difference of opinion’ and exhibited ‘a gross disregard for its policy obligations.’”
Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 624–25 (2d Cir. 2001) (citing Sukup, 19
N.Y2d at 522. Here, Northway has failed to assert any allegations showing bad faith or a gross
disregard for Hartford’s obligations under the Policy. Instead, the Complaint’s allegations consist
of no more than a difference of opinion about coverage under the Policy, and conclusory
allegations. See YMCA of Plattsburgh, 2018 WL 6267923, at *8 (“As Plaintiff has alleged no
underlying facts to support a finding of bad faith, other than ‘an arguable difference of opinion
between carrier and insured over coverage’ . . . and conclusory allegations . . . the Court will not
‘impose extra-contractual liability’ for attorneys’ fees.”) (citing Sukup, 19 N.Y.2d at 522)).
Accordingly, Northway’s request for attorneys’ fees is dismissed.
Lastly, Hartford alleges that the true party in interest is Sentinel, a wholly owned subsidiary
of Hartford that issued the insurance policy at issue. (Mem. at 13.) Northway does not object the
substitution. (Opp. at 12.) Accordingly, Hartford’s request for a substitution is granted.
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For the foregoing reasons, Hartford Financial Services Group, Inc.’s partial motion to
dismiss is GRANTED. Northway Medical Center Condo’s breach of contract claim is its only
surviving claim. Hartford Financial Services Group, Inc. is dismissed as the defendant and
substituted with Sentinel Insurance Company, Limited.
Sentinel is directed to answer the
complaint on or by February 1, 2022.
The Clerk of Court is respectfully directed to terminate the motion at ECF No. 12.
Dated: January 10, 2022
White Plains, New York
NELSON S. ROMÁN
United States District Judge
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