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MERRIN JEWELRY CO. v. ST. PAUL FIRE & MARINE INS.

May 13, 1969

MERRIN JEWELRY CO., Inc., Plaintiff,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant


Pollack, District Judge.


The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

This is a diversity case. On May 2, 1968 plaintiff, while insured by defendant under a "Jewelers Block policy" was the victim of an armed robbery occurring on plaintiff's premises. Defendant was notified of the loss and sent its representatives to take inventory and in cooperation with plaintiff's accountants, to audit the books and records of the plaintiff.

 On July 31, 1968 the defendant sent plaintiff a notice of cancellation of the policy effective on August 6, 1968. A claim of loss in the amount of $352,716.23 was submitted on or about August 6, 1968 to the defendant under the policy. Plaintiff's principal officer and its accountant were orally examined thereafter by defendant's agents in connection with the claim.

 On November 8, 1968 defendant informed plaintiff that defendant "considers its policy of insurance to be null and void as of its inception date."

 Plaintiff has brought this action to recover the full value of the stolen merchandise and for damages incurred and to be incurred from alleged improper and wrongful cancellation of the insurance pursuant to a plan and course of conduct to avoid responsibility under the policy and to force the plaintiff, through economic pressure and prospective expense, to accept in settlement of its claim a grossly inadequate amount; and plaintiff also demands punitive damages against defendant for engaging generally in a wrongful scheme to thwart claimants insured by it from pursuing their claims for recovery of losses sustained.

 Defendant moves pursuant to Rule 12(b) Fed.R.Civ.P.,

 (a) to dismiss the first two counts with leave to replead because they allegedly "split" a single cause of action;

 (b) to dismiss (without leave to replead) the third, fourth and fifth counts which seek a tort measure of damages not recoverable in an action in contract; and

 (c) to dismiss the sixth count for punitive damages, because of plaintiff's alleged failure to exhaust administrative remedies.

 The paragraphs in plaintiff's complaint entitled "First Cause of Action" and "Second Cause of Action" split a single claim into two parts. Rules 8(a)(2) and 10(b) of the Federal Rules of Civil Procedure steer the careful draftsman away from this practice. However, where as here the opposing party can suffer no discernible prejudice, the Court pursuant to Rules 8(e) and 8(f), may overlook such inartistic pleading in the interest of avoiding unnecessary collateral and time-consuming exercises. Pleadings should not be dismissed or ordered amended unless the allegations therein are not sufficiently particular to give notice of the matter in controversy or unless the form thereof is instinct with demonstrable prejudice. No doubt these paragraphs will be treated appropriately and as a single claim at trial. Defendant's motion to dismiss and to require repleading of the first two counts in the complaint is, accordingly, denied.

 In the paragraphs comprising the third, fourth and fifth counts, plaintiff seeks to plead a tort claim for what is essentially a breach of contract. New York law permits this in certain factual circumstances. Albemarle Theatre, Inc. v. Bayberry Realty Corp., 27 A.D.2d 172, 277 N.Y.S.2d 505 (1st Dept. 1967); Rich v. New York Central & H.R.R.R. Co., 87 N.Y. 382 (1882). Where the facts constituting the breach of the contract also constitute a breach of an independent legal duty owed by the defendant to the plaintiff, a separate claim for tort will lie. An example of this occurs when a common carrier permits goods in its custody to suffer damage; this not only breaches its contract of safe carriage but imposes liability in tort under the absolute standard of care imposed by the common law. Cf. J. & H. Flyer, Inc. v. Pa. R.R. Co., 316 F.2d 203 (2d Cir. 1963).

 Similarly, where the facts constituting the breach of contract are part of a larger plan to achieve an unlawful end (or a lawful end through unlawful means), a claim in tort will also lie. An example thereof occurs when the breach of the contract is but part of a course of conduct aimed at destroying plaintiff's business for the benefit of its competitors; in such circumstances, plaintiff may sue in tort for wrongful interference with its business. North Shore Bottling Co. v. C. Schmidt & Sons, Inc., 22 N.Y.2d 171, 292 N.Y.S.2d 86, 239 N.E.2d 189 (1968).

 However, a claim in tort does not lie on allegations of conspiracy of a party to a contract to break it, and his consequent failure to carry out the contract, in pursuance of the conspiracy, without more. Bereswill v. Yablon, 6 N.Y.2d 301, 189 N.Y.S.2d 661, 160 N.E.2d 531 (1959); cf. Osgoodby v. Talmadge, 45 F.2d 696 (C.C.A.2d, 1930).

 The complaint herein does not come within the theory of the Albemarle Theatre, the Rich or the North Shore Bottling cases for no larger scheme designed for the purpose of damaging plaintiff's business is alleged. The claim herein, at most, asserts a willful attempt on the part of defendant to avoid its obligations under the contract. The only scheme alleged ...


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