The opinion of the court was delivered by: Gerard E. Lynch, District Judge
Plaintiff St. Paul Fire and Marine Insurance Company ("St. Paul") seeks a declaratory judgment that the costs incurred by defendant 111 Tenants Corporation ("the co-op") in replacing the gas distribution system in its cooperative apartment building at 111 East 75th Street in Manhattan are not covered by the co-op's "all risks" policy with St. Paul. The co-op counterclaims for the amount it expended on the replacement. The parties have cross-moved for summary judgment. Because the losses here come within the policy's exclusion for losses arising from deterioration of covered property, St. Paul's motion will be granted.
On July 24, 2000, the superintendent of the co-op, Daniel Orszulak, smelled gas in the basement of the building and reported it to Consolidated Edison ("Con Ed"), the co-op's gas utility company. A Con Ed inspector found a leak in a gas line immediately above one of the 38 basement gas meters, and shut off the building's gas supply. As required by the New York City administrative code § 27-922(d), the entire gas piping system was tested at about six times the normal pressure before service was restored. When the required tests were conducted, 32 of the 38 gas risers leading from the basement to the apartments failed; in a second round of testing performed by a different contractor, 27 of the risers failed again. The co-op accordingly undertook to replace the entire gas distribution system, and submitted a claim to St. Paul for the ensuing costs, which totaled $358,000.00.
St. Paul argues that it has no obligation to cover the cost of replacing the system because the "all risk" policy expressly excludes losses "caused or made worse by . . . deterioration [or] any quality . . . that causes [the covered property] to deteriorate or destroy itself" (Schreiner Affid. Ex. 1 ("Policy"), at STP 00071.) Alternatively, St. Paul argues that the loss here is not covered because it comes within a policy provision that, it argues, excludes losses due to "testing." (P. Mem. at 11.) For reasons unclear to the Court, St. Paul does not rely on the policy's exclusion for "loss caused . . . by the enforcement of any ordinance . . . governing the . . . repair . . . of any property." (Policy, at STP 00069.)
The co-op argues in response that (1) a triable issue of fact remains as to whether the initial gas leak was due to deterioration; (2) even if the first leak was due to deterioration, the large number of leaks detected during the subsequent testing were actually paused by the high gas pressure used during the testing itself.
1. Summary Judgment Standard
When adjudicating a motion for summary judgment, a court must resolve any ambiguities in favor of the nonmoving party, although "the nonmoving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). The court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996). Summary judgment is then appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
To establish a genuine issue of material fact, the opposing party "`must produce specific facts indicating' that a genuine factual issue exists." Scotto, 143 F.3d at 114 (quoting Wright v. Coughlin, 132 F.3d 133, 137 (2d Cir. 1998)); see also Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986). "If the evidence [produced by the nonmoving party] is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) (internal citations omitted).
II. The "Testing" Exclusion
Both parties in this action misconstrue the obvious intent of the policy's exclusion of losses due to "Defects — ...