The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
Before the Court is the motion of defendant CNA Financial Corp.
("CNA") for summary judgment against plaintiff Tufo's Wholesale
Dairy, Inc. ("Tufo"). For the reasons that follow, defendant's
motion is granted in part and denied in part.
The following is a summary of the parties' "Agreed Statement of
Undisputed Material Facts."
Tufo operates a wholesale food company in Bronx County, New
York, that sells, among other items, dairy products. Tufo
purchased a policy of insurance ("policy") from CNA's subsidiary,
Continental Casualty Company, providing coverage for the period
of November 3, 2002, to November 3, 2003.
On August 14, 2003, an electrical power outage (hereinafter
referred to as the "blackout") covered the east coast of the
United States, extending to the Midwest as far as Ohio. Before
the blackout occurred, Tufo's electrical supplier, Consolidated
Edison Company ("Con Ed") was experiencing normal system
operations. Just before 4:11 p.m., voltage on the Con Ed system
began fluctuating and declining and frequency began to drop. Low
system frequency triggered sensors which caused the functioning
of safety and protective devices that activated an automatic,
four-step under-frequency load shedding program disconnecting
approximately 50% of Con Ed's load. The voltage continued to
fluctuate and did not recover. There was a loss of generation and transmission and the function of safety and protective
devices shut down the system very quickly. The Con Ed system shut
down was not caused by physical damage to Con Ed equipment.
Tufo's refrigeration units consequently lost electrical power
until August 15, 2003. As a result, Tufo's dairy products spoiled
and had to be discarded.
Other than the spoiled dairy products, there was no physical
damage to property owned by Tufo, including its refrigeration
units, that necessitated repair or replacement as a result of the
blackout. Once power was restored, Tufo's refrigeration units
were turned on and operated normally.
After filing its insurance claim with defendant and being
denied coverage, plaintiff filed the instant action in the
Supreme Court, Bronx County, as a class action, alleging breach
of contract and unfair claim settlement practices, and demanding
damages exceeding $100 million plus punitive damages. Defendant,
a Delaware corporation with its principal place of business in
Illinois, removed the action to this court. In the interest of
expediency, the parties, in a Civil Case Scheduling Order dated
March 17, 2004, agreed that plaintiff's motion for class
certification would be stayed pending the outcome of defendant's
summary judgment motion. In its summary judgment motion, defendant argues principally
that plaintiff cannot prove that it meets the requirements for
triggering coverage under the policy. Specifically, defendant
argues that, according to the policy, plaintiff's loss of
inventory resulting from the blackout is not a covered loss.
Plaintiff principally contends that the contract is ambiguous and
illusory and that "a reasonable business person" would have
believed that the policy covered losses due to the blackout.
Defendant also argues that plaintiff's second cause of action
for unfair claim settlement practices should be dismissed because
no private cause of action for such a claim exists.
The parties do not dispute that New York law applies to the
interpretation of the provisions of the policy, which are
The following is a summary of the relevant provisions of Tufo's
policy. A copy of the complete policy is included as Exhibit A to
the Affirmation ...