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COHEN v. UNITED STATES FIDELITY AND GUARANTY COMPANY

May 3, 2005.

DR. STEVEN COHEN, Plaintiff,
v.
UNITED STATES FIDELITY AND GUARANTY COMPANY a/k/a ST. PAUL FIRE AND MARINE INSURANCE, ST. PAUL TRAVELERS, and THE ST. PAUL COMPANIES, INC., Defendants.



The opinion of the court was delivered by: RICHARD BERMAN, District Judge

DECISION AND ORDER

I. Introduction

On or about June 24, 2004, Dr. Steven Cohen ("Dr. Cohen" or "Plaintiff") filed this action against United States Fidelity and Guaranty Company a/k/a St. Paul Fire and Marine Insurance ("USF&G"), St. Paul Travelers, and The St. Paul Companies, Inc. (collectively, "Defendants") in New York State Supreme Court for the County of New York. (See Complaint, dated June 23, 2004.) On or about July 29, 2004, Defendants removed the action to this Court on the basis of diversity of citizenship. 18 U.S.C. § 1332.

  Plaintiff served an amended complaint on or about November 1, 2004, asserting claims of breach of contract ("First Cause of Action"), violation of New York's General Business Law § 349 ("GBL § 349") ("Second Cause of Action"), and "bad faith refusal to pay an insurance claim" ("Third Cause of Action"), arising out of USF&G's alleged refusal to pay business interruption losses sustained by Plaintiff, a chiropractor, after a water pipe burst in his office on or about April 18, 2002. (See Amended Complaint, dated November 1, 2004 ("Amended Complaint" or "Compl."), ¶¶ 31-50.) Plaintiff seeks "direct damages," consequential damages, punitive damages, and attorneys' fees with respect to his breach of contract and bad faith claims. He seeks actual damages and attorneys' fees pursuant to GBL § 349. (See Compl. ¶¶ 35,42, 45, 50.)

  On or about November 18, 2004, Defendants moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the following of Plaintiff's claims: GBL § 349 claim; claim for punitive damages; claim for consequential damages; claim for attorneys' fees (under the breach of contract claim); and all claims against Defendants other than USF&G (the "non-USF&G Defendants"). See Memorandum of Law in support of Defendants' Motion to Dismiss, dated November 18, 2004 ("Defs'. Mem.").) Plaintiff filed an opposition on or about December 16, 2004. (See Plaintiff's Memorandum of Law in Opposition to Defendants' Motion to Dismiss the Amended Complaint, dated December 8, 2004 ("Pl. Mem.").) Defendants submitted a reply on December 20, 2004. (See Reply Memorandum of Law in Further Support of Defendants' Motion to Dismiss, dated December 20, 2004 ("Defs.' Reply").) Oral argument was held on May 3, 2005. For the reasons set forth below, the Court grants Defendants' motion to dismiss. Plaintiff is given leave to replead.

  II. Background

  For the purposes of this motion, the allegations contained in the Amended Complaint are taken as true. See Abraham v. Penn Mut. Life Ins. Co., No. 98 Civ. 6439, 2000 WL 1051848, at *2 (S.D.N.Y. July 31, 2000).

  "On or about July 22, 2001, USF&G issued an insurance policy to Dr. Cohen, by which USF&G agreed to provide insurance coverage to Dr. Cohen, including business interruption coverage, in consideration for which, Dr. Cohen agreed to pay [and did pay] premiums (the `Policy')." (Compl. ¶¶ 17-18.) On or about April 18, 2002, a pipe burst at Dr. Cohen's office and "water was emitted into and about the Office." (Id. ¶¶ 19-20.) "On or about October 11, 2002, Dr. Cohen began to experience significant losses in his business as a result of the Pipe Burst." (Id. ¶ 21.) USF&G deemed the pipe burst "to constitute an occurrence within the meaning of the Policy, triggering an obligation by USF&G to provide coverage," including indemnification "for all business losses resulting from occurrences . . . for a period of up to 12 months." (Id. ¶¶ 22-24.) Plaintiff submitted to USF&G a Proof of Loss in the amount of $86,241. (See id. ¶¶ 25-27.) "Although acknowledging the existence of coverage and an occurrence, USF&G has refused to pay the amount of the loss, despite Dr. Cohen's repeated demands to do so." (Id. ¶ 28.)

  Plaintiff alleges that "USF&G has no arguable justification for failing to pay Dr. Cohen under the Policy" and that "[a]s a result of USF&G's conduct, Dr. Cohen has been forced to sustain additional, consequential losses." (Id. ¶¶ 29-30.) Plaintiff also alleges that:
Upon information and belief, defendants developed a scheme (the `Scheme') by which they agreed to seek to artificially reduce the amount they would pay claimants for all business interruption losses occurring after the 9/11/01 tragedy. . . . As part of the Scheme, defendants would inform all insureds whose businesses were located in downtown New York City that their base-line income was necessarily and permanently reduced as a result of the 9/11 Tragedy, such that, any ensuing business interruption would be compensable in a lesser amount.
(Id. ¶ 38.)

  III. Legal Standard

  In ruling on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), a court "must accept the factual allegations of the complaint as true, and draw all reasonable inferences in favor of the plaintiff." Abraham, 2000 WL 1051848, at *2 (citing Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996)). "Dismissal of a complaint for failure to state a claim . . . is proper only where it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Lava Trading Inc. v. Hartford Fire Ins. Co, 326 F. Supp. 2d 434, 438 (S.D.N.Y. 2004) (internal quotation omitted); see also Conley v. Gibson, 355 U.S. 41, 45-46 (1957). "`A complaint which consists of conclusory allegations unsupported by factual assertions fails even the liberal standard of Rule 12(b)(6).'" Lava Trading, 326 F. Supp. 2d at 438 (quoting DeJesus v. Sears, Roebuck & Co., 87 F.3d 65, 70 (2d Cir. 1996)).

  IV. Analysis

  A. GBL § 349 claim

  Defendants argue that the Amended Complaint fails to state a claim under GBL § 349 because the conduct Plaintiff alleges relates "to a contractual dispute and does not constitute consumer oriented conduct." (Defs.' Mem. at 8-9.) Defendants also argue that the Amended Complaint does not (sufficiently) allege, among other things: (i) "that the challenged acts or practices were likely to mislead a reasonable consumer, acting reasonably under the circumstances"; (ii) "that plaintiff suffered injury as a result of the `scheme'"; and (iii) that Plaintiff "was misled by the `scheme.'" (Id. at 10-11.) Defendants further contend that ...


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