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Federal Insurance Co. v. U.S. Distributing Inc.

December 15, 2006

FEDERAL INSURANCE CO., AS SUBROGEE OF CLARA WELCH, THANKSGIVING HOME, INC., PLAINTIFF,
v.
U.S. DISTRIBUTING INC.; SUNDOG CONSTRUCTION SERVICES, INC.; ANDREW R. MANCINI ASSOCIATES, INC.; PELBRO, INC., D/B/A ROCHESTER LINOLEUM & TILE CENTER; AND FLOWER CITY CUSTOM CARPET, DEFENDANTS.
PELBRO, INC., D/B/A ROCHESTER LINOLEUM & TILE CENTER; AND FLOWER CITY CUSTOM CARPET, THIRD-PARTY PLAINTIFFS,
v.
THE ST. PAUL TRAVELERS COMPANIES, INC.; TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; AND TRAVELERS PROPERTY CASUALTY CORPORATION, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Scullin, Senior Judge

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

Currently before the Court are Third-party Defendants' (collectively referred to as "Travelers") motions to dismiss the third-party Complaints of Pelbro, Inc., d/b/a Rochester Linoleum & Tile Center ("Rochester") and Flower City Custom Carpet ("Flower City") for failure to state a cause of action upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.*fn1

II. BACKGROUND

On September 5, 2002, Clara Welch, Thanksgiving Home, Inc. ("Clara Welch"), Plaintiff Federal Insurance Company's insured, contracted with Defendant Andrew R. Mancini Associates ("Mancini") as its general contractor to undertake an addition to and renovation of the Clara Welch Thanksgiving Home in Cooperstown, New York. Defendant Mancini subsequently subcontracted with Defendant Rochester to provide labor, materials, and equipment for the project. In turn, Defendant Rochester sub-subcontracted with Defendant Flower City to provide labor for the project.

During the course of the construction and renovation, Defendant Mancini procured propane space heaters for use inside the work area. Defendant U.S. Distributing, Inc. allegedly manufactured the heaters, and Defendant Sundog Construction Services, Inc. allegedly distributed them.

On March 26, 2003, a fire substantially destroyed the Clara Welch Thanksgiving Home. An investigator for the Otsego County Office of Emergency Services concluded that the fire probably started at or near the location of one the heaters.

As a result of the fire, Plaintiff Federal Insurance Company has made payments in excess of $2,000,000 to Clara Welch and may make additional payments in the future. It brought the underlying subrogation action seeking judgment jointly and severally against Defendants for an amount in excess of $6,000,000 and additional relief.*fn2

Defendants Rochester and Flower City allege that Thomas Kinsley, an employee of one or more of the Travelers companies, was present at the scene of the fire on April 11, 2003, acting as Defendant Mancini's insurer. They further allege that the local fire inspector informed all the parties that the heater was the likely cause of the fire. Thereafter, on April 16, 2003, Defendants Rochester and Flower City assert that they entered into an oral agreement with Mr. Kinsley, on behalf of Travelers, to have him take possession of the suspect heater, keep it at Travelers' laboratory, and maintain the heater in its post-fire condition for later examination and testing. Sometime thereafter, Travelers allegedly disposed of the heater without notice.

Based on these allegations, Defendants Rochester and Flower City commenced a third-party action alleging causes of action against Travelers for the alleged spoliation of the heater based on principles of negligence and breach of contract.*fn3

III. DISCUSSION

A. Spoliation -- based on negligence

Third-party Defendants maintain that, under New York law, there is no cause of action for spoliation based on negligence pursuant to MetLife Auto & Home v. Joe Basil Chevrolet, Inc., 1 N.Y.3d 478 (2004).

In MetLife, a fire destroyed a vehicle owned by Joe Basil Chevrolet and used by Michael Basil. See id. at 481. Michael Basil's home was also extensively damaged. See id. MetLife insured Mr. Basil's home and paid on the policy. See id. Royal, Chevrolet's insurer, agreed in a telephone conversation to take possession of and preserve the vehicle. See id. Royal, MetLife, and General Motors arranged for a joint inspection of the vehicle at Royal's lot, but Royal disassembled the vehicle and discarded it before the inspection. See id. MetLife, as Michael Basil's subrogee, commenced an action against Chevrolet and General Motors based on the fire and also asserted a cause of action against Royal based on spoliation for negligently impairing ...


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