The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge
Plaintiffs Irma Dalton and Blanche Dalton, doing business as Sidney 39, Ltd. ("the Daltons") have sued their property insurer, Harleysville Worcester Insurance Company, and its parent, the Harleysville Group (collectively refereed to as "Harleysville") for breach of contract and for a declaratory judgment seeking to force Harleysville to pay for damage to property located at 39 Sidney Place, Brooklyn, New York ("the Property"). Harleysville has moved for summary judgment on the Daltons' claims. The Daltons have cross-moved for summary judgment on their breach of contract claim. For the reasons set forth below, Harleysville's motion for summary judgment is granted and that of the Daltons is denied.
The Daltons own the Property, which is designated as 39 Sidney Place, Brooklyn, New York. Harleysville's Local Rule 56.1 Statement ("Def. Rule 56.1 Stat."), ¶ 2. On May 23, 2003, the Daltons insured the Property by purchasing "Deluxe Business Owners" insurance policy, Policy Number BO-3E0363 ("the Policy") from Harleysville. A copy of the Policy is annexed to the Affirmation of Henry J. Cernitz ("Cernitz Aff.") as Exhibit A. The Policy was in effect from August 3, 2003, to August 3, 2004. See Complaint, annexed to the Affidavit of Patricia A. Rooney ("Rooney Aff.") as Exhibit A.
On February 25, 2004, a substantial impairment of the structural integrity of an "interior common party wall" separating the Property and an adjacent property occurred.*fn1 The Daltons' Rule 56.1(a) Statement ("Pl. Rule 56.1(a) Stat."), ¶ 17. The Daltons immediately reported the impairment to Harleysville. Id. at ¶ 18.
Other than reporting the impairment to Harleysville, the Daltons do not appear to have taken any additional action-- including repairing the Property. On April 2, 2004, Tom Van Staey of Walter B. Melvin Architects, LLC ("WBM") wrote to the Daltons and warned that the impairment created "a very real possibility that these buildings could collapse at any time."*fn2 Affidavit of Benjamin A. Lavon in Support of the Dalton's Cross-Motion ("Lavon Aff."), ¶ 8. On April 14, 2004, WBM wrote to the New York City Department of Buildings and requested that the Property be declared structurally unsafe and the tenants removed. Id. at ¶¶ 9-10. On May 14, 2004, WBM again wrote to the Daltons to advise them that the Department of Buildings would be issuing a vacate order for the Property. The letter further requested that the Daltons assist in the removal of the tenants occupying the Property, and that the Daltons execute several contracts to shore up the party wall to prevent against an actual collapse. Id. at ¶ 12; Lavon Aff. Exhibit 5. Apparently the Daltons did not cooperate in removing the tenants and, on June 10, 2004, the Department of Buildings issued a vacate order. Id. at ¶¶ 12-14; Lavon Aff. Exhibits 6-7. The emergency evacuation was necessary in case the Property or parts of it collapsed during the work to shore up the party wall. Id.
Meanwhile, Harleysville conducted its own investigation and dispatched both an engineer and a claims adjuster. Pl. Rule 56.1(a) Stat., ¶ 21. Harleysville's engineer found that the cause of the impairment was severe deterioration and rotting of a wood supporting plate placed along a level of the floor beams for the entrance level. Due to the rotted and deteriorated wood plate, there was movement in the common brick party wall. The result was weakness, tension and shifting of the building.
Id. at 22; Cernitz Aff., Exhibit C. On June 2, 2004, Harleysville disclaimed converge of the loss based on their engineer's report. Id. Specifically, Harleysville's disclaimer letter was based on Sections B.2.k. and B.3.c. of the Policy. Pl. Rule 56.1(a) Stat., ¶¶23-24; Cernitz Aff. Exhibit. A. Sections B.2.k. and B.3.c. of the Policy are discussed in greater detail below.
After Harleysville disclaimed coverage, the Daltons retained their own expert, Benjamin Lavon. Pl. Rule 56.1(a) Stat., ¶ 26. Lavon, a licenced engineer, conduced field observations on June 15, 2004, and July 7, 2004. Id. During these visits, Lavon observed that the party wall exhibited a "large bulging . . . movements, deteriorated masonry and crumbling mortar joints." Lavon Aff. ¶ 19.
Lavon also observed that much of the deterioration of the mortar joints was hidden from view and was only revealed when he cut into the wall. Id. A laboratory report subsequently confirmed that the mortar had deteriorated. Id. at ¶ 20.
As part of this litigation, Lavon issued an expert report on March 29, 2006. A copy of the report is annexed to the Cernitz Aff. as Exhibit. A. The report observed that "the said failed party wall exhibited large bulging of the masonry wall, movements, deteriorated masonry and crumbling mortar joints. The wall bulging was estimated to be as much as approximately 12 inches." Id. Lavon estimated the party wall is approximately nine inches thick and that the fount masonry wall had separated from the party wall by "as much as two inches." Id. Lavon went on to state that "the client has reported that, the structural conditions were discovered only after the party wall finishes were removed. Until that time the masonry bearing wall remained concealed to them." Id. Lavon concluded that the deterioration of the mortar joints that resulted in the collapse of the Party Wall was hidden from view because the Party Wall was completely covered with finish that remained in place until it was uncovered. Thus, there is no doubt that it was impossible for anyone to have known or seen that the mortar joints were deteriorating prior to the time that the wall finish was removed.
Id. Lavon concluded that "the structural failure of the Party Will resulted from deteriorated mortar joints." Lavon Aff. ¶ 21.