The opinion of the court was delivered by: Kenneth M. Karas, Usdj
Before the Court is Defendant Fireman's Fund Insurance's ("Defendant") Motion to Dismiss and/or Motion for Summary Judgment, as well as Plaintiff Dream Spa Inc. d/b/a Tranquility Spa's ("Plaintiff") Cross-Motion to Dismiss and/or Motion for Summary Judgment. For the reasons stated herein, Defendant's Motion is denied in part and granted in part, and Plaintiff's Cross-Motion is denied without prejudice to renewal.
The following facts are not in dispute, except where noted. Plaintiff is a New York corporation operating a day spa in Scarsdale, New York. (Compl. ¶¶ 1-2.) Defendant is a property and casualty insurance company with a principal place of business in California and a license to do business in New York. (Compl. ¶ 3; Answer and Countercl. ¶ 3.) Defendant originally issued to Plaintiff a Business Coverage Policy under policy number 8 H3 AZC 80774603 ("the Policy"), which was effective from November 19, 2004 until November 19, 2005. (Def.'s Rule 56.1(a) Statement ¶ 4 ("Def.'s 56.1 Stmt"); Pl.'s Rule 56.1(b) Statement Responding to Def.'s 56.1(a) Statement ¶ 4 ("Pl.'s 56.1 Resp.").) The Policy was renewed to remain effective from November 19, 2005 until November 19, 2006, and then from November 19, 2006 until November 19, 2007. (Def.'s 56.1 Stmt ¶ 4; Pl.'s 56.1 Resp. ¶ 4.)
The Policy provides coverage for two main types of property: (i) "business personal property," which was provided for by Coverage B, and (ii) buildings, which were provided for by Coverage A.*fn1 (Def.'s 56.1 Stmt ¶¶ 13, 15; Pl.'s 56.1 Resp. ¶¶ 13, 15; Schwalbach Aff., Ex. A, Policy 2.) The Policy's Declarations provide for a $158,000 coverage limit for damage to business personal property under Coverage B.*fn2 (Def.'s 56.1 Stmt ¶ 4; Pl.'s 56.1 Resp. ¶ 4; Schwalbach Aff., Ex. A, Declarations.) There is also a list of "Additional Coverages," one of which -- "Business Income" -- is at the center of the present dispute. (See Def.'s 56.1 Stmt ¶ 15; Pl.'s 56.1 Resp. ¶ 15; Schwalbach Aff., Ex. A, Policy 3-4.) The "Additional Coverages" provide that "[a]ny limit provided for [the Additional Coverages] is in addition to the Coverage A and B Limits of Insurance unless otherwise indicated." (Def.'s 56.1 Stmt ¶ 15; Pl.'s 56.1 Resp. ¶ 15; Schwalbach Aff., Ex. A, Policy 3.)
"Business Income" coverage allows Plaintiff to recover "the actual loss of Business Income [it] sustain[s] due to the necessary suspension of [its] operations during the period of restoration" for up to "12 consecutive months after the date of direct physical loss or damage." (Schwalbach Aff., Ex. A, Policy 5.) However, this coverage was only available if the suspension was "caused by direct physical loss of or damage to property at the described premises, including personal property . . . caused by or resulting from any Covered Causes of Loss." (Id., Ex. A, Policy 5.) "Covered Causes of Loss" are defined by the Policy as "RISKS OF DIRECT PHYSICAL LOSS unless the loss is: . . . Excluded in Part B. . . ." (Def.'s 56.1 Stmt ¶ 14; Pl.'s 56.1 Resp. ¶ 14; Schwalbach Aff., Ex. A, Policy 3.)
Among the losses excluded from the definition of "Covered Causes of Loss" are losses caused by:
(1) Flood, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;
(4) Water that backs up from a sewer or drain; or
(5) Water under the ground surface pressing on, or flowing or seeping through . . . . (Def.'s 56.1 Stmt ¶ 8; Schwalbach Aff., Ex. A, Policy 14-15.) The Parties, however, executed a Water Damage Endorsement ("WDE"), which modified the Exclusions section by deleting provisions (4) and (5), and otherwise leaving "[a]ll other terms and conditions of [the Policy] . . . the same." (Schwalbach, Ex. A, WDE.) The Policy's Declarations indicate that "[t]he limit of insurance for [optional coverages] is the applicable [Coverage A or Coverage B] limit . . . unless a limit of insurance is . . . shown below." (Id., Ex. A, Declarations.) Below this statement is a line indicating that the WDE is subject to a $50,000 limit. (Id., Ex. A, Declarations.)
On July 19, 2006, Plaintiff notified Defendant that Plaintiff's spa was damaged as a result of flooding and a sewer drain backup, and Defendant assigned its Regional General Adjuster, Eric Schwalbach, to adjust the loss. (Def.'s 56.1 Stmt ¶¶ 5-6; Pl.'s 56.1 Resp. ¶¶ 5-6.) Several days later, on July 24, 2006, Defendant issued to Plaintiff a check for $50,000 for damage caused by the sewer drain backup.*fn3 (Def.'s 56.1 Stmt ¶ 10; Pl.'s 56.1 Resp. ¶ 10.) On August 4, 2006, Defendant issued to Plaintiff another check for $50,000, this time as an advance on an anticipated claim for loss of business income. (Pl.'s Rule 56.1(a) Statement ¶ 1 ("Pl.'s 56.1 Stmt"); Def.'s Rule 56.1(b) Statement Responding to Pl.'s 56.1(a) Statement ¶ 1 ("Def.'s 56.1 Resp.").)
On August 24, 2006, Defendant sent a letter to Plaintiff, which expressed Defendant's view that all loss caused to Plaintiff's spa resulting from the sewer drain backup was subject to an overall limit of $50,000. (See Def.'s 56.1 Stmt ¶ 9; Aff. of Eric Schwalbach, Ex. B ("Schwalbach Aff.").) The letter also notified Plaintiff of Defendant's position that the second check for $50,000 was issued in error. (Pl.'s 56.1 Stmt ¶ 3; Def.'s 56.1 Resp. ¶ 3; Schwalbach Aff., Ex. B.) The letter stated, "[w]hile we [Defendant] would appreciate reimbursement of our overpayment in error, we will not pursue the matter beyond this one request." (Schwalbach ...