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Eddie v. Scottsdale Insurance Co.

May 8, 2009


The opinion of the court was delivered by: Kenneth M. Karas, District Judge


In this diversity action, Plaintiffs Rod Eddie and Paula Eddie (together, the "Eddies"), and their holding corporation, McClintock Realty, Inc. (collectively, "Plaintiffs"), seek a declaratory judgment relating to their insurance coverage, and money damages for breach of insurance contract, for losses they sustained as a result of a fire at Plaintiffs' property at 1057 State Road, Walden, New York ("1057 State Road"), against Defendant Scottsdale Insurance Company ("Scottsdale" or "Defendant"), from which they purchased an insurance policy. Defendant now moves for summary judgment on the grounds that an Occupancy Endorsement clause in the policy that it sold to Plaintiffs precludes coverage. For the reasons stated herein, Defendant's motion is granted.

I. Background

A. 1057 State Road

Plaintiffs Rod Eddie and Paula Eddie purchased the property located at 1057 State Road in October 2005. (Def.'s Rule 56.1 Statement of Undisputed Material Facts ("Def.'s 56.1") ¶ 4.) At the time of the purchase, the two-family house at 1057 State Road consisted of a basement, first-floor apartment, second-floor apartment, attic, and attached garage with three separate rooms. (Id. ¶ 6.) The Eddies purchased 1057 State Road with the intention of using it to store Mr. Eddie's business materials and equipment. (Id. ¶ 12.) Approximately two weeks after purchasing 1057 State Road, the Eddies transferred the property to their holding company, McClintock Properties, Inc.*fn1 (Id. ¶ 7.)

At the time the Eddies purchased 1057 State Road, the house was occupied by tenants living in the first- and second-floor apartments. (Id. ¶ 13.) The first-floor apartment was occupied by an individual named Matthew Slater ("Slater"), and the second-floor apartment was occupied by the Calabrese family. (Id. ¶ 14.) These tenants also occupied portions of the attic and used the attached garage for storage purposes. (Id. ¶ 15.) On the same day that the Eddies purchased the property, Mr. Eddie informed Mr. Slater and the Calabrese family that they would have to vacate the premises. (Id. ¶ 16.) These tenants subsequently moved out of the house in February or March of 2006. (Id. ¶ 17.) From that time until the August 1, 2006 fire, the two- story house was not used for residential purposes. (Id. ¶ 21.) No running appliances were left in the house, and no additions or renovations were made to the house. (Id. ¶¶ 22, 33.)

Shortly after the tenants moved out, Mr. Eddie nailed shut the front door, the back screen door, and the two doors that led from the house to the attached garage. (Id. ¶ 23.) Subsequently, the only remaining unsecured access to the house was through the attached garage's roll-up door. (Id. ¶ 24.) Mr. Eddie and his employees utilized the attached garage to store and fix business equipment, and were at 1057 State Road approximately three to five times per week for this purpose. (Id. ¶ 25.) Mr. Eddie did not, however, authorize his employees or anyone else to stay at the house, and neither Mr. Eddie nor his employees performed any work inside the house. (Id. ¶¶ 31-32.) According to Mr. Eddie, approximately three weeks to one month before the fire, some person or persons broke into the house. (Pls.' Rule 56.1 Counter-Statement of Facts ¶ 24.) Mr. Eddie testified that he subsequently inspected the premises and found "a lot of beer bottles" and "several rubbers, stuff like that." (Id.)

Mr. Eddie stored personal items inside the attic, basement, and attached garage, including antique lawn mower parts, glassware, and other miscellaneous items. (Def.'s 56.1 ¶ 26.) Mr. Eddie acquired these items when he purchased 1057 State Road, and from that time, Plaintiffs did not move, use, or repair these items. (Id. ¶¶ 27-28.)

On August 1, 2006, a fire occurred inside 1057 State Road, after a lamp used to dry marijuana caused a mattress to catch fire in the second-floor back bedroom. (Id. ¶¶ 18-19.) Plaintiffs were able to salvage most of the antique personal items stored in the house, as well as all of Mr. Eddie's business equipment, and are not making any claims for these items under their insurance policy with Defendant. (Id. ¶¶ 29-30.) As a result of the fire, Plaintiffs eventually demolished the house and leveled the property. (Id. ¶ 20.) Plaintiffs' claims for damages under their policy with Defendant are based on the loss of the house at 1057 State Road, as well as the costs they incurred in demolishing the property. (Compl. 2.)

B. Scottsdale Policy

Scottsdale issued to Plaintiffs the following policy: Dwelling Policy, No. DFS 0561603, for the policy period January 1, 2006 to January 1, 2007, for the location "1057 State Rd., Walden, NY 12586 -- Loc #1: Two Family, Frame -- Tenant Occupied Dwelling; Loc #2: One Family, Frame Dwelling Used For Storage" (the "Dwelling Policy"). (Def.'s 56.1 ¶ 35 (emphasis omitted).) Location #1, where the fire took place, is subject to a liability limit of $300,000, and a deductible of $2,500. (Id.) The policy on Location #2 was cancelled prior to the August 1, 2006 fire. (Id.)

The Dwelling Policy contains a coverage provision which states:


This insurance applies to the Described Location, Coverages for which a Limit of Liability is shown and Perils Insured ...

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