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Clark Moving & Storage, Inc. v. Selective Insurance Company of America

August 27, 2010

CLARK MOVING & STORAGE, INC. AND AXA RE PROPERTY AND CASUALTY INSURANCE COMPANY, PLAINTIFFS,
v.
SELECTIVE INSURANCE COMPANY OF AMERICA AND HARTFORD INSURANCE COMPANY, AS SUBSIDIARY OF THE HARTFORD FINANCIAL SERVICES GROUP, INC., DEFENDANTS.



The opinion of the court was delivered by: Michael A. Telesca United States District Judge

DECISION and ORDER

INTRODUCTION

Plaintiffs Clark Moving & Storage, Inc. ("Clark") and Axa Re Property and Casualty Insurance Company ("Axa Re"), (hereinafter collectively "Plaintiffs"), bring this action against defendant Selective Way Insurance Company ("Selective" or "Defendant"), incorrectly named as Selective Insurance Company of America, seeking a declaration that Selective is obligated to indemnify and provide insurance coverage to Clark in connection with a lawsuit and arbitration award against Clark for damages sustained to its customer's property while being held in storage in Clark's warehouse. Axa Re seeks reimbursement for the costs it incurred defending Clark in the action brought against Clark by the customer and for the costs incurred to pursue the instant action*fn1.

Clark claims that it purchased a Warehouseman's Legal Liability insurance policy ("the Relevant Policy") from Selective for the yearly period from May 1, 2000 through May 1, 2001 (hereinafter the "relevant policy period"), during which a customer's household goods and belongings were damaged while in storage at Clark's warehouse located at 3680 Buffalo Road, Rochester, New York.

Clark contends that it sought liability coverage from Selective in connection with the customer's lawsuit and the resulting arbitration proceeding pursuant to the terms of the Policies, but Selective denied coverage. Instead, Axa Re defended Clark in the lawsuit and arbitration, and now it seeks to be reimbursed for those expenditures, as well as the costs incurred to date in bringing a declaratory judgment action against Selective.

Selective denied Clark's request for indemnification and insurance coverage because, among other things, it did not deem the customer's "loss" to be a "covered loss" under the terms of the Policies. Selective claims that the type of loss at issue is specifically excluded from coverage under the terms of the Policies.

Before the Court for determination is Plaintiffs' Motion for Summary Judgment ("Plaintiffs' Motion"). Plaintiffs seek a declaratory judgment in their favor as a matter of law based upon interpretation of the disputed language in the relevant policy. Selective opposes Plaintiffs' Motion, contending there are several issues of material fact that require a trial in this matter.

For the reasons set forth below, I grant in-part and deny in-part the Plaintiffs' Motion for Summary Judgment. I find that to the extent the customer's goods were damaged by accidental exposure to water, such a "loss" is a "covered loss" as those terms are used and defined in the 2000/2001 warehouseman's liability policy (the "Relevant Policy"). Accordingly, Plaintiffs' Motion seeking a declaration that the Relevant Policy covers the customer's losses resulting from the warehouse roof leak is granted, and Selective was required to provide a defense to Clark against the customer's lawsuit. Therefore, Axa Re is entitled to reimbursement of the defense costs. Plaintiffs' Motion is denied in-part, however, because there is a genuine issue of material fact concerning the apportionment of damages in this case. Specifically, there are questions of fact as to how much of the damages sustained and awarded to the customer resulted from the accidental "loss," and whether some of the damage resulted from Clark's alleged intentional conduct. Accordingly, I deny without prejudice Plaintiffs' request for a declaration that they are entitled to indemnification in connection with the customer's lawsuit against Clark.

BACKGROUND

In September 1999, John and Teri Petrie (collectively, the "Petries") entered into a storage contract with Clark. (Plaintiffs' App.*fn2 , Ex. K). Clark agreed to pack and store a large quantity of personal property and household goods for the Petries while they relocated in connection with John Petrie's transfer for Delphi Automotive ("Delphi"). (Id.). The Petries' goods remained in storage at Clark's warehouse for four years, until September 2003.

Sometime in or around April 2001, a roof leak occurred in Clark's facility in which the Petries' property was stored located at 3680 Buffalo Road. (Plaintiff's App., Ex. H, p. 7; Reply Affidavit of Robert G. Scumaci, Esq. ("Scumaci Reply Aff.") ¶8, Ex. A). The location of the leak was concentrated, at least in part, over the storage room that housed the Petries' property. (Plaintiff's App., Ex. H, pp. 9-10, 15). As a result, Plaintiffs allege that the property became wet, which in turn caused water and mold damage to the items. (Id., pp. 9-10, 15, 16).

Clark contends that immediately upon discovering the leak (on April 17, 2001), it repaired the roof. (Affidavit of Katherine M. Clark ("Clark Aff."), ¶8). Although Clark repaired the roof, it did not notify the Petries that a roof leak had occurred over the unit storing their property. (Plaintiffs' App., Ex. H, 11).

The Petries did not discover the damage to their property until a few years later in September 2003, when Clark shipped the property to the Petries' new home in Michigan. (Plaintiffs' App., Ex. H, pp. 19-21; Clark Aff., ¶12). The Petries testified in their action against Clark that when their goods were being unloaded from the truck, they immediately noticed a problem because the boxes were not marked or labeled as they originally had been when they were placed in storage in 1999. (Plaintiffs' App., Ex. E, pp.19-22, Ex., F, pp. 29-32).

Upon opening the boxes, the Petries discovered that their goods had water stains, or appeared discolored from water exposure, and many of the items were covered with mold. (Plaintiffs' App., Ex. E, pp. 22-24, Ex., F. pp. 32-33). That mold allegedly infested the new residence in Michigan, which required remediation. (Plaintiffs' App., Ex. A, ¶15, Ex. A at Ex. A, ¶19). The Petries allegedly had to move out of their new home for a time while the mold infestation was addressed. (Id.).

Thereafter, in early 2005, the Petries and Delphi*fn3 commenced an action against Clark for property damage and the costs associated with remediating the Michigan home to remove the mold (hereinafter the "Underlying Action")*fn4 . (Plaintiffs' App., Ex. A at Ex. A). The Petries contended that upon discovering the roof leak affecting the Petries' storage unit, Clark re-packed their belongings in dry boxes, and in doing so, mixed water-damaged items with non-damaged items, thereby spreading the mold damage to other property. (Id., ¶¶ 13, 14). Clark denied this allegation throughout the Underlying Action (as well as in the instant motion before this Court), claiming they were totally unaware that any damage had been done to the Petries' property as a result of the roof leak until 2003 when the items were unpacked at the Michigan home. (Clark Aff., ¶12).

The Underlying Action, initially commenced in the Monroe County, New York Supreme Court, was removed to the Federal Court for the Western District of New York, where it proceeded to binding arbitration pursuant to the terms of the contract between Clark and the Petries. The Arbitrator awarded the Petries $500,000 in damages, based upon the evidence before him of the value of the goods at the time the items were placed in storage with Clark (hereinafter the "Arbitration Award"). (Plaintiffs' App., Ex. D). Clark demanded that Selective pay the Arbitration Award, but Selective has not responded to this demand.

Because Selective refused to defend Clark in the Underlying Action, Clark and Axa Re commenced the instant declaratory judgment action seeking insurance coverage, indemnification and reimbursement from Selective. (Plaintiffs' App., Ex. A). Clark and Axa Re claim to have tendered the defense of the Underlying Action to Selective on a number of occasions, and further claim that Selective has had multiple opportunities to settle the Petries' claims on Clark's behalf and/or participate and defend Clark in the arbitration proceeding, but Selective refused. (Id.; Scumaci Aff., ¶¶ 13-15).

Clark and Axa Re now move for summary judgment against Selective seeking a declaratory judgment that pursuant to the terms of the Relevant Policy, Selective must indemnify Clark for the Arbitration Award and must reimburse Axa Re for all costs incurred in defending Clark in the Underlying Action and in bringing the instant action against Selective for coverage.

There is no dispute that Selective was timely and/or properly notified of the Petries' loss and/or the claims against Clark, and there is no debate that Selective issued a proper denial of coverage. The only issue before the Court is whether Selective's 2000/2001 liability policy insures Clark in connection with the Underlying Action and the Arbitration Award.

For the reasons set forth below, I find that the terms of the Relevant Policy provide insurance coverage for damages to the Petries' property that resulted from the warehouse roof leak that occurred in April 2001, and therefore, Plaintiffs' Motion for a declaratory judgment declaring that the Relevant Policy provides coverage for the loss attributable to the roof leak and declaring that Selective was required to tender a defense to Clark in the Underlying Action is granted. However, material questions of fact remain as to what portion, if any, Clark is responsible for the Petries' damages. ...


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