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Tropic Pollo I Corp. D/B/A v. National Specialty Insurance

July 8, 2011


The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge:


Plaintiff Tropic Pollo I Corp., d/b/a Tropic Pollo Restaurant, filed this action against defendant National Specialty Insurance Company, Inc. ("NSIC" or "Defendant") on March 9, 2009. The parties cross-moved for summary judgment pursuant to Fed. R. Civ. P. 56 on June 25, 2010. For the reasons set forth below, defendant's motion is granted and plaintiff's motion is denied.


Plaintiff owns a restaurant that sells rotisserie chickens. National Specialty Insurance Company issued a policy of property insurance ("policy") to plaintiff that insured against inter alia, risk of fire. (Pl.'s 56.1 Stmt. ¶ 1; Def.'s 56.1(b) Stmt. ¶ 1.) On April 12, 2008, a greasy chicken ignited in plaintiff's restaurant causing fire and extensive damage. (Pl.'s 56.1 Stmt. ¶¶ 16, 17; Def.'s 56.1(b) Stmt. ¶¶ 16,17.) Plaintiff filed a claim under the policy to recover his losses. (Compl. ¶ 8.) In response, NSIC sent a claims adjuster on April 14, 2008, to observe the damage. (Def.'s 56.1 Stmt. ¶ 12; Pl.'s 56.1(b) Stmt. ¶ 12.) The claims adjuster recommended that Mr. LeBow, a cause and origination specialist, further inspect plaintiff's restaurant. (WardDep. 64:2-8.) NSIC followed the claim adjuster's recommendation, and on April 16, 2008, Mr. LeBow conducted his initial investigation. (Def.'s 56.1 Stmt. ¶ 13; Pl.'s 56.1(b) Stmt. ¶ 13.)

Mr. LeBow examined, among other things, the exhaust filters, and the chemical fire suppression system. The filters, which attach to the hood over the rotisserie, sieve the smoke before it enters the ducts. (LeBow Dep. 35:13-26; 37:13-22.) Mr. LeBow concluded that after the chicken ignited, the fire traveled through these four filters, consuming one of them, and then spread through the entire duct system. (LeBow Dep. 35:13-22.) As for the suppression system, Mr. LeBow observed that the system valve was "jammed." (LeBow Dep. 29:21-22.) Specifically he observed that the suppression nozzle at the duct entry point above the rotisserie was twisted in such a way that, had it activated, it would have inadequately dispersed suppressant. (LeBow Dep. 20:16-25; 21:1-9.) However, the inner workings of the suppression system were beyond Mr. LeBow's expertise, as such he could not make any conclusive determinations about the affect of this "jam" on the fire damage. (LeBow Dep. 21:10-19.) For this reason, the investigator told plaintiff that an engineer would be coming to look at the fire remains and that plaintiff should not touch anything. (Def.'s 56.1 Stmt. ¶ 14; Pl.'s 56.1(b) Stmt. ¶ 14.) Plaintiff responded by closing his restaurant to await further inspection. (Def.'s 56.1 Stmt. ¶ 14; Pl.'s 56.1(b) Stmt. ¶ 14.)

Then, according to defendant, the NSIC claims adjuster reached out to potential subrogation targets, including the manufacturer of the chemical-fire suppression system. (Def.'s 56.1 Stmt. ¶ 15.) The defendant attempted to organize a joint inspection with all parties, targets, and engineers on May 14, 2008; however, plaintiff was unavailable on that date, so the meeting was rescheduled to May 22, 2008. (Pl.'s 56.1 Stmt. ¶ 23-24; Def.'s 56.1(b) Stmt. ¶ 23-24; Bora Aff. ¶ 21.) The May 22 meeting was also rescheduled, to May 30, but this time because the NSIC-affiliated engineer was unavailable. (Pl.'s 56.1 Stmt. ¶ 25; Def.'s 56.1(b) Stmt. ¶ 25.) ByMay 30, approximately seven weeks after the initial incident, plaintiff had removed the damaged ductwork, replaced the fire suppression system and completely cleaned the fire scene. (Def.'s 56.1 Stmt.¶ 22; Pl.'s 56.1(b) Stmt. ¶ 16.) Defendant contends that by cleaning up the fire scene and replacing the suppression system, it was unable to complete its investigation. Accordingly, NSIC denied plaintiff's request for coverage. (Denial Letter, annexed to Leavy Decl., as Ex. J.) Plaintiff initiated this action on March 9, 2009demanding payment for his loss. Defendant, asserts four affirmative defenses including that plaintiff: (1) impaired defendant's subrogation rights; (2) failed to clean its duct filters in compliance with the Protective Safeguards Endorsement provisions of the policy; (3) failed to preserve property for inspection; and (4) has no proof of an insurable interest in improvements and betterments.


I. Standard for Summary Judgment

Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). The court must view all facts in the light most favorable to the nonmoving party, but "only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380 (2007). "When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Id. A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The nonmoving party, however, may not rely on "[c]onclusory allegations, conjecture, and speculation," Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998), but must affirmatively "set out specific facts showing a genuine issue for trial," FED. R. CIV. P. 56(e). "When no rational jury could find in favor of the nonmoving party because the evidence to support its case is so slight, there is no genuine issue of material fact and a grant of summary judgment is proper." Gallov. Prudential Residential Servs., Ltd. P'ship., 22 F.3d 1219, 1224 (2d Cir. 1994) (citing Dister v. Cont'l Group, Inc., 859 F.2d 1108, 1114 (2d Cir.1988)).

Under New York law,*fn1 "'a motion for summary judgment may be granted in a contract dispute only when the contractual language on which the moving party's case rests is found to be wholly unambiguous and to convey a definite meaning.'" Gesualdi v. Laws Constr. Corp., 2010 WL 5185067, at *3 (S.D.N.Y. Dec. 22, 2010) (quoting Topps Co., Inc. v. Cadbury Stani S.A.I.C., 526 F.3d 63, 68 (2d Cir. 2008)). Thus, "'the initial question for the court on a motion for summary judgment with respect to a contract claim is whether the contract is unambiguous with respect to the question disputed by the parties.'" Cont'l Ins. Co. v. Atl. Cas. Ins. Co., 603 F.3d 169, 180 (2d Cir. 2010) (quoting Law Debenture Trust Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 465 (2d Cir. 2010)). This inquiry "is a question of law for the court." Law Debenture Trust, 595 F.3d at 465. "The test for ambiguity is whether the language in the insurance contract is susceptible of two reasonable interpretations" MDW Enters. v CNA Ins. Co., 4 A.D.3d 338, 340-41 (2d Dep't 2004) (quotations omitted).

II. Subrogation Rights

A. The Language of the Policy is Clear and Unambiguous

NSIC claims that plaintiff impaired its subrogation rights in violation of the plain language of the policy. Included in the policy is a "Commercial Property Conditions" clause. Among those conditions is the "Transfer of Rights of Recovery Against Others to Us," which states:

If any person or organization to or for whom we may make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to the extent of our payment. That person or organization must do everything necessary to ...

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