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B&A Demolition and Removal, Inc v. Markel Insurance Company

August 9, 2011

B&A DEMOLITION AND REMOVAL, INC.,
PLAINTIFF,
v.
MARKEL INSURANCE COMPANY,
DEFENDANT.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

The plaintiff in this case, B&A Demolition and Removal, Inc. ("B&A") seeks a declaratory judgment against the defendant Markel Insurance Company, LLC ("Markel"), affirming that Markel has an obligation to indemnify B&A in a lawsuit presently pending in New York State Supreme Court. In addition, the Town of Hempstead seeks to intervene as a plaintiff in this case in support of B&A's position. For the reasons that follow, the Court denies both Markel's motion to dismiss and the Town of Hempstead's motion to intervene.

I. BACKGROUND

This derivative action relates to a case commenced on April 13, 2009 in New York Supreme Court, Nassau County, by Parabit Realty LLC and Parabit Systems Inc. (collectively, "Parabit") against the Town of Hempstead, B&A, and several other persons (the "Parabit Lawsuit"). Parabit owns a building at 35 Debevoise Avenue in Roosevelt, New York, and alleges in the Parabit Lawsuit that B&A and the Town of Hempstead are responsible for having damaged that building during construction of an adjacent structure.

When the Parabit Lawsuit was filed, B&A held insurance with the present-defendant Markel that covered the type of claim that Parabit had asserted against B&A. However, it was not until November 17, 2009, approximately seven months after Parabit commenced this lawsuit, that B&A notified Markel of the pending claims. Under the parties' insurance contract, B&A's notice to Markel of the Parabit Lawsuit was not timely-although B&A alleges that this delay did not prejudice Markel. On December 2, 2009, Markel disclaimed liability to B&A under their insurance contract, based on this delay in providing notice. On December 10, 2010, just over a year later, B&A commenced the present suit in New York Supreme Court, Nassau County, seeking to compel Markel to honor its coverage. After removal to this Court, Markel moved on February 11, 2011 to dismiss B&A's complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim.

B&A bases its lawsuit on a relatively new provision of the New York Insurance Law, which took effect on January 17, 2009. Prior to that date, an insurer was permitted to issue contracts that allowed it to deny coverage to an insured based on an untimely notice of claim-even when the delay did not prejudice the insurer. Under the new rule, insurance contracts must provide that an insurer may avoid coverage based on untimely notice only if the insurer is prejudiced by the delay. B&A contends that the new rule governs the parties' insurance contract, and that to deny coverage, Markel must show that it was prejudiced by B&A's late notice. Markel maintains that the old rule controls, and that the untimeliness of B&A's notice is reason enough to disclaim liability.

Before the Court ruled on Markel's motion to dismiss, the Town of Hempstead moved on May 13, 2011 to intervene as a plaintiff in this action. The Town of Hempstead is a co-defendant with B&A in the Parabit Lawsuit, and maintains that it has a contractual right to be indemnified by B&A if Parabit succeeds against the Town of Hempstead in that underlying lawsuit. The Town of Hempstead further maintains that B&A was contractually obligated to purchase insurance to protect this indemnification right, and that a disclaimer from Markel would, in practical terms, vitiate the Town of Hempstead's indemnification rights against B&A. The Town of Hempstead therefore requests to intervene in this case, or in the alternative, to be named an amicus curiae in this case. Markel opposes this application by the Town of Hempstead.

II. DISCUSSION

A. As to Markel's Motion to Dismiss

1. Standard on a Motion to Dismiss

Under the now well-established Twombly standard, a complaint should be dismissed only if it does not contain enough allegations of fact to state a claim for relief that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007). The Second Circuit has explained that, after Twombly, the Court's inquiry under Rule 12(b)(6) is guided by two principles. Harris v. Mills, 572 F.3d 66 (2d Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009)).

"First, although ‗a court must accept as true all of the allegations contained in a complaint,' that ‗tenet' ‗is inapplicable to legal conclusions' and ‗threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.'" Id. (quoting Iqbal, 129 S. Ct. at 1949). "‗Second, only a complaint that states a plausible claim for relief survives a motion to dismiss' and ‗[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'"

Id. (quoting Iqbal, 129 S. Ct. at 1950). Thus, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and . . . determine whether they plausibly give rise to an ...


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