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Everhome Mortgage Company v. the Charter Oak Fire Insurance

March 14, 2012


The opinion of the court was delivered by: Roslynn R. Mauskopf, United States District Judge.


Plaintiff EverHome Mortgage Company ("EverHome") brings this diversity action against homeowner Mantina Kraiem ("Kraiem"), insurers the Charter Oak Fire Insurance Company and St. Paul Travelers Companies (together "Travelers"), and mortgage lender LaSalle Bank, N.A. ("LaSalle"). EverHome, the successor lender on Kraiem's home equity loan, seeks damages for Travelers' failure to name EverHome on a proceeds check issued under Kraiem's home insurance policy after Kraiem's home was destroyed by fire. (AC (Doc. No. 62) ¶¶ 1--2.) EverHome further seeks declaratory judgment of its entitlement to any proceeds beyond those due to LaSalle, the successor lender on Kraiem's mortgage. (Id. ¶ 6.) EverHome also brings claims for breach of contract and unjust enrichment against Kraiem. (Id. ¶ 4.) LaSalle in turn presents counterclaims against EverHome for declaratory judgment of the priority of its lien, and crossclaims against Travelers for the policy proceeds. (LaSalle Ans. (Doc No. 75) at 15--21.) LaSalle and Travelers both bring crossclaims against Kraiem to recover the proceeds. (LaSalle Ans. at 22--23; Travelers Ans. to AC (Doc No. 77) at 13--15.)

Travelers now moves for summary judgment on all claims against it by EverHome and LaSalle. (Travelers Mot. Summ. J. against EverHome (Doc. No. 102); Travelers Mot. Summ. J. against LaSalle (Doc. No. 110).) For the reasons set forth below, both motions for summary judgment are GRANTED.


On November 12, 2004, Kraiem purchased a property at 2037 East 23rd Street, Brooklyn, New York (the "Property"), which included a two story residential structure (the "Structure"), for a total purchase price of $670,000. (EverHome Statement of Material Undisputed Facts ("EverHome 56.1 Stmt.") (Doc. No. 108) ¶ 1.) In connection with the purchase, Kraiem took out two mortgages secured by the Property. Kraiem's first mortgage, for $427,000 (the "LaSalle Mortgage" or "First Mortgage"), was executed with a nominee of Bank of New York Mortgage Company LLC. (LaSalle Statement of Material Undisputed Facts ("LaSalle 56.1 Stmt.") (Doc. No. 116) at 7--8 ¶¶ 1--2.) The First Mortgage was eventually gathered into a series of Washington Mutual mortgage pass-through certificates, for which LaSalle now serves as trustee. (Id.) Kraiem's second mortgage, a Home Equity Line of Credit mortgage for $109,000 (the "EverHome Mortgage" or "Second Mortgage"), was also issued by the Bank of New York Mortgage Company, but was ultimately assigned to EverHome as successor-in-interest. (EverHome 56.1 Stmt. ¶ 3; Fox Decl. in Suppt. Of Mot. against EverHome ("Fox Decl.") (Doc. No. 104) Ex. 9.) Kraiem's closing settlement statement confirms that "BNY Mortgage Company, LLC" was a lender of $427,000, and acknowledges an additional $109,000 in "Subordinate Financing." (Fox Decl. Ex. 8.)

In connection with the purchase of the Property, Kraiem obtained a Homeowners Policy from defendant Travelers on the Structure (the "Policy"), including fire insurance, which was effective from November 8, 2004 to November 8, 2005. (EverHome 56.1 Stmt.¶ 5.) Paragraph 12 of the Policy, entitled "Mortgage Clause," states in relevant part,

If a mortgagee is named under this policy, any loss payable under Coverage A or B shall be paid to the mortgagee and you, as interests appear. If more than one mortgagee is named, the order of payment shall be the same as the order of precedence of the mortgages. If we deny your claim, that denial shall not apply to a valid claim of the mortgagee, if the mortgagee:

a. notifies us of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware;

b. pays any premium due under this policy on demand if you have neglected to pay the premium;

c. submits a signed, sworn statement of loss within 60 days after receiving notice from us of your failure to do so. Policy conditions relating to Appraisal, Suit Against Us, and Loss Payment apply to the mortgagee.

(Fox Decl. Ex. 5, form HO-3 at 11.)

The Policy contains a "Suit Against Us" limitation, which is amended by a New York endorsement.*fn2 (LaSalle Statement of Material Undisputed Facts ("LaSalle 56.1 Stmt.") at 2--3 ¶¶ 5--6.) The New York endorsement states in relevant part,

8. Suit Against Us. Is deleted and the following substituted:

8. Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions and the action is started within two years after the occurrence causing loss or damage. (Fox Decl. Ex. 5, form HA-300 NY "Special Provisions -- New York" at 3.)

The Policy's original insurance binder listed LaSalle's and EverHome's common predecessor-in-interest "Bank of New York" as mortgagee. (Bohn Aff. (Doc. No. 115) Ex. A.)

On January 27, 2005, the Structure was completely destroyed by fire. (EverHome 56.1 Stmt. ¶ 7.) EverHome sent Travelers a letter on February 22, 2005, asking that Travelers amend the Policy to include it as mortgagee. (Daskalakis Decl. (Doc. No. 107) Ex. 5.) Travelers acknowledges possession of this letter in response to a discovery request by EverHome, and conceded that a "Policy Change Declaration" dated March 14, 2005 lists "Washington Mutual Bank FA" as a first mortgagee and EverHome as a second mortgagee. (Daskalakis Decl. Ex. 4 ("Travelers Responses to Request for Admissions") at 2; id. Exs. 5--6.) Despite awareness of the mortgagees' claims, on September 13, 2005, Travelers issued a check for the loss payable to Kraiem alone in the amount of $291,336.21. (Fox Decl. ¶ 8.) On that date, the outstanding balance on the LaSalle Mortgage was $422,762.29. (Id. ¶ 9.) EverHome, Travelers, and LaSalle agree that Kraiem did not spend the insurance proceeds to pay down the LaSalle Mortgage or to repair the property. (Travelers Mem. of Law in Supp. of Mot. for Summ. J. against EverHome ("Travelers Mem. against EverHome") (Doc. No. 103) at 4; Pl. Mem. of Law in Opp. to Mot. for Summ. J. ("EverHome Mem.") (Doc. No. 106) at 4; LaSalle Ans. at 22--23.)

On December 11, 2006, EverHome sued Travelers in New York State Supreme Court, alleging that Travelers was liable to EverHome for at least $109,861.17, the total amount required to pay off the EverHome Mortgage. (Notice of Removal (Doc. No. 1) at 4--5; EverHome Mem. at 5.) EverHome also asserted claims against Travelers for breach of the implied contract of good faith and fair dealing, promissory estoppel, breach of fiduciary duty, negligence, and violation of New York General Business Law § 349. (EverHome Mem. at 5.) Travelers removed the case under this Court's diversity jurisdiction on January 9, 2007. (Notice of Removal at 1--3.)

In August 2009, EverHome filed an Amended Complaint, adding LaSalle and Kraiem as defendants. (AC at 1.) The Amended Complaint renews all of EverHome's claims against Travelers. (Id. at 9--15.) The Amended Complaint adds claims against Kraiem for inter alia breach of the EverHome Second Mortgage, and against LaSalle for a declaratory judgment of EverHome's entitlement to "any monetary amounts greater than the amounts due to LaSalle" under the LaSalle Mortgage. (Id.;AC at 15--17.)

On June 8, 2010, Travelers, Kraiem, and LaSalle each answered the Amended Complaint.

Travelers' Answer includes crossclaims against Kraiem for equitable restoration of the insurance proceeds, unjust enrichment, constructive trust, and conversion. (Travelers Ans. to AC (Doc No. 77) at ...

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