United States District Court, E.D. New York
433 MAIN STREET REALTY, LLC and CORD MEYER DEVELOPMENT COMPANY, Plaintiffs,
DARWIN NATIONAL ASSURANCE COMPANY, Defendant.
MEMORANDUM & ORDER
NICHOLAS G. GARAUFIS, District Judge.
This action is before the court pursuant to the court's diversity jurisdiction under 28 U.S.C. § 1332(a) and concerns coverage for damage to Plaintiffs' property caused by Hurricane Sandy under an insurance policy issued by Defendant to Plaintiffs. Plaintiffs seek declaratory judgment that the policy's general deductible applies to their claims and allege breach of contract, breach of the covenant of good faith and fair dealing, and violation section 349 of the New York State General Business Law. For the reasons set forth below, Plaintiffs' good faith and fair dealing and New York General Business Law claims are DISMISSED without prejudice.
A. Factual Background
The Complaint alleges that Plaintiffs 433 Main Street Realty, LLC and Cord Meyer Development Company are owners of a construction project for a residential building located in Port Washington, New York. (Compl. (Dkt. 1) ¶ 4.) Defendant Darwin National Assurance Company issued a commercial inland marine insurance policy to Plaintiffs for the period of September 11, 2012, to January 11, 2014 ("the Policy"). (Id. ¶ 9.) The Policy contains a $10, 000 deductible, except for loss caused by flood, which is subject to a $250, 000 deductible. (Id. ¶¶ 13-14.) Plaintiffs claim that on October 29, 2012, the date of Hurricane Sandy ("the storm"), high winds blew down or damaged fencing, formwork, and the waterproof membrane at the construction site, and water backed up in a nearby storm sewer, causing it to overflow and discharge water into the excavated foundation. (Id. ¶¶ 7-8.) Plaintiffs filed a claim under the Policy for coverage of their loss resulting from the storm. (Id. at ¶ 15.) According to the Complaint, Defendant agrees that the Policy covers Plaintiffs' loss but insists that the damage was caused by flood, and thus the $250, 000 deductible applies. (Id. ¶ 16.) Plaintiffs contend that the standard $10, 000 deductible should apply because high winds and the overflow of a sewer system caused the damage. (Id. ¶¶ 17-18.)
In a letter dated March 17, 2014, Plaintiffs provide further allegations about the parties' interaction after Plaintiffs made a claim under the Policy. For eight months following the storm, Defendant refused to issue payment to Plaintiffs, who then threatened litigation. (Pis.' Mar. 17, 2014, Ltr. (Dkt. 21) at 3.) Plaintiffs then met with Defendant's claims adjuster, who requested additional documents and promised to review the claim and expedite the matter. (Id.) After the meeting, Defendant followed up with subsequent requests for documents over the next four months, which Plaintiffs claim they satisfied. (Id.) Plaintiffs believed that Defendant was delaying and did not intend to honor the claim, and therefore commenced litigation. (Id.)
B. Procedural History
Plaintiffs brought an action against Defendant in the Supreme Court of New York, Queens County, and Defendant removed the action to this court on January 27, 2014. (Not. of Removal (Dkt. 1).) The case was designated a "Hurricane Sandy Case" in accordance with Eastern District Administrative Order 14-03 and is subject to practice and procedure orders governing this body of cases. Case Management Order No. 1, issued February 21, 2014, directed plaintiffs in all Hurricane Sandy Cases to voluntarily withdraw various state law claims, such as those alleging bad faith, or submit a letter within fourteen days of the Order explaining the legal basis for continuing to pursue such claims. (Case Mgmt. Order No. 1 (Dkt. 16) at 5-6.) On March 17, 2014, ten days after the deadline, Plaintiffs in the instant case submitted a letter in support of maintaining two claims: (1) breach of the implied covenant of good faith and fair dealing (Third Cause of Action), and (2) violation of New York General Business Law § 349 (Fourth Cause of Action). Defendant responded by letter, contending that Plaintiffs have not adequately pleaded these claims in the Complaint. (See Def.'s Mar. 18, 2014, Ltr. (Dkt. 22).)
Despite the untimeliness of Plaintiffs' letter, the court will consider it. The court applies a motion to dismiss standard, taking as true the facts as pleaded in the Complaint.
In order to state a viable claim, a complaint "must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 663. While "detailed factual allegations" are not required, "[a] pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'" Id. at 678 (quoting Twombly, 550 U.S. at 555).
A. Breach of Covenant of Good Faith and Fair Dealing
Plaintiffs' third cause of action alleges that Defendant breached the covenant of good faith and fair dealing. (Compl. ¶¶ 28-30.) New York law implies a duty of good faith and fair dealing into every express contract. Nat'l Mkt. Share, Inc. v. Sterling Nat'l Bank, 392 F.3d 520, 525 (2d Cir. 2004) (citing U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 64 (2d Cir. 2004)). However, "breach of that duty is merely a breach of the underlying contract." Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002). "New York law... does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled." Id. at 81; see also Funk v. Allstate Ins. Co., No. 13-CV-5933 (JS), 2013 WL 6537031, at *4 (E.D.N.Y. Dec. 13, 2013) (holding that a breach of good faith and fair dealing "must be premised on a different set of facts from those underlying a claim for breach of contract"). "Therefore, when a complaint alleges both a breach of contract and a breach of the implied covenant of good faith and fair dealing based on the same facts, the latter claim should be dismissed as redundant." Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 125 (2d Cir. 2013) (citing L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 434 n.17 (2d Cir. 2011)).
Plaintiffs claim that Defendant "unilaterally breached the covenant of good faith and fair dealing implied in the Policy by deliberately, negligently, and wrongfully: (a) Mishandling the Claim; (b) Delaying payment of the Claim, despite promising to expedite adjustment of the Claim; and, (c) Insisting that the $250, 000.00 deductible relating to flood' applies to the Claim." (Compl. ¶ 29.) Plaintiffs argue these allegations are ...