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Binghamton-Johnson City Joint Sewage Bd. v. Am. Alternative Ins. Corp.

United States District Court, N.D. New York

September 22, 2014

BINGHAMTON-JOHNSON CITY JOINT SEWAGE BD.; CITY OF BINGHAMTON; and VILLAGE OF JOHNSON CITY, Plaintiffs,
v.
AM. ALTERNATIVE INS. CORP., Defendant.

JAMES J. BARRIERE, ESQ., NATHAN R. SABOURIN, ESQ., HINCKLEY, ALLEN & SNYDER, LLP, Albany, NY, Counsel for Plaintiffs.

TERENCE S. HANNIGAN, ESQ., HANNIGAN LAW FIRM PLLC, Albany, NY, Counsel for Defendant.

DECISION and ORDER

GLENN T. SUDDABY, District Judge.

Currently before the Court, in this insurance action filed by Binghamton-Johnson City Joint Sewage Board, the City of Binghamton and the Village of Johnson City ("Johnson City") ("Plaintiffs") against Defendant American Alternative Insurance Corporation ("Defendant"), is Plaintiffs' motion for partial summary judgment. (Dkt. No. 13.) For the reasons set forth below, Plaintiffs' motion is denied.

I. RELEVANT BACKGROUND

A. Plaintiffs' Complaint

Generally, in their Complaint, Plaintiffs assert claims for declaratory judgment and breach of contract, in an attempt to recover, under a property damage and general liability insurance policy provided by Defendant, $3, 555, 993.94 in costs resulting from a structural wall collapse at the Binghamton-Johnson City Joint Sewage Treatment Plant on May 16, 2011. (Dkt. No. 1 [Plfs.' Compl.].)

B. Parties' Briefing on Plaintiffs' Motion

1. Plaintiffs' Memorandum of Law in Chief

Generally, in their memorandum of law in chief, Plaintiffs assert two arguments. (Dkt. No. 13, Attach. 1 [Plfs.' Memo. of Law in Chief].)

First, argue Plaintiffs, they are entitled to a judgment for the replacement cost of the media and gravel lost due to the wall collapse, because it is undisputed that (a) a valid policy was in place during the time in question, Plaintiffs were insureds under the Policy, the media and gravel lost from C-Cells 2-4 constitute a covered personal property loss under the express terms of the Policy, and the amount paid by Defendant in connection with the loss (in an untimely manner) does not entirely compensate Plaintiffs for the cost of the Biolite L.2.7mm filter media and gravel that was lost due to the wall collapse, and (b) the Haydite media and gravel contemplated by AAIC (in its payment) is not of the same "kind and quality" (i.e., the same type, grade, or class of material) as the Biolite L.2.7mm filter media and gravel that was lost due to the wall collapse. ( Id. at 13-16 [attaching pages "9" through "12" of Plfs.' Memo. of Law in Chief].)

Second, argue Plaintiffs, statutory pre-judgment interest in the amount of nine percent (9%) per year should be assessed on Plaintiffs' breach-of-contract claim from the earliest ascertainable date on which that claim existed (i.e., November 9, 2011, or thirty days from of their submission of their sworn statement of loss), pursuant to N.Y. C.P.L.R. ยงยง 5001, 5002, 5004. ( Id. at 17-18 [attaching pages "13" and "14" of Plfs.' Memo. of Law in Chief].)

2. Defendant's Opposition Memorandum of Law

Generally, in its opposition memorandum of law, Defendant asserts three arguments. (Dkt. No. 16 [Def.'s Opp'n Memo. of Law].)

First, argues Defendant, Plaintiffs' motion should be denied because they failed to comply with Section V(6)(a)(5) of the Policy by listing, in their Proof of Loss, the imported "Biolite L.2.7mm" filter media that they now seek, or the cost of those items, nor did they object to the cost of the media and gravel that was calculated by Defendant following their Proof of Loss, thus rendering their current request, at best, premature (and a complete surprise to Defendant). ( Id. at 3-5 [attaching pages "1" through "3" of Def.'s Opp'n Memo. of Law].)

Second, argues Defendant, in the alternative, at a minimum, issues of fact exist as to the specific type and cost of replacement media required under the policy, because the Affidavit of Ned Paschke raises genuine disputes of material fact regarding (a) whether the only suitable replacement media must be obtained from Norway (given industry advancements and the more recent availability of that media from United States-based sources since the time of the subject reconstruction project), and (b) whether the Haydite media analyzed by him (and essentially provided by Defendant) is of the same "kind and quality" as the media contained in the Plant at the time of the May 2011 wall collapse (which dispute can be resolved only through an affirmative directive or letter of the process manufacturer, Infilco Degremont, Inc., and not merely through the affidavit of Hussien Elzoghby, which reflects his opinion as the engineer and not the opinion of the manufacturer). ( Id. at 6 [attaching page "4" of Def.'s Opp'n Memo. of Law].)

Third, argues Defendant, in the alternative, Plaintiffs' claim for statutory interest from November 9, 2011, is improper, because Defendant was never placed on notice that its calculations were in error (particularly given its analysis and response to the Proof of Loss documents submitted by Plaintiffs). ( Id. at 5 [attaching page "3" of Def.'s Opp'n Memo. of Law].)

3. Plaintiffs' Reply Memorandum of Law

Generally, in their reply memorandum of law, Plaintiffs assert four arguments. (Dkt. No. 22 [Plfs.' Reply Memo. of Law].)

First, argue Plaintiffs, the Court should deem the entirety of the factual assertions contained their Local Rule 7.1 Statement admitted for the purposes of their motion, because Defendant has failed to comply with Local Rule 7.1(a)(3) by failing to cite specific record citations in support of several denials of fact, and asserting several inappropriate legal arguments. ( Id. at 4-7 [attaching pages "1" through "4" of Plfs.' Reply Memo. of Law].)

Second, argue Plaintiffs, they complied with the Policy, because (a) only substantial and not strict compliance is required of the Policy, which is to be liberally construed in favor of Plaintiffs, (b) where there has been no request for more information by Defendant, the Policy required merely "a description of the property involved" and not a "list" or "itemization" of the claims and costs that Plaintiffs seek in the current action, (c) Defendant had at least constructive notice that Plaintiffs needed, and were seeking recovery of, the Biolite media, and that Plaintiffs were accepting Defendant's payment of "283, 572.75" with a "full reservation of rights" (and in any event Defendant could have confirmed that fact through discovery, which it failed to conduct). ( Id. at 7-10 [attaching pages "4" through "7" of Plfs.' Reply Memo. of Law].)

Third, argue Plaintiffs, there is no dispute as to the type and cost of replacement media under the Policy, because (a) there is no dispute that the party responsible for the ultimate determination of what type of replacement media material should be utilized is Plaintiffs' process engineer, IDI, and (b) Defendant's witness, Ned Paschke, has not been disclosed as an expert, and in any event he does not opine that Haydite media material is of the "same kind and quality" as Biolite L.2.7. mm. ( Id. at 11-13 [attaching pages "8" through "10" of Plfs.' Reply Memo. of Law].)

Fourth, argue Plaintiffs, their breach-of-contract claim accrued on November 9, 2011, because Defendant has failed to adduce any factual or legal support for its argument to the contrary. ( Id. at 10-11 [attaching pages "7" and "8" of Plfs.' Reply Memo. of Law].)

C. Statement of Undisputed Material Facts

Unless otherwise followed by citations to the record, the following material facts have been asserted and supported by Plaintiffs' in their Local Rule 7.1 Statement of Undisputed Material Facts, and either admitted or denied without a supporting record citation by Defendant in its Local Rule 7.1 Response. ( Compare Dkt. No. 13, Attach. 2 [Plfs.' Rule 7.1 Statement] with Dkt. No. 15 [Def.'s Rule 7.1 Response].)

1. Plaintiff B-JC is a public board that is comprised of members appointed by the Plaintiff Binghamton, a New York municipal corporation located in Broome County, New York, and the Plaintiff Johnson City, a New York municipal corporation located in Broome County, New York.

2. Plaintiff B-JC operates and maintains the Binghamton-Johnson City Joint Sewage Treatment Plant ("Plant") located at 4480 Vestal Road, Vestal, New York.

The Project

3. In 2001, pursuant to a Consent Order issued by the New York State Department of Environmental Conservation ("NYS DEC"), Plaintiffs began reconstruction of the Plant to expand its wastewater treatment facilities to meet effluent quality requirements for the discharge of treated waste water into the Susquehanna River and Chesapeake Bay Watershed and to increase the plant's secondary treatment capacity to a peak discharge rate for finished effluent of sixty million gallons per day ("mgd") during peak demand and storm water flows in the region (the "Project").

4. As part of the Project, Plaintiffs procured a biological aerated filter ("BAF") system to replace an existing activated sludge secondary treatment process. The work included the demolition of existing plant facilities, the construction of a 70 mgd BAF influent pump station and mechanical systems, the construction of reinforced concrete facilities and masonry buildings to house the BAF system, the conversion of four secondary clarifiers to primary clarifiers, new controls and monitoring systems, new electrical service to the filter complex, new primary sludge pumps and additional chlorination tanks.

5. Pursuant to the specifications provided by the BAF system designer and supplier, Infilco Degremont, Inc. f/k/a Ondeo Degremont, Inc. ("IDI"), Plaintiffs and their contractors were required to procure two types of media material for the system-Biolite L.2.7mm for the Plant's aerated carbonaceous filter cells ("C-Cells") and nitrification filter cells ("N-Cells"), and Biolite P.4.6mm for the Plant's anoxic denitrification filter cells ("DN-Cells").[1]

6. The Biolite media material is an expanded shale/clay material with a high specific area, low density, and high resistance to attrition. It is specifically designed and developed for use in treating wastewater, and was a ...


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