United States District Court, S.D. New York
MEMORANDUM & ORDER
ALISON J. NATHAN, District Judge.
Plaintiff Columbia Casualty Company ("Columbia") brings this action for a declaratory judgment and, in the alternative, for reformation of a provision of its casualty insurance contract with Defendant Neighborhood Risk Management Corporation ("Neighborhood Risk").  Neighborhood Risk has moved to dismiss Columbia's Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), see Dkt. No. 64, and has requested that the Court take judicial notice of certain documents in conjunction with its motion, see Dkt. No. 66-1. Columbia, in addition to opposing the motion to dismiss, has moved the Court to strike from the record the documents that Neighborhood Risk has offered for judicial notice, see Dkt. No. 79. For the following reasons, Columbia's motion to strike the documents from the record is DENIED, and Neighborhood Risk's motion to dismiss is DENIED.
For the purpose of evaluating Neighborhood Risk's motion to dismiss, the Court accepts as true all well-pleaded allegations in the Amended Complaint, and draws all reasonable inferences in Columbia's favor. See Barrows v. Burwell, 777 F.3d 106, 111 (2d Cir. 2015).
Neighborhood Risk is a nonprofit member organization that assists its members in obtaining property and general liability insurance at lower rates and with broader coverage than they could obtain individually. Am. Compl. ¶ 11. To that end, it obtained an insurance policy from Columbia that was effective from April 1, 2010 to April 1, 2011. Am. Compl. ¶ 17. As a standard feature of its insurance policies, and one that was present in its 2010-11 policy with Columbia, Neighborhood Risk maintains control over a "retention fund" comprised of certain amounts paid by each of its members. Am. Compl. ¶ 15. The retention fund is used to self-insure a portion of Neighborhood Risk's insurance coverage; Neighborhood Risk would thus maintain responsibility for ensuring some portion of the insurance claims filed during the policy year, and the insurer issuing the policy would cover the remainder of the claim or claims. Am. Compl. ¶ 15. According to Columbia, the retention amount would be depleted by amounts paid on claims, amounts posted in reserve on claims, and administrative expenses. Am. Compl. ¶ 16.
The contract between Neighborhood Risk and Columbia for the policy year 2010-11 set Neighborhood Risk's retention amount for the year at $1.125 million, with a maximum to be paid from the fund of$100, 000 per occurrence. Am. Compl. ¶¶ 16-17. The relevant terms of the "Self Insured Retention Endorsement, " which is the contract provision setting forth the parties' agreement about the retention amounts and other obligations surrounding the retention, are set forth at Appendix A to this Memorandum as they appear in the Amended Complaint.
On Neighborhood Risk's request, Columbia also agreed to include a provision that would allow Neighborhood Risk to buy out the remainder of its potential liability on the self-insured retention three years after the 2010-11 policy was set to go into effect. Am. Compl. ¶¶ 2-3. This provision, which the parties refer to as the "Buy-Out Endorsement, " was negotiated between Columbia and various agents of Neighborhood Risk, including one Albert Shapiro. Am. Compl. ¶ 21-22, 26. According to Columbia, Neighborhood Risk and its agents knew at all times that the Buy-Out terms provided that Neighborhood Risk would pay the full amount of incurred losses to the self-insured retention, and an additional premium of twenty-five percent on those losses, in exchange for Columbia's assumption of all costs for claims raised after the buyout. Am. Compl. ¶ 25. The full Buy-Out Endorsement reads (all emphasis and formatting as in original):
SIR BUYOUT TERMS
1) All open claims handled by the TPA firm will be reviewed by CNA claims 30-33 months from the inception date of the policy
2) The following methodology will be used to calculate the Additional Premium required in order for CNA to assume liability for losses in the insured's retention after three years (36 months) of development.
Additional Premium = Policy Period Losses evaluated as of 36 months x 0.25
The losses will be evaluated as of 36 months in the loss run from the TPA [Third-Party Administrator].
For example, losses for the 4/1/2010-2011 policy period will be evaluated as of 3/31/2013.
Policy Period Losses include:
-Case Loss Indemnity Reserves
-Case ALAE Reserves
-All claims within the insured's 100, 000 retention, open and closed, on a first dollar basis
3) CNA will calculate the additional premium for SIR buy-out approximately 37 months from inception.
4) CNA will prepare a premium bearing endorsement in April 2013 with the additional premium for the buy-out. The insured must pay this additional premium within 30 days of offer. If the premium is not paid within this time frame, the SIR buy-out terms will not apply. The Self-Insured Retention Endorsement terms will continue to apply.
5) The additional premium will be booked as premium with commission.
6) The insured's retention will become Nil after payment of the additional premium.
7) The $1, 125, 000 SIR Aggregate listed on the Self-Insured Retention Endorsement is the maximum retention for the insured.
Am. Compl. ¶ 29. The parties arrived at this language after Neighborhood Risk requested revisions to some of the terms that Columbia initially proposed. Am. Comp I.¶ 28.
Neighborhood Risk's agent and broker, RT Specialty, asked Columbia to conduct a claims review pursuant to the Buy-Out Endorsement in December 2012. Am. Compl. ¶ 32. Columbia then requested updated loss statistics from the third-party administrator, but when it received them, discovered that they were inaccurate because some claims were improperly being held in reserve. Am. Compl. ¶¶ 32-33. After this issue was resolved to Columbia's satisfaction, it submitted its first buyout quote to RT Specialty, which was $212, 202.64, in addition to the transfer of any funds originally in ...