Argued: September 19, 2016
appeals from the judgment of the United States District Court
for the Northern District of New York (D'Agostino,
J.) granting summary judgment in favor of
Defendants. Plaintiff, an automobile repair shop, brought
claims as assignee of its customers against Defendants,
automobile insurance companies, for breach of contract and
deceptive business practices under New York General Business
Law § 349. Plaintiff alleges that Defendants failed to
fulfill their contractual obligation to pay sufficient funds
to repair vehicles to their pre-accident condition, and
engaged in deceptive practices in claims processing. The
district court's grant of summary judgment was premised
on its conclusion that there were no genuine issues of
material fact on which Plaintiff could prevail, and, as to
Plaintiff's claims of deceptive business practices, that
such claims were in addition precluded by New York Insurance
Law § 2601.
the district court erred in part in granting summary judgment
in favor of Defendants on Plaintiff's breach of contract
and deceptive practices claims. The Judgment is AFFIRMED IN
PART, VACATED IN PART, and REMANDED.
Cecelia R.S. Cannon, Bousquet Holstein PLLC, Syracuse, NY,
Kymberly Kochis (Veronica M. Wayner on the brief), Sutherland
Asbill & Brennan LLP, New York, NY, for
Before: LEVAL and LOHIER, Circuit Judges KORMAN, District
Nick's Garage, Inc. ("Garage" or
"Plaintiff"), appeals from the judgment of the
United States District Court for the Northern District of New
York (D'Agostino, J.) granting summary judgment
in favor of the Defendants, Progressive Casualty Insurance
Company and related entities (collectively, the
"Insurer"). Garage, an automobile repair shop, brought
these claims as assignee of its customers against the Insurer
for breach of contract and deceptive business practices under
New York General Business Law ("GBL") § 349.
Garage alleges that Insurer failed to pay sufficient funds to
fulfill its obligation to return the damaged vehicles to
pre-accident condition, and engaged in deceptive practices in
claims processing. The district court granted summary
judgment in favor of Defendants, finding that there were no
genuine issues of material fact, and furthermore, as to its
claims of deceptive business practices, that such claims were
also precluded by New York Insurance Law § 2601.
conclude that the district court erred in part in granting
summary judgment to Insurer on Garage's breach of
contract claims. Insurer failed to show its entitlement to
judgment for costs relating to labor hours, parts, labor
rates, electronic database access, and hazardous waste
removal charges, and the absence of genuine disputes of
material fact on these issues. Summary judgment should have
been denied for those categories. On the other hand, Insurer
demonstrated its entitlement to judgment, and Garage failed
to raise a genuine dispute of material fact, on Insurer's
payments for paint material costs; the district court
properly granted summary judgment to Insurer on that category
conclude that the district court erred in part in granting
summary judgment to Insurer on Garage's GBL claims. There
is a question of material fact on Garage's claim that
Insurer engaged in deceptive practices concerning its labor
rates payments, and that claim is not precluded by N.Y. Ins.
Law § 2601. On the other hand, the district court
properly granted summary judgment to Insurer on Garage's
GBL claim that Insurer misled customers regarding their
ability to use the repair shop of their choice.
we affirm the judgment in part, vacate the judgment in part,
and remand to the district court for further proceedings.
Garage is an automobile repair shop in Syracuse, New York.
Defendant Insurer issues auto insurance policies in New York.
From 2007 to 2011, Garage repaired various vehicles that had
suffered damage for which the vehicle owners submitted damage
claims to Insurer.
vehicle owners made Garage their designated representative to
negotiate with Insurer for coverage of repairs, and assigned
their insurance claims to Garage. The assignors fall into two
categories: (i) "First-Party Assignors" are Insurer
policyholders; and (ii) "Third-Party Assignors" are
owners of vehicles that were damaged by Insurer's
policyholders. Garage, as assignee, brings claims on behalf
of 26 First-Party Assignors and 11 Third- Party Assignors.
All of the assignors signed a form captioned,
Authorization and Guideline for Repairs, undertaking
to pay to Garage the balance of its charges for the repairs
if Insurer did not pay Garage's full charges. All of the
assignors assigned to Garage related claims and rights
arising from the property damage insurance claims, and all
First-Party assignors assigned their rights under the
specified insurance policies to Garage.
Law § 2601 and Regulation 64, which is Part 216 of the
New York State Insurance Department Regulations, provide
context for the interactions between repair shops and
insurance companies. Section 2601 prohibits insurers from
"engag[ing] in unfair claim settlement practices, "
and specifies various acts which, when "committed
without just cause and performed with such frequency as to
indicate a general business practice, shall constitute unfair
claim settlement practices." N.Y. Ins. Law §
2601(a). Such acts include "knowingly misrepresenting to
claimants pertinent facts or policy provisions relating to
coverages at issue, " and "not attempting in good
faith to effectuate prompt, fair and equitable settlements of
claims submitted." Id. § 2601(a)(1), (4).
Regulation 64, when a claim is made, the insurer may inspect
the car, and must negotiate in good faith with the insured or
the insured's designated representative and make "a
good faith offer of settlement, sufficient to repair the
vehicle to its condition immediately prior to the loss."
11 N.Y.C.R.R. § 216.7(b)(1). If after such negotiations
the parties cannot reach an "[a]greed
price"-i.e., "the amount agreed . . . as
the reasonable cost to repair damages to the motor vehicle
resulting from the loss, " id. §
216.7(a)(1)-then the insurer must send the insured a
prescribed notice of rights letter, which states the
insurer's offer and indicates that, upon the
insured's request, the insurer is able to recommend a
shop to perform the repairs at the stated offer price,
id. §§ 216.7(b)(14)(i), 216.12.
vehicles in the instant case, the typical interaction between
Garage and Insurer proceeded as follows: Owners brought the
damaged vehicles to Garage seeking an estimate on the
necessary repairs; Garage inspected the vehicles and sent
Insurer an estimate of the repairs Garage determined were
necessary to return the vehicles to their pre-accident
condition. Insurer then sent a Managed Repair Representative
("MRR") to inspect the vehicle and provided an
estimate as to the cost to repair the vehicle to pre-loss
condition. Garage responded by sending Insurer a notice of
deficiencies, identifying items that were omitted or
insufficient in Insurer's estimates and informing Insurer
that there was no agreed upon amount for the repairs. This
process was sometimes repeated with supplements if additional
damage was discovered during the course of the repair. Garage
would repair the vehicles after it had received the estimate
relevant to this appeal, Garage brings two categories of
claims. For Plaintiff's first category of claims, which
it brings as assignee of First-Party Assignors, Garage claims
that Insurer breached its contractual obligations to the
First-Party Assignors by failing to pay the amount necessary
to return the vehicles to their pre-accident condition,
leaving the First-Part Assignors liable to Garage for the
balance of the repair cost to the extent that Garage's
charge exceeded Insurer's payment. Garage alleges five
categories of under- payments: (1) failing to allow for
sufficient labor hours to make necessary repairs; (2) failing
to pay for original equipment manufacturer ("OEM")
parts when the non-OEM parts suggested by Insurer were
inadequate to return the vehicle to pre-accident condition;
(3) paying insufficient labor rates; (4) failing to pay the
amount necessary for paint materials; (5) failing to pay for
charges for accessing an electronic database and removing
relevant here, Insurer's insurance policy provides:
Limits of Liability
1. The limit of liability for loss to a covered auto,
non-owned auto, or custom parts or equipment is the lowest
c. the amount necessary to repair the damaged property to its
pre- loss condition reduced by the applicable deductible; or
. . . .
2. Payments for loss to a covered auto, non-owned auto, or
custom parts or equipment are subject to the following
d. In determining the amount necessary to repair damaged
property to its pre-loss condition, the amount to be paid by
i. will not exceed the prevailing competitive labor rates
charged in the area where the property is to be repaired and
the cost of repair or replacement parts and equipment, as
reasonably determined by [Insurer]; and
ii. will be based on the cost of repair or replacement parts
and equipment which may be new, reconditioned,
remanufactured, or used, including, but not limited to:
(a)original manufacturer parts or equipment; and
(b)nonoriginal manufacturer parts or equipment.
Confidential App. 31-32 (emphasis omitted).
second category of claims, Garage alleges that Insurer
violated GBL § 349 by engaging in deceptive acts in
handling the claims of both the First-Party Assignors and
Third-Party Assignors. Specifically, Garage claims Insurer
misled consumers by falsely representing to them that it was
willing to pay prevailing competitive labor rates, and by
misrepresenting consumers' ability to obtain repairs at
the shop of their choice.
originally filed this suit in New York State Supreme Court.
On May 10, 2012, Insurer removed to federal court, which had
diversity jurisdiction pursuant to 28 U.S.C. § 1332. On
February 27, 2013, the district court granted in part
Insurer's motion to dismiss, dismissing Garage's
claims for quantum meruit and those GBL § 349
claims that were barred by the statute of limitations.
Nickʹs Garage, Inc. v. Progressive Cas. Ins.
Co., No. 5:12-CV-777, 2013 WL 718457 (N.D.N.Y. Feb. 27,
September 23, 2013, Garage filed an amended complaint. On
March 31, 2015, the district court granted Insurer's
motion for summary judgment as to all of Garage's claims.
Nickʹs Garage, Inc. v. Progressive Cas. Ins.
Co., No. 5:12-CV-777, 2015 WL 1481683 (N.D.N.Y. Mar. 31,
2015). The district court found that Garage failed to raise a
genuine dispute of material fact that could support its
claims that Insurer breached its contractual obligations to
the First-Party assignors as to any of the categories of
costs identified. Id. at *6-10. As to Garage's
GBL § 349 claims, the district court found that Garage
failed to raise a genuine dispute of material fact that could
support its claims that Insurer engaged in materially
misleading practices, and found in the alternative that these
claims were precluded by N.Y. Ins. Law § 2601.
Id. at *10-15.
review a district courtʹs grant of summary judgment de
novo, "resolv[ing] all ambiguities and draw[ing] all
[reasonable] factual inferences in favor of the party against
whom summary judgment is sought." Johnson v.
Killian, 680 F.3d 234, 236 (2d Cir. 2012) (per curiam)
(quoting Terry v. Ashcroft, 336 F.3d 128, 137 (2d
Cir. 2003)). For the court to grant summary judgment, the
movant must "show[ ] that there is no genuine dispute as
to any material fact and the movant is entitled to judgment
as a matter of law." Fed.R.Civ.P. 56(a). A genuine issue
of material fact exists if "the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party." Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986).
movant bears the burden of "demonstrat[ing] the absence
of a genuine issue of material fact." Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986). "Where, as
here, the burden of persuasion at trial would be on the non-
moving party . . . the party moving for summary judgment may
satisfy his burden of production under Rule 56 in either of
two ways: (1) by submitting evidence that negates an
essential element of the non-moving party's claim, or (2)
by demonstrating that the non-moving party's evidence is
insufficient to establish an essential element of the
non-moving party's claim." Farid v. Smith,
850 F.2d 917, 924 (2d Cir. 1988) (citing Celotex,
477 U.S. at 331 (Brennan, J., dissenting)).
Breach of Contract
alleges that Insurer failed to pay sufficient sums to fulfill
its contractual policy obligations to cover the reasonable
costs necessary to repair the damaged vehicles to their
pre-loss condition. To state a claim for breach of contract
under New York law, "the complaint must allege: (i) the
formation of a contract between the parties; (ii) performance
by the plaintiff; (iii) failure of defendant to perform; and
(iv) damages." Johnson v. Nextel Commc'ns,
Inc., 660 F.3d 131, 142 (2d Cir. 2011). Insurer does not
dispute that prongs (i) and (ii) have been met.
argues that the First-Party Assignors (whose claims are
asserted by Garage as their assignee) suffered no damages
because their vehicles were repaired by Garage to their
pre-loss condition. Insurer misunderstands the theory of this
category of claim. Insurer was obligated to pay its insureds
the "loss" on a covered vehicle, i.e., the
amount of money sufficient to return the vehicles to their
pre-loss condition. Thus, the difference between what Insurer
paid to Garage and the amount necessary to return the
vehicles to their pre- loss condition constitutes damages
suffered by the insureds on which Garage, as assignee, can
bring suit.See Citibank, N.A. v. Tele/Resources,
Inc., 724 F.2d 266, 269 (2d Cir. 1983). There is no
merit to Insurer's contention that the First- Party
Assignors suffered no damages regardless of ...