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Sunrise One LLC v. Harleysville Insurance Co. of New York

United States District Court, E.D. New York

March 28, 2018

Sunrise One, LLC and Sunrise One Operating LLC d/b/a Rockville Centre Inn, Plaintiffs,
v.
Harleysville Insurance Company of New York, Defendant.

          MEMORANDUM AND ORDER

          JOSEPH F. BIANCO United States District Judge.

         Sunrise One, LLC and Sunrise One Operating LLC, doing business as the Rockville Centre Inn, (collectively, “Sunrise” or “plaintiffs”) bring this action against Harleysville Insurance Company of New York (“Harleysville” or “defendant”) for breach of an insurance contract. Plaintiffs own and operate a hotel called the Rockville Centre Inn, located in Nassau County, New York. According to plaintiffs, the Rockville Centre Inn sustained wind and rain damage during Hurricane Sandy in October 2012. After inspecting the hotel, however, Harleysville determined that Hurricane Sandy did not cause damage to the Rockville Centre Inn, and denied coverage for damage to the hotel, as well as for business income losses resulting from that damage. This lawsuit eventually resulted.

         Presently before the Court are motions for partial summary judgment. In its motion, Harleysville argues that it is entitled to summary judgment on (1) Sunrise's claim for business income losses; (2) Sunrise's claim for consequential damages; and (3) Sunrise's claim for attorney's fees and costs. Harleysville additionally seeks summary judgment on Sunrise's attempt to use its Third Estimate of Damages, and instead, seeks to limit Sunrise to the damages sought in its Second Estimate. Sunrise's motion, in turn, argues that Sunrise is entitled to summary judgment on Harleysville's third through fourteenth affirmative defenses, and that Harleysville's third through eleventh affirmative defenses should be stricken as redundant under Federal Rule of Civil Procedure 12(f).

         For the reasons that follow, the Court grants summary judgment to Harleysville on (1) Sunrise's claim for business income losses; (2) Sunrise's claim for consequential damages; and (3) Sunrise's claim for attorney's fees and costs. The Court denies Harleysville's motion for summary judgment on plaintiffs' Third Estimate of Damages because there are disputed issues of fact that preclude summary judgment on the issue of whether the Third Estimate of Damages was timely under the at-issue insurance contract. Finally, the Court denies Sunrise's motion for summary judgment and motion to strike.

         I. Background

         A. Facts[1]

         At all times relevant to this litigation, non-parties Thomas Morash, Sr., Rosemary Morash, Thomas Morash, Jr., and Michael Morash (“the Morash Family”) owned three hotels in Nassau County: The Five Towns Motor Inn, the Holiday Inn Express, and the Rockville Centre Inn. (Pls. 56.1 ¶ 180.) Although Harleysville insures all three properties (Def. 56.1 ¶ 20), only the Rockville Centre Inn is the subject of this litigation. The Rockville Centre Inn is an approximately 40, 000 square foot, five-story hotel, with 68 guest rooms. (Id. ¶ 76.) Plaintiff Sunrise One LLC owns the Rockville Centre Inn property (id. ¶ 21), and plaintiff Sunrise One Operating LLC operates the hotel (id. ¶ 22).

         Sunrise obtained property insurance on the Rockville Centre Inn from Harleysville, effective from April 22, 2012 to April 22, 2013 (“the Insurance Policy”).[2] (Def. 56.1 Ex. 7.) Under the Insurance Policy, Harleysville agreed to cover, inter alia, (1) “direct physical loss of or damage to” the Rockville Centre Inn and (2) “the actual loss of Business Income . . . result[ing] from” such loss or damage, with limitations. (Id.) In the event of any loss or damage to the Rockville Centre Inn, Sunrise agreed to, inter alia, (1) provide Harleysville “prompt notice of the direct physical loss or damage[, ] includ[ing] a description of the property involved”; (2) “[a]s soon as possible, give [Harleysville] a description of how, when, and where the direct physical loss or damage occurred”; (3) “[a]t [Harleysville's] request, give [Harleysville] complete inventories of the damaged and undamaged property[, ] includ[ing] quantities, costs, values and amount of loss claimed”; and (4) “cooperate with [Harleysville] in the investigation or settlement of the claim.” (Id.)

         In late October 2012, Hurricane Sandy made landfall on the east coast of the United States. Sunrise asserts that the rain and high winds resulted in substantial damage to the Rockville Centre Inn. (E.g., Pls. 56.1 ¶¶ 180, 202-04.) According to plaintiffs, Michael Morash drove by all three Morash Family hotels on October 29, 2012, and “noted visible wind damage, water penetration issues, and various leaks at each property.” (Id. ¶ 180.) Plaintiffs further assert that, on November 9, 2012, Michael Morash reported, via telephone, damage to all three hotels to the broker for all three insurance policies (id. ¶¶ 181-84), and that in January 2013, he submitted a claim via email (id. ¶ 187).[3]

         Harleysville disputes that Michael Morash submitted a claim for damage to the Rockville Centre Inn on November 9, 2012, or in January 2013. (E.g., Def. 56.1 ¶¶ 24-25, 29.) Harleysville further asserts that, based on an inspection conducted by its general adjuster, consulting engineer, and building consultant, Hurricane Sandy did not cause damage to the Rockville Centre Inn.[4](E.g., id. ¶¶ 82-85.)

         B. Procedural History

         The Court assumes familiarity with the lengthy procedural history of this case, and provides only a brief recitation here. Plaintiffs filed the original complaint in this action on January 15, 2015. Plaintiffs sought leave to amend the complaint on June 21, 2016, which the Court granted on July 29, 2016. Thereafter, on August 3, 2016, plaintiffs filed the first amended complaint. Defendant answered on August 10, 2016. On July 28, 2017, plaintiffs moved for partial summary judgment. On September 27, 2017, defendant moved for partial summary judgment. The parties filed oppositions on October 27, 2017 and replies on November 15, 2017. The Court heard oral argument on both motions on December 19, 2017. The Court has fully considered the parties' submissions and arguments.

         II. Standard of Review

         Under Federal Rule of Civil Procedure 56(a), a court may grant a motion for summary judgment only if “the movant shows 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); Gonzalez v. City of Schenectady, 728 F.3d 149, 154 (2d Cir. 2013). The moving party bears the burden of showing that he or she is entitled to summary judgment. Huminski v. Corsones, 396 F.3d 53, 69 (2d Cir. 2005). “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1). The court “is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments.” Amnesty Am. v. Town of West Hartford, 361 F.3d 113, 122 (2d Cir. 2004) (quoting Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996)); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (summary judgment is unwarranted if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party”).

         Once the moving party has met its burden, the opposing party “must do more than simply show that there is some metaphysical doubt as to the material facts . . . . [T]he non-moving party must come forward with specific facts showing that there is a genuine issue for trial.” Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). As the Supreme Court stated in Anderson, “[i]f the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” 477 U.S. at 249-50 (citations omitted). Indeed, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment.” Id. at 247-48. The non-moving party may not rest upon conclusory allegations or denials but must set forth “concrete particulars” showing that a trial is needed. R.G. Grp., Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir. 1984) (quoting SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978)). Thus, it is insufficient for a party opposing summary judgment “merely to assert a conclusion without supplying supporting arguments or facts.” BellSouth Telecomms., Inc. v. W.R. Grace & Co., 77 F.3d 603, 615 (2d Cir. 1996).

         Where, as here, the parties have filed cross-motions for summary judgment, “the court must consider each motion independently of the other and when evaluating each, the court must consider the facts in the light most favorable to the nonmoving party.” Chartis Seguros Mexico, S.A. de C.V. v. HLI Rail & Rigging, LLC, 3 F.Supp.3d 171, 179 (S.D.N.Y. 2014); see also Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993) (“[T]he court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.” (citing Schwabenbauer v. Board of Educ. of Olean, 667 F.2d 305 (2d Cir. 1981))).

         III. Harleysville's Motion

         A. Business Income Losses

         Harleysville argues that summary judgment is warranted on Sunrise's claim for lost business income for four independent reasons: (1) Sunrise did not sustain a covered business income loss under the Insurance Policy's plain terms; (2) Sunrise failed to timely notify Harleysville of its business income loss claim; (3) Sunrise waived its right to pursue lost business income; and (4) Sunrise is estopped from seeking lost business income. As explained below, the Court grants summary judgment to Harleysville based on the plain language of the Insurance Policy. Because it grants summary judgment on this ground, the Court need not, and does not, reach the alternative grounds.

         As noted above, the Insurance Policy provides that Harleysville will cover business income losses resulting from covered damage to the Rockville Centre Inn, with certain limitations. This coverage is established in the Insurance Policy's “Business Income (and Extra Expense) Coverage Form” (“the Business Income Form”), which provides that Harleysville will “pay for the actual loss of Business Income you sustain due to the necessary ‘suspension' of your ‘operations' during the ‘period of restoration.'” (Def. 56.1 Ex. 54.)[5]The Court will now examine this language in more detail, and apply the provisions to the facts of this case.

         1. The Period of Restoration

         The parties dispute the length of the “period of restoration” under the Insurance Policy. The Business Income Form defines the “period of restoration” as the period of time that “begins 72 hours after the time of direct physical loss or damage . . . caused by or resulting from any Covered Cause of Loss at the described premises” and “ends on the earlier of”:

(1) The date when the property at the described premises should be repaired, rebuilt, or replaced with reasonable speed and similar quality; or
(2) the date when business is resumed at a new location.

(Id.)

         Attached to the Insurance Policy is an “Actual Loss Sustained” endorsement (“the Endorsement”), which states that it “modifies insurance provided under the . . . Business Income (and Extra Expense) Coverage Form.” (Def. 56.1 Ex. 55.)[6] As relevant here, the Endorsement further states that “[t]he following replaces paragraph B. of 3. ‘Period of Restoration' of G. Definitions”:

         B. Ends on the earlier of:

(1) The date when the property at the described premises should be repaired, rebuilt, or replaced with reasonable speed and similar quality; or
(2) the date when business is resumed at a new location; or
(3) the anniversary date that ends a 12 consecutive month period after the date on which the direct physical loss of or damage to the property occurred at the described premises which caused the “suspension” of your “operations”.

(Id.)

         Harleysville contends that the Endorsement unambiguously modifies the definition of “period of restoration” such that the period ended no later than “12 consecutive month[s] after the date on which the direct physical loss of or damage to the property occurred.” In response, Sunrise notes that the Endorsement purports to modify section “G. Definitions, ” but the Business Income Form's definitions section is section “F.” Sunrise asserts that this incongruity demonstrates that the Endorsement does not modify the Business Income Form, or, at a minimum, creates an ambiguity. For the reasons explained below, the Court concludes that the Endorsement ...


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