THE BUFFALO CITY CEMETERY PLAINTIFF RESPONDENT v. NETHERLANDS INSURANCE COMPANY DEFENDANT APPELLANT (2026)

MEMORANDUM AND ORDER

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting those parts of the motion seeking dismissal of plaintiff's claims for punitive damages and attorneys’ fees in this action and dismissing those claims and as modified the order is affirmed without costs.

Memorandum: Plaintiff, The Buffalo City Cemetery (BCC), commenced this action seeking, inter alia, a declaration that defendant, Netherlands Insurance Company (Netherlands), is obligated to defend and indemnify BCC in an underlying lawsuit, Robinson v Buffalo City Cemetery, Inc. Netherlands filed a pre-answer motion to dismiss contending that there was no justiciable controversy and no obligation of Netherlands to defend or indemnify BCC. Supreme Court granted that part of the motion seeking to dismiss BCC's claim that Netherlands was required to indemnify BCC for any punitive damages awarded in the Robinson action and otherwise denied the motion. Netherlands appeals from the order except to the extent that it granted its motion.

BCC owns and operates a cemetery in West Seneca, bordered by Cayuga Creek. When part of the bank near the creek collapsed due to ground subsidence, BCC disinterred and reburied the remains of 215 buried individuals without notice to or permission from the next of kin of the deceased. The Robinson action seeks damages for emotional distress, mental suffering, and mental anguish, among other causes of action. In a separate proceeding, BCC obtained a court decision granting its request for a judgment approving the relocation, nunc pro tunc (see Matter of Buffalo City Cemetery, Inc. v 215 Lot Owners &/or Next-of-Kin for Decedents Interred at St. Matthew’s Cemetery, 227 AD3d 1445, 1445 [4th Dept 2024]).

During all relevant time periods, BCC was covered by general liability policies issued by Netherlands. Following commencement of the Robinson action, Netherlands agreed to “provide a defense to BCC” in the Robinson action “subject to a partial disclaimer and complete reservation of rights.” Subsequently, Netherlands disclaimed “any duty to defend or indemnify BCC” with respect to the Robinson action. At the same time, Netherlands stated that “nothwithstanding [the] disclaimer of coverage, [it] agree[d] to continue to provide a courtesy defense to BCC, without admitting coverage, until further written notice to or from BCC.” According to Netherlands, the plaintiffs in the Robinson action did not sustain any bodily injury or property damage, as those terms are defined in the coverage sections of the policies, inasmuch as the Robinson plaintiffs alleged only emotional distress, mental suffering, and mental anguish. Netherlands relied on the provision in the policies that defines bodily injury as “physical injury, sickness or disease sustained by a person [including] mental anguish, mental injury, shock, fright or death that results from such physical injury, sickness or disease” (emphasis added). The pre-answer motion to dismiss relied on the same provision.

BCC opposed the motion, asserting that an applicable endorsement, i.e., the Funeral Homes or Cemeteries endorsement, provided that “ ‘Bodily injury,’ including mental anguish, or ‘property damage’ arising out of the rendering or failure to render professional services as a funeral director, embalmer, intern or while you are doing business as a cemetery shall be deemed to be caused by an ‘occurrence.’ All acts or omissions in the furnishing of these services to the human remains or cremains of any one person will be considered one ‘occurrence’ ” (emphasis added). BCC further asserted that the endorsement would cover damages BCC was required to pay due to “injury to or destruction of ․ [t]ombstones, urns, caskets, linings or fittings, casket cases, crypts[,] mausoleum[s] or other facilities for the care or burial of a deceased human body, belonging to others and in the care, custody or control of the insured for the purposes of burying or caring for a deceased human body.”

Netherlands initially contends that its disclaimer of coverage does not give rise to a justiciable controversy. We reject that contention. CPLR 3001 permits the court to “render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed.” Where, as here, there is a pre-answer motion to dismiss, the question “present[ed] for consideration [is] only the issue of whether a cause of action for declaratory relief is set forth, not the question of whether the plaintiff is entitled to a favorable declaration. [W]here a cause of action is sufficient to invoke the court's power to render a declaratory judgment ․ as to the rights and other legal relations of the parties to a justiciable controversy ․, a motion to dismiss that cause of action should be denied” (88-18 Tropical Restaurante Corp. v Utica First Ins. Co., 223 AD3d 772, 773 [2d Dept 2024] [internal quotation marks omitted]).

“A declaratory judgment action ․ ‘requires an actual controversy between genuine disputants with a stake in the outcome,’ and may not be used as ‘a vehicle for an advisory opinion’ ” (Long Is. Light. Co. v Allianz Underwriters Ins. Co., 35 AD3d 253, 253 [1st Dept 2006], appeal dismissed 9 NY3d 1003 [2007]). Even potential liability may impact an insurer's coverage, “rendering[a] controversy justiciable” (id.). “The primary purpose of a declaratory judgment is to stabilize an uncertain or disputed jural relationship with respect to present or prospective obligations” (Chanos v MADAC, LLC, 74 AD3d 1007, 1008 [2d Dept 2010] [emphasis added]; see Thome v Alexander & Louisa Calder Found., 70 AD3d 88, 99 [1st Dept 2009], lv denied 15 NY3d 703 [2010]; see generally James v Alderton Dock Yards, 256 NY 298, 305 [1931], rearg denied 256 NY 681 [1931]). “[I]t is long settled that a declaratory judgment action against insurers ․ is permitted prior to judgment where the ‘judgments likely to be recovered’ in the underlying claims ․ or the ‘potential liability’ might well reach into the [relevant] coverage” (State Farm Fire & Cas. Co. v LiMauro, 103 AD2d 514, 518 [2d Dept 1984], affd 65 NY2d 369 [1985] [emphasis added]; see Cabrini Med. Ctr. v KM Ins. Brokers, 142 AD2d 529, 530 [1st Dept 1988], appeal dismissed 73 NY2d 785 [1988]).

Here, Netherlands has disclaimed all coverage, including the “duty to defend” (Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 424 [1985]), and, although the carrier offered to provide a “courtesy defense,” we conclude that there is a justiciable controversy (see Cobblestone Lofts Condominium v Great Am. Ins. Co., 241 AD3d 441, 441-442 [1st Dept 2025]; 88-18 Tropical Restaurante Corp., 223 AD3d at 773-774; cf. AB Oil Servs., Ltd. v TCE Ins. Servs., Inc., 188 AD3d 624, 626 [2d Dept 2020]; see generally Lang v Hanover Ins. Co., 3 NY3d 350, 356 [2004]).

Netherlands further contends that the court should have granted its motion to dismiss in its entirety because the policies at issue do not cover “mental anguish” that does not “result[ ] from” a concomitant bodily injury, i.e., “physical injury, sickness or disease sustained by a person.” We disagree. The question whether the Funeral Homes or Cemeteries endorsement expanded the definition of bodily injury so as to encompass “mental anguish” cannot properly be resolved on a pre-answer motion to dismiss inasmuch as the endorsement is susceptible to more than one reasonable interpretation (see Camperlino v Bargabos, 96 AD3d 1582, 1584 [4th Dept 2012]; see generally Moshiko, Inc. v Seiger & Smith, 137 AD2d 170, 175 [1st Dept 1988], affd 72 NY2d 945 [1988]; Penna v Federal Ins. Co., 28 AD3d 731, 732 [2d Dept 2006]). As a result, we conclude that the court properly denied the pre-answer motion to dismiss to that extent.

Netherlands contends, and we agree, that the court erred in denying that part of its motion seeking dismissal of BCC's claims for punitive damages and attorneys’ fees. There are simply no claims by BCC in this action that would permit the recovery of punitive damages, such as egregious conduct or “an independent tort ․ of the egregious nature set forth in [case law][,] ․ directed to [the] plaintiff[,] ․ and ․ part of a pattern directed at the public generally” (New York Univ. v Continental Ins. Co., 87 NY2d 308, 316 [1995]; see Miller v Allstate Indem. Co., 132 AD3d 1306, 1308 [4th Dept 2015]; Aldrich v Aetna Life & Cas. Ins. Co., 140 AD2d 574, 574 [2d Dept 1988]).

BCC's claim for attorneys’ fees “is governed by the general rule that attorneys’ fees and other litigation expenses are ‘incidents of litigation’ that the prevailing party may not collect ‘from the loser unless an award is authorized by agreement between the parties or by statute or court rule’ ” (Zelasko Constr., Inc. v Merchants Mut. Ins. Co., 142 AD3d 1328, 1329 [4th Dept 2016], quoting Matter of A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 5 [1986]; see New York Univ., 87 NY2d at 324). Although parties to a contract, such as an insurance policy, can contract for such fees or expenses, the parties here did not do so (see Stein, LLC v Lawyers Tit. Ins. Corp., 100 AD3d 622, 622-623 [2d Dept 2012]). Nor is there any basis to award fees to BCC as a sanction for frivolous conduct (see 22 NYCRR 130-1.1 [c]).

We therefore conclude that the order should be modified by granting those parts of the motion of Netherlands seeking dismissal of BCC's claims for punitive damages and attorneys’ fees and dismissing those claims.

Entered: July 24, 2026

Ann Dillon Flynn

Clerk of the Court