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George PETRIKAS and Jackie Petrikas, Plaintiffs, v. ALLSTATE VEHICLE AND PROPERTY INSURANCE COMPANY, Defendant.
Plaintiff George Petrikas and his wife, plaintiff Jackie Petrikas, own certain premises located at 81 Catherine Street in the Town of Fort Ann, Washington County. On February 17, 2020, plaintiffs were receiving a fuel delivery to the premises when “fuel oil was unexpectedly discharged into the basement ․ due to the sudden collapse of a leg on the fuel tank,” resulting in damage to the property. Plaintiffs submitted a claim for coverage to defendant—with whom they have a property insurance policy—which claim was denied on February 18, 2020. As a result, the Department of Environmental Conservation (hereinafter DEC) covered the cost of remediation and then sought reimbursement from plaintiffs. Plaintiffs subsequently filed a claim for coverage of the reimbursement amount, which was denied on February 25, 2020. The DEC then filed a separate claim for reimbursement. This too was denied on April 19, 2021.
Plaintiffs commenced this action against defendant on February 16, 2022, alleging three causes of action. The first cause of action seeks a declaratory judgment that plaintiffs are entitled to coverage relative to the spill under the terms of the policy. The second cause of action seeks a declaratory judgment that defendant acted in bad faith, and the third cause of action seeks to hold defendant liable for breach of contract. Presently before the Court is defendant's pre-answer motion to dismiss the first and third causes of action based upon documentary evidence, and the second cause of action for failure to state a claim (see CPLR 3211 [a] , ).
Turning first to that aspect of the motion which seeks dismissal based upon documentary evidence, “ ‘[a] motion pursuant to CPLR 3211 (a) (1) ․ may be properly granted only if the documentary evidence utterly refutes the plaintiff's factual allegations, conclusively establishing a defense as a matter of law. To qualify as documentary evidence, the evidence must be unambiguous and of undisputed authenticity’ ” (Koziatek v SJB Dev. Inc., 172 AD3d 1486, 1486 [3d Dept 2019], quoting Calhoun v Midrox Ins. Co., 165 AD3d 1450, 1450 [3d Dept 2018] [internal quotation marks, brackets and citations omitted]; see Doller v Prescott, 167 AD3d 1298, 1299 [3d Dept 2018]). “ ‘Materials that clearly qualify as documentary evidence include documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable’ ” (Koziatek v SJB Dev. Inc., 172 AD3d at 1487, quoting Ganje v Yusuf, 133 AD3d 954, 956-957 [3d Dept 2015] [citations omitted]; see Midorimatsu, Inc. v Hui Fat Co., 99 AD3d 680, 682 [2d Dept 2012], lv dismissed 22 NY3d 1036 ). Here, defendant has submitted a certified copy of plaintiffs' insurance policy — which clearly qualifies as documentary evidence (see Calhoun v Midrox Ins. Co., 165 AD3d at 1451).
Beginning with the first cause of action, the Court notes that “[i]nsurance contracts generally are assigned to one of two classes: either ‘first-party coverage’ or ‘third-party coverage’ ” (Great N. Ins. Co. v Mount Vernon Fire Ins. Co., 92 NY2d 682, 687 ). “ ‘First-party coverage’ pertains to loss or damage sustained by an insured to its property; the insured receives the proceeds when the damage occurs” (id. [citation omitted]; see Gap, Inc. v Fireman's Fund Ins. Co., 11 AD3d 108, 112 ). “In contrast, if the insurer's duty to defend and pay runs to a third-party claimant who is paid according to a judgment or settlement against the insured, then the insurance is classified as ‘third-party insurance’ ” (id. [citation omitted]; see Gap, Inc. v Fireman's Fund Ins. Co., 11 AD3d at 112). Here, plaintiffs made two separate claims: one for first-party coverage relative to the initial loss; and one for third-party coverage relative to reimbursement of remediation costs.
Beginning with that aspect of the first cause of action which seeks first-party insurance coverage relative to the initial loss, this claim falls under the “Dwelling Protection-Coverage A” section of plaintiffs' policy. Defendant denied coverage under “paragraph[s] A 10, D 5 a d, [and] 11 d” of that section, with paragraph A (10) providing as follows:
“A. Under Dwelling Protection-Coverage A ․ of this policy, we do not cover any loss which consists of, is caused by, or would not have occurred but for, one or more of the following excluded events, perils or conditions. Such loss is excluded regardless of: a) the cause of source of the excluded event, peril or condition; b) any other causes contributing concurrently or in any sequence with the excluded event, peril or condition to produce the loss; or c) whether the excluded event, peril or condition involves isolated or widespread damage, arises from natural, man-made or other forces, or arises as a result of any combination of these forces․
10. Vapors, fumes, smoke, smog, soot, alkalis, acids, toxic chemicals, toxic gasses, toxic liquids, toxic solids, waste materials, or other irritants, contaminants or pollutants.”
Paragraphs D (5) (a) and (d) and (11) (d) then provide:
“D. Under Dwelling Protection-Coverage A ․ of this policy, we do not cover any loss consisting of or caused by one or more of the following excluded events, perils or conditions. Such loss is excluded regardless of whether the excluded event, peril or condition involves isolated or widespread damage, arises from natural, man-made or other forces, or arises as a result of any combination of these forces․
“5. a) Wear and tear, aging, marring, scratching, deterioration, inherent vice, or latent defect; ․
d) rust or other corrosion ․”
11. Planning, Construction or Maintenance, meaning faulty, inadequate or defective ․
“ ‘It is well established that when interpreting an insurance contract, as with any written contract, the court must afford the unambiguous provisions of the policy their plain and ordinary meaning’ ” (Daire v Sterling Ins. Co., 204 AD3d 1189, 1190 [3d Dept 2022], quoting Hilgreen v Pollard Excavating, Inc., 193 AD3d 1134, 1137 [3d Dept 2021] [internal quotation marks and citations omitted], appeal dismissed 37 NY3d 1002 ). Here, paragraph A (10) of Coverage A unambiguously provides that a loss caused by contaminants and pollutants—such as fuel oil—will not be covered under the policy. While this paragraph includes certain exceptions to the exclusions listed, none of them are applicable in this case.
Further, paragraphs D (5) (a) and (d) and D (11) (d) unambiguously provide that a loss caused by wear and tear, aging, rust and other corrosion, and faulty maintenance will not be covered under the policy. While Jackie Petrikas has submitted an affidavit in opposition to the motion stating that neither she nor her husband “notice[d] any issue with the fuel tank, its base, or any other fuel receiving, storage or distribution system within [their] home,” she makes no indication as to the age of the fuel tank nor does she indicate that it was free of wear and tear.1 It must also be noted that paragraph D (5) (a) includes losses caused by latent defects—which would not have been noticeable to plaintiffs. Under the circumstances, the Court finds that the policy utterly refutes plaintiffs' allegation that defendant erred in denying their claim for first-party coverage relative to the initial loss.
Turning now to that aspect of plaintiffs' first cause of action which seeks third-party coverage relative to reimbursement of remediation costs, this claim falls under “Coverage X” of the policy, which pertains to “damages which an insured person becomes legally obligated to pay because of ․ property damage arising from an occurrence to which this policy applies ․” Defendant denied this claim—as well as the later claim filed by the DEC—under paragraphs 8, 9 and 16 of Coverage X, with paragraph 8 providing as follows:
“We do not cover bodily injury or property damage arising out of:
a) lead paint; or
b) the discharge, dispersal, release or escape of oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from, a storage tank. This exclusion does not apply when the discharge, dispersal, release or escape is sudden and accidental.”
Paragraph 9 then provides:
“We do not cover any liability imposed upon any insured person by any civil, governmental or military authority for bodily injury or property damage arising out of:
a) lead paint; or
b) the discharge, dispersal, release or escape of oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from, a storage tank.”
Finally, paragraph 16 provides:
“We do not cover any loss, cost or expense arising out of any request, demand, or order that any insured person test for, monitor, clean up, remove, contain, treat, detoxify, decontaminate, or neutralize, or in any way respond to or assess the effects of any type of vapors, fumes, smoke, smog, soot, alkalis, acids, toxic chemicals, toxic gasses, toxic liquids, toxic solids, waste materials, or other irritants, contaminants, or pollutants.”
It is a “well-settled principle that provisions of an insurance policy are to be harmonized and that ambiguities must be resolved in favor of the insured” (Cantanucci v Reliance Ins. Co., 43 AD2d 622, 623 [3d Dept 1977]; see Bronx Sav. Bank v Weigandt, 1 NY2d 545, 551 ). “A construction favorable to the insurer will only be sustained where it is the sole construction which can fairly be placed upon the words employed” (Cantanucci v Reliance Ins. Co., 43 AD2d at 623); Bronx Sav. Bank v Weigandt, 1 NY2d at 551).
Here, third-party coverage is unambiguously excluded under paragraphs 9 and 16 of Coverage X. While paragraph 8 provides that the exclusion set forth therein “does not apply when the discharge, dispersal, release or escape is sudden and accidental”—as was arguably the case here—finding coverage under paragraph 8 would render the exclusions in paragraphs 9 and 16 meaningless. This would, in turn, be contrary to the principle that provisions of an insurance policy are to be harmonized. Under the circumstances, the Court finds that these provisions must be read together such that, if liability is not being imposed “by a civil, governmental or military authority,” and the claim does not arise from a request that the insured “clean up ․ any type of ․ toxic chemicals, toxic gasses, toxic liquids, ․ or other irritants, contaminants, or pollutants,” then third-party coverage may be available for “the discharge, dispersal, release or escape of ․ fuel oil ․ intended for ․ a storage tank ․ when the discharge, dispersal, release or escape is sudden and accidental.” Indeed, this is the only construction that gives meaning to all provisions of the policy. To the extent that liability is being imposed by a governmental authority—namely, the DEC—and the claim arises from the DEC's request that plaintiffs clean up the fuel oil spilled in their basement, there is no third-party coverage for reimbursement of remediation costs.
This analysis relative to the first cause of action is equally applicable to plaintiffs' third cause of action, which alleges breach of contract. The Court thus finds that defendant is entitled to dismissal of plaintiffs' first and third causes of action based upon documentary evidence (see CPLR 3211 [a] ; Calhoun v Midrox Ins. Co., 165 AD3d at 1452).
Turning now to the latter aspect of the motion, on a motion to dismiss for failure to state a cause of action the Court “ ‘must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts fit within any cognizable legal theory’ ” (Rodriguez v Jacoby & Meyers, LLP, 126 AD3d 1183, 1185 [3d Dept 2015], lv denied 25 NY3d 912 , quoting He v Realty USA, 121 AD3d 1336, 1339 [3d Dept 2014] [internal quotation marks and citations omitted]; see CPLR 3211 [a] ; Snyder v Brown Chiari, LLP, 116 AD3d 1116, 1117 [3d Dept 2014]).
To establish a prima facie case of bad faith, as alleged in the second cause of action, a “plaintiff must [demonstrate] that the insurer's conduct constituted a ‘gross disregard’ of the insured's interests” (Miller v Allstate Indem. Co., 132 AD3d 1306, 1307-1308 [4th Dept 2015], quoting Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453 , rearg denied 83 NY2d 779 ). Here, plaintiffs allege as follows:
“There is a reasonable basis for a difference of opinion as to the meaning of the policy with respect to the coverage of sudden and accidental losses.
“As there is a reasonable basis for a difference of opinion, the [d]efendant should have interpreted the policy in favor of the insured.
“The [d]efendant acted in bad faith as the insurer's conduct constituted a gross disregard of the insured's interests.”
Notwithstanding plaintiffs' use of the correct language when stating their cause of action, the underlying factual allegations simply do not reflect the gross disregard necessary to support a bad faith claim (see Miller v Allstate Indem. Co., 132 AD3d at 1308). Indeed, “ ‘[w]hile it is axiomatic that a court must assume the truth of the complaint's allegations, such an assumption must fail where there are conclusory allegations lacking factual support’ ” (Dominski v Frank Williams & Son, LLC, 46 AD3d 1443, 1444 [4th Dept 2007], quoting Elsky v KM Ins. Brokers, 139 AD2d 691, 691 [2d Dept 1988]; accord Miller v Allstate Indem. Co., 132 AD3d at 1307). The Court thus finds that defendant is entitled to dismissal of the second cause of action based upon plaintiffs' failure to state a claim (see CPLR 3211 [a] ; Miller v Allstate Indem. Co., 132 AD3d at 1308).
Based upon the foregoing, defendant's motion is granted in its entirety and the complaint dismissed.
Therefore, having considered NYSCEF document Nos. 4 through 12, 18, 19, and 21, and oral argument having been heard on November 4, 2022 with John D. Wright, Esq. appearing on behalf of plaintiffs and Karen M. Berberich, Esq. appearing on behalf of defendant, it is hereby
ORDERED that defendant's motion is granted in its entirety; and it is further
ORDERED that the complaint is dismissed.
The original of this Decision and Order has been e-filed by the Court. Counsel for defendant is hereby directed to serve a copy of the Decision and Order with notice of entry in accordance with CPLR 5513.
1. In its denial of coverage to the DEC, defendant indicates that “the spill occurred when a rusted leg of the oil tank collapsed.” It is unclear, however, where they got this information.
Robert J. Muller, J.
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Docket No: Index No.: EC2022-33716
Decided: March 15, 2023
Court: Supreme Court, New York,
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