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118 F.Supp.3d 548 (2015)

SI VENTURE HOLDINGS, LLC, Plaintiff, v. CATLIN SPECIALTY INSURANCE, Defendant.

United States District Court, S.D. New York.

Signed July 13, 2015.

Attorney(s) appearing for the Case

Scott E. Agulnick, Esq. , Greenblatt & Agulnick, P.C., Great Neek, NY, for Plaintiff.

Patrick M. Tomovic, Esq. , Hodgson, Russ, LLP, Buffalo, NY, for Defendant.

CORRECTED OPINION AND ORDER

SHIRA J. SCHEINDLIN, District Judge.

I. INTRODUCTION AND BACKGROUND1

This case presents an issue of first impression under New York law—whether a contract that requires an insured party to seek approval from its insurer before expending funds for environmental clean-up is void as against public policy. The facts are not in dispute. SI Venture Holdings ("SI"), a real estate development company, entered into an insurance contract with Catlin Specialty Insurance ("Catlin") that included the following provision ("Consent Provision"):

The Insurer shall pay on behalf of the Insured for Clean-Up Costs and related Claim Expense in excess of the Deductible stated in the Declarations because of a Pollution Condition2 discovered by the Insured during the Policy Period. . . but only if the Insured notifies the Insurer of the Pollution Condition, in writing, during the Policy Period or any applicable Extended Reporting Period.. . . The Insured shall not assume or admit liability, make any payment, consent to any judgment, settle any Claim or Protective Third Party Claim or incur any Clean-Up Cost, Claim Expense or Protective Third Party Claims Expense without prior written consent of the Insurer, which consent shall not be unreasonably withheld. The Insurer shall not be liable for any expense, settlement, assumed obligation or admission to which it has not consented.3

In February 2013, SI tested the soil of one of its properties in Staten Island, only to discover that it was contaminated with petroleum.4 The level of contamination was such that SI thought that it was obligated—based on its understanding of New York law—to transport the soil to a disposal site in New Jersey.5 SI did so. Then, six months later, it sent a notice of claim to Catlin, requesting coverage of $250,000 worth of clean-up costs.6 Catlin denied that request, citing SI's failure to comply with the Consent Provision.7

SI concedes that it did not seek Catlin's consent before embarking on the soil disposal. Nor does SI dispute that by failing to obtain such consent, SI breached the Consent Provision. Instead, SI argues that the Consent Provision is unenforceable as against public policy, because it impedes compliance with environmental regulations. According to SI, if an insured party must seek approval from its insurer before incurring clean-up costs, the practical effect will be that less clean-up takes place—to the public's detriment. Therefore, SI has moved for summary judgment, asking the Court to set aside the Consent Provision, and to require Catlin to reimburse SI the amount that it expended in connection with the soil disposal. Catlin has cross-moved for summary judgment, asking the Court to enforce the Consent Provision—and accordingly, to release Catlin from any putative coverage obligations.8 For the reasons set forth below, SI's motion is DENIED, and Catlin's motion is GRANTED.

II. APPLICABLE LAW
A. Construction of Insurance Contracts

Under New York law, "unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court."9 Pursuant to this general rule, consent-to-settle provisions—requiring insured parties to give insurers notice before entering into voluntary settlement agreements—are "routinely enforced" as "a condition precedent to coverage."10 This[118 F.Supp.3d 551]
same is true, moreover, of settlements between private actors and public agencies that arise from enforcement actions. In 2008, for example, the New York Court of Appeals enforced a consent-to-settle provision against Bear Steams, in connection with a settlement that it entered into with the Securities and Exchange Commission ("SEC").11 And Judge Katherine Forrest of this District recently enforced a similar provision against Northrop Grumman, in connection with an informal agreement it made with the United States Navy to spearhead the clean up of land adjacent to a weapons plant.12

B. Void as Against Public Policy

There is no magic formula for determining when a contract—or a particular provision of a contract—is void as against public policy.13 Under New York law, "[a]n agreement may be unenforceable[] as contrary to public policy even in the absence of a direct violation of a criminal statute, if the sovereign has expressed a concern for the values underlying the policy implicated."14 A contract is "contrary to public policy, not only if it directly violates a statutory prohibition ... but also if it is contrary to the social judgment on the subject implemented by the [relevant] statute."15

III. DISCUSSION

SI argues that the Consent Provision "conflicts with [] and contravenes" numerous environmental regulations, because it leaves insured parties in a position—theoretically—of having to finance clean-up without the benefit of reimbursement.16 In practice, this means that insured parties will be unwilling (or in some cases, unable) to comply with environmental regulation "expeditious[ly]"—an out-come that would clearly imperil the public interest.17

There are two problems with SI's position. First, clauses such as the Consent Provision are routinely enforced, which means that even if SI's position were appealing on policy grounds, adopting it[118 F.Supp.3d 552]
would effectively "revolutionize" New York insurance law.18 Second, SI's argument sweeps too broadly. The rule that SI proposes would be unfair to insurers, because it would preclude even reasonable withholding of consent to reimburse an insured party's clean-up costs.

A. This Court Declines to Revolutionize New York Insurance Law

SI has pointed to no case—nor have I been able to locate one—in which a consent provision, like the one at issue here, was deemed unenforceable on public policy grounds. On the other side, by contrast, Catlin has pointed to ample case law in which consent provisions have been enforced. The consensus among New York courts (and federal courts applying New York law) is clear—consent provisions are typically upheld to their letter.19

SI responds by pointing out that none of the cases invoked by Catlin directly addressed the public policy argument that SI presses here—so the question is open.20 That is true. But it hardly follows that the cases invoked by Catlin are irrelevant. Silence can be revealing. That no court has ruled on the public policy implications of consent provisions suggests that few, if any, courts have confronted such challenges—which in turn suggests that such challenges are rarely, if ever, made.21

In short, SI's argument is either legally innovative or legally precarious—and very likely both. Either way, it is not the role of this Court, exercising diversity jurisdiction, to take the radical step that SI's position would require. On appeal, SI will have an opportunity to request certification to the New York Court of Appeals (and the Second Circuit will have discretion to order such certification sua sponte), at which point the proper institution—the final arbiter of state law-will be able to entertain SI's argument.22 For[118 F.Supp.3d 553]
now, federalism principles counsel in favor of rejecting that argument.

B. The Equities Favor Catlin

The second problem with SI's position is that it would effectively strip Catlin—and, by extension, all insurers—of the ability to reasonably object to compliance-related expenditures that an insured party intends to make. As written, the parties' agreement prohibits Catlin from "unreasonably with[holding]" consent with regard to, inter alia, clean-up costs.23 Therefore, had SI requested Catlin's consent, and had Catlin decided to withhold it, SI would have had legal recourse—it could have sought to enforce the "consent shall not be unreasonably withheld" clause against Catlin, and to seek recovery, on that basis, for whatever hardship Catlin's withholding of consent might have caused. Notably, SI makes no effort to argue that the "consent shall not be unreasonably withheld" clause is somehow inoperative, or that it affords insufficient protection. Instead, SI focuses on (hypothetical) scenarios in which an insured party (1) requests consent from its insurer, (2) receives no consent, but (3) is still required (by law) to proceed with, and foot the bill for, compliance efforts. According to SI, the mere possibility of this outcome—enabled by enforcement of the Consent Provision here—would discourage compliance and imperil the public good.

SI's argument proves too much. According to SI, even when an insurer's decision to withhold its consent with regard to specific clean-up costs is reasonable, that result would still contravene the public interest. It is hard to believe that the requirements of public policy would so dramatically curtail insurers' rights. Under the rule advocated by SI, insurers would never be able to withhold consent regarding proposed clean-up costs, no matter how exorbitant or excessive. But an insurance company should be allowed to negotiate for some mechanism to refuse to underwrite unreasonable expenditures incurred by insured parties, which is just what the Consent Provision provides.

To be sure, if the agreement here did not contain a clause prohibiting Catlin from unreasonably withholding its consent—if Catlin had carte blanche, under the terms of the agreement, to refuse all reasonable requests—a different outcome might well be warranted. In the abstract, SI's concerns about insurers "imped[ing]" environmental clean-up are certainly valid.24 In practice, however, there is little[118 F.Supp.3d 554]
reason to think SI's concerns will materialize. As it stands, Catlin is prohibited—by the very same provision that SI seeks to have invalided—from unreasonably refusing to reimburse an insured party for clean-up costs.25 As written, the Consent Provision strikes a sensible balance between competing interests. If and when the New York courts consider the question, they may conclude that policy considerations require disrupting this balance. In the absence of further guidance, however, I decline to draw that conclusion here.

IV. CONCLUSION

For the reasons set forth above, SI's motion is DENIED, and Catlin' cross-motion is GRANTED. The Clerk of the Court is directed to close both motions (Dkt. Nos. 7 and 13), and this case.

SO ORDERED.


Cohen v Tri-State Consumer Ins. Co.
Cohen v Tri-State Consumer Ins. Co. 2019 NY Slip Op 06470 Decided on September 11, 2019 Appellate Division, Second Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on September 11, 2019 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
WILLIAM F. MASTRO, J.P.
MARK C. DILLON
VALERIE BRATHWAITE NELSON
ANGELA G. IANNACCI, JJ.
2018-02526
(Index No. 601039/17)

[*1]Craig Cohen, et al., respondents,

v

Tri-State Consumer Insurance Company, appellant.



Kaufman, Dolowich & Voluck, LLP (Thomas Torto, New York, NY, of counsel), for appellant.

Greenblatt & Agulnick, P.C., Great Neck, NY (Scott E. Agulnick of counsel), for respondents.



DECISION & ORDER

In an action to recover damages for breach of a homeowner's insurance policy, the defendant appeals from an order of the Supreme Court, Nassau County (Anna R. Anzalone, J.), entered January 16, 2018. The order granted the plaintiffs' motion for summary judgment on the issue of liability.

ORDERED that the order is affirmed, with costs.

After the plaintiffs' home sustained water damage as a result of overflow from a clogged toilet, the plaintiffs filed a claim with the defendant under a homeowner's insurance policy. The defendant disclaimed coverage based on an exclusion in the subject insurance policy for "water which backs up through sewers or drains." The plaintiffs commenced this action alleging breach of the insurance policy. After issue was joined, the plaintiffs moved for summary judgment on the issue of liability. The Supreme Court granted the motion, and the defendant appeals.

The plaintiffs demonstrated their prima facie entitlement to summary judgment on the issue of liability by establishing "that there was a valid policy of insurance covering the subject property, a loss occurred, a timely claim was made, and the loss fell within the terms of the policy" (Anghel v Utica Mut. Ins. Co., 127 AD3d 897, 899). In opposition, the defendant failed to raise an issue of fact as to whether any policy exclusions applied (see Pichel v Dryden Mut. Ins. Co., 117 AD3d 1267).

Accordingly, we agree with the Supreme Court's determination to grant the plaintiffs' motion for summary judgment on the issue of liability.

MASTRO, J.P., DILLON, BRATHWAITE NELSON and IANNACCI, JJ., concur.

ENTER:

Aprilanne Agostino

Clerk of the Court 



published decisions of interest 



GC Clinton, LLC v Leading Ins. Group Ins. Co., Ltd. (United States Branch)
GC Clinton, LLC v Leading Ins. Group Ins. Co., Ltd. (United States Branch) 2017 NY Slip Op 06063 Decided on August 9, 2017 Appellate Division, Second Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on August 9, 2017 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
REINALDO E. RIVERA, J.P.
CHERYL E. CHAMBERS
JOSEPH J. MALTESE
BETSY BARROS, JJ.
2015-09701
(Index No. 502093/15)

[*1]GC Clinton, LLC, appellant,

v

Leading Insurance Group Insurance Co., Ltd. (United States Branch), et al., respondents.

Greenblatt & Agulnick, P.C., Great Neck, NY (Scott E. Agulnick and Steven A. Kotchek of counsel), for appellant.

Chartwell Law Offices, LLP, New York, NY (Linda Fridegotto and Matthew Kraus of counsel), for respondent Leading Insurance Group Insurance Co., Ltd. (United States Branch).

Perry, Van Etten, Rozanski & Primavera, LLP, Melville, NY (Leonard Porcelli of counsel), for respondent Omni Agency, Inc.



DECISION & ORDER

In an action to recover damages for breach of contract and for declaratory relief, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Bunyan, J.), dated July 29, 2015, as denied its motion for summary judgment on the complaint and for a declaration in its favor.

ORDERED that the order is affirmed insofar as appealed from, with one bill of costs.

The defendant Leading Insurance Group Insurance Co., Ltd. (hereinafter Leading), issued a commercial insurance policy with respect to the plaintiff's residential rental property in Brooklyn. The policy lists the defendant Scottish American Insurance General Agency, Inc., formerly known as Buckingham Badler Associates, Inc. (hereinafter Buckingham), as the agent. According to the plaintiff, the defendant Omni Agency, Inc. (hereinafter Omni), was the plaintiff's broker.

On March 26, 2013, Leading issued a notice of cancellation of insurance for nonpayment of premium and mailed that notice to Buckingham. After the purported cancellation date, there was a fire on the top floor of the plaintiff's building. The plaintiff commenced this action, seeking, inter alia, a declaratory judgment regarding coverage and damages for breach of contract. The plaintiff moved for summary judgment, contending that Leading failed to comply with the requirement set forth in Insurance Law § 3426 that the notice of cancellation be mailed or delivered to the insured's "authorized agent or broker," and therefore, the policy was not effectively cancelled.

The plaintiff made a prima facie showing that mailing the notice of cancellation to Buckingham, rather than Omni, did not satisfy the requirement set forth in Insurance Law § 3426 [*2]that notice be mailed or delivered to the insured's "authorized agent or broker." However, in opposition, Leading raised triable issues of fact, inter alia, as to whether Buckingham was the "authorized agent or broker" (see Longobardi v New York Merchant Bakers Mut. Fire Ins. Co., 238 AD2d 387, 388; cf. Unified Window Sys., Inc. v Endurance Am. Specialty Ins. Co., 149 AD3d 1009; Holowacz v Insurance Corp. of N.Y., 27 AD3d 621, 622).

The parties' remaining contentions need not be addressed in light of our determination.

Accordingly, the Supreme Court properly denied the plaintiff's motion for summary judgment on the complaint and for a declaration in its favor.

RIVERA, J.P., CHAMBERS, MALTESE and BARROS, JJ., concur.

ENTER:

Aprilanne Agostino

Clerk of the Court


Gray v Tri-State Consumer Ins. Co.
Gray v Tri-State Consumer Ins. Co. 2018 NY Slip Op 00546 Decided on January 31, 2018 Appellate Division, Second Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on January 31, 2018 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
L. PRISCILLA HALL, J.P.
SYLVIA O. HINDS-RADIX
JOSEPH J. MALTESE
ANGELA G. IANNACCI, JJ.
2015-12445
(Index No. 705510/13)

[*1]Michelle Gray, respondent,

v

Tri-State Consumer Insurance Company, appellant.

Kaufman Dolowich & Voluck LLP, Woodbury, NY (Eric B. Stern of counsel), for appellant.

Greenblatt & Agulnick, P.C., Great Neck, NY (Scott E. Agulnick and Steven A. Kotchek of counsel), for respondent.


DECISION & ORDER

In an action, inter alia, to recover damages for breach of a homeowner's insurance policy, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Queens County (Gavrin, J.), entered December 16, 2015, as denied its motion for summary judgment dismissing the complaint and on its counterclaim to recover damages for breach of the concealment and fraud provision of the policy, and conditionally granted the plaintiff's cross motion pursuant to CPLR 3126 to strike its answer unless it served a "meaningful" response to the plaintiff's supplemental demand for discovery and inspection within a specified time.

ORDERED that the order is modified, on the facts and in the exercise of discretion, by deleting the provision thereof conditionally granting the plaintiff's cross motion pursuant to CPLR 3126 to strike the defendant's answer unless the defendant served a "meaningful" response to the plaintiff's supplemental demand for discovery and inspection within a specified time, and substituting therefor a provision denying the cross motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements, and a subsequent order of the same court entered July 28, 2016, granting the plaintiff's motion to strike the defendant's answer based upon the defendant's alleged failure to comply with the conditional order entered December 16, 2015, is vacated.

After her home was damaged by a fire, the plaintiff commenced this action, inter alia, to recover damages for breach of a homeowner's insurance policy. In its amended answer, the defendant insurance carrier asserted a counterclaim to recover damages for breach of the concealment and fraud provision of the policy, which stated that the defendant does not provide coverage for an insured who "[i]ntentionally concealed or misrepresented any material fact or circumstance," or "[e]ngaged in fraudulent conduct relating to this insurance." In the order appealed from, the Supreme Court, inter alia, denied the defendant's motion for summary judgment dismissing the complaint and on its counterclaim, and conditionally granted the plaintiff's cross motion pursuant to CPLR 3126 to strike the defendant's answer unless the defendant served a "meaningful" response to the plaintiff's supplemental demand for discovery and inspection within a specified time. The defendant appeals.

The Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint and on its counterclaim to recover damages for breach of the concealment and fraud provision of the policy. The evidence submitted by the defendant revealed the existence of triable issues of fact as to whether the defendant breached the subject insurance policy by failing to pay the claim within 60 days after it received proof of loss and reached an agreement with the plaintiff as to the amount of the loss (see 232 Broadway Corp. v Calvert Ins. Co., 149 AD2d 694, 695-696). Further, although the defendant established its prima facie entitlement to judgment as a matter of law on the issue of whether the plaintiff breached the concealment and fraud provision of the policy and thus vitiated the defendant's obligation to provide coverage, in opposition, the plaintiff raised a triable issue of fact as to whether she intentionally submitted an inaccurate proof of loss (see Walker v Tighe, 142 AD3d 549, 551; Christophersen v Allstate Ins. Co., 34 AD3d 515, 516; St. Irene Chrisovalantou Greek Orthodox Monastery v Cigna Ins. Co., 226 AD2d 624). Moreover, contrary to the defendant's contention, it was not entitled to partial summary judgment dismissing the request for consequential damages, as it failed to make a prima facie showing that the consequential damages sought by the plaintiff were not within the contemplation of the parties when they executed the insurance policy (see Pandarakalam v Liberty Mut. Ins. Co., 137 AD3d 1234, 1236; 30-40 E. Main St. Bayshore, Inc. v Republic Franklin Ins. Co., 74 AD3d 1330, 1333).

Since there are triable issues of fact as to whether the defendant breached the insurance policy, we decline the plaintiff's invitation to search the record and award her summary judgment on her breach of contract cause of action (see Cioffi v Target Corp., 114 AD3d 897, 899; Central Irrigation Supply v Putnam Country Club Associates, LLC, 27 AD3d 684, 685).

The Supreme Court improvidently exercised its discretion in conditionally granting the plaintiff's cross motion pursuant to CPLR 3126 to strike the defendant's answer unless the defendant served a "meaningful" response to the plaintiff's supplemental demand for discovery and inspection within a specified time. "The drastic remedy of striking an answer is inappropriate absent a clear showing that a defendant's failure to comply with discovery demands is willful and contumacious" (Lantigua v Goldstein, 149 AD3d 1057, 1059). Here, the defendant had already complied with the plaintiff's supplemental demand for discovery and inspection, except for items four and five of the demand. The defendant properly objected to items four and five, which called for information regarding the claims of other insureds, as those items sought information that was not necessary and proper to the prosecution of this action (see Diaz v City of New York, 140 AD3d 826, 827; Cabrera v Allstate Indem. Co., 288 AD2d 415, 416).

HALL, J.P., HINDS-RADIX, MALTESE and IANNACCI, JJ., concur.

ENTER:

Aprilanne Agostino

Clerk of the Court


Nunez v U.S. Underwriters Ins. Co. 

*1] Nunez v U.S. Underwriters Ins. Co. 2011 NY Slip Op 21050 Decided on February 10, 2011 Supreme Court, Queens County Markey, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Decided on February 10, 2011
Supreme Court, Queens County

Antonia Nunez, etc., et al., Plaintiffs,

against

U.S. Underwriters Insurance Company, etc., et al., Defendants.



32082/09



Appearances of Counsel:

For the Plaintiff: Greenblatt & Agulnick, by Scott E. Agulnick, Esq., 55 Northern Blvd., Great Neck, New York 11021

For the Defendant Nicholas Gomez and Teodora Gomez: Miranda, Sambursky, Slone, Sklarin, Vereniotis, LLP, by Ondine Slone and Gabriella Camiglia, Esqs., 240 Mineola Blvd., Mineola, New York 11501

For the Defendant U.S. Underwriters Insurance Co.: Martyn, Toher & Martin, by Joseph S. Holotka, Esq., 330 Old Country Rd., Mineola, NY 11501-4187

Charles J. Markey, J.

The following papers numbered 1 to 15 read on this motion by plaintiff pursuant to CPLR 3212 for summary judgment on the first cause of action against the defendant U.S. Underwriters Insurance Company (U.S. Underwriters), dismissing the defendant U.S. Underwriters' fifth affirmative defense, dismissing the defendant U.S. Underwriters' first and second counterclaims; and on the cross motion by the defendant U.S. Underwriters pursuant to CPLR 3212 for summary judgment dismissing the complaint.

Papers Numbered

Notice of Motion - Affidavits - Exhibits ..........................................1-4

Notice of Cross Motion - Affidavits - Exhibits ................................5-10

Answering Affidavits - Exhibits .......................................................11-13

Reply Affidavits ................................................................................14-15

The plaintiff commenced this action to recover money damages for water damage sustained in her retail store at 95-09 Jamaica Avenue, Woodhaven, New York as a result of a fire that occurred in the second floor residential unit above store.

On or about August 3, 2009, the defendant U.S. Underwriters provided Businessowners Liability Coverage and Businessowners Property Coverage to the plaintiff, under policy number xxxxxxxxx. Pursuant to the policy, the defendant U.S. Underwriters agreed to insure the plaintiff's store for a one-year term beginning on August 3, 2009 and expiring on August 3, 2010. The Policy included a Protective Safeguard Endorsement. The Protective Safeguard Endorsement states: [*2]

We will not pay for loss or damage caused by or resulting from fire, if, prior to the fire, you:

1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact; or

2. Failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order.

On September 18, 2009, a fire started on the second floor residential apartment above the plaintiff insured's space, a retail store. As a result of the fire the plaintiff sustained damage to the insured premises due to water from extinguishing the fire in the residential unit. At the request of U.S. Underwriters, Independent Adjustment Company inspected the plaintiff's property and found no smoke detectors in the first floor store area and the basement area. In a letter dated October 12, 2009, the defendant U.S. Underwriters denied coverage for the claim based on the plaintiff's failure to comply with the Protective Safeguard Endorsement.

In a letter dated, October 21, 2009, the plaintiff responded, stating that the loss sustained was a result of water damage and was not a result of the fire itself and, therefore, that the failure to have a smoke detector was immaterial, as a matter of law, and could not be used as a basis for denial of coverage. In a letter dated October 26, 2009, the defendant U.S. Underwriters followed up stating that it stood by its denial based on the language of the policy.

The plaintiff commenced this action on November 17, 2009. Issue was joined by the moving defendant on January 22, 2010. The plaintiff has now moved for summary judgment and the defendant U.S. Underwriters has cross-moved for summary judgment.

On a summary judgment motion, the movant has to offer sufficient evidence to establish entitlement to judgment as a matter of law (see, Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). The plaintiff concedes that she did not have a functioning and operational smoke/heat detector. However, the plaintiff argues that this was a breach of warranty that did not materially effect the risk of loss and, therefore, is not grounds for the denial of coverage.

The defendant U.S. Underwriter argues, upon the foregoing papers, that the Protective Safeguard Provision was not a warranty, but, rather, an express condition of the contract. The defendant's argument that the Protective Safeguard Provision is an express condition, rather than a warranty within the meaning of Insurance Law section 3106, is without merit.

Insurance Law section 3106(a) defines warranty as:

any provision of an insurance contract which has the effect of requiring as a condition precedent of the taking effect of such contract or as a condition precedent of the insurer's liability thereunder, the existence of a fact which tends to diminish, or the non-existence of a fact which tends to increase, the risk of the occurrence of any loss, damage, or injury within the coverage of [*3]the contract.

The Protective Safeguard Provision is a warranty as defined by Insurance Law 3106(a). Similar safety provisions have been found by the First and Second Department to be a warranty under Insurance Law section 3106 (see, Anjay Corp. v Those Certain Underwriters at Lloyd's of London Subscribing to Certificate No. HN01AAF4393, 33 AD3d 323 [1st Dept. 2006] [requiring video cameras at a jewelry store held to be a warranty within the meaning of Insurance Law § 3106]; 730 J & J, LLC v Twin City Fire Ins. Co., 293 AD2d 519 [2nd Dept. 2002] [requiring the premises to be locked and secured held a warranty under Insurance Law § 3106]; M. Fabrikant & Sons, Inc. v Overton & Co. Customs Brokers, Inc., 209 AD2d 206 [1st Dept. 1994] [requiring an armored vehicle to be occupied with an armed guard locked inside whenever insured property was in the vehicle during a delivery was a warranty under Insurance Law § 3106]).

A Protective Safeguard Provision requiring the installation of a fire alarm system has, furthermore, been found to be warranty under Insurance Law section 3106(a). In Mirabelli v Merchants Ins. Co. of New Hampshire (2007 WL 2236395, 2007 NY Slip Op 31615(U) [Sup Ct Suffolk County 2007]), the court stated: Here, defendant adequately demonstrated through its submissions that there was no central station fire alarm or an automatic fire alarm reporting to a public or private fire alarm station at the subject premises on the date of the fire. Through said submissions, defendant established that plaintiffs breached the Automatic Fire Alarm Protective Safeguards warranty in the subject policy.

Insurance Law section 3106(b) provides that a "breach of warranty shall not avoid an insurance contract or defeat recovery thereunder unless such breach materially increased the risk of loss, damage or injury within the coverage of the contract." Only if the lack of a smoke detector was material can it thus be used as a basis for denial of coverage. See, Great Lakes Reinsurance (UK), PLC v Rosin,F Supp 2d, 2010 WL 5397246 [S.D. Fla. 2010] [applying New York law].

The plaintiff submitted an affidavit in which she stated that fire was contained to the residential unit above the store. She further stated that there was no damage to the store from smoke and the only damage occurred as a result of water that was used to extinguish the fire in the unit above the store. The plaintiff further submitted a certified copy of the Fire Incident Report indicating that the fire originated in the second floor apartment and was confined to that apartment. The plaintiff established that inasmuch as no fire or smoke entered into the store that the lack of a smoke detector was not material. In opposition, the defendant failed to raise a triable issue of fact. The defendant, therefore, cannot deny coverage based on a violation of the Protective Safeguard Provision as a result of a lack of a smoke detector.

The defendant, however, alleged in its answer and in a counterclaim that the plaintiff made a material misrepresentation on the application for insurance that she had working smoke [*4]detectors in the insured premises and, therefore, it can rescind the policy based on the misrepresentation. The plaintiff argues that the defendant U.S. Underwriters, by failing to include the claim of misrepresentation in its denial letter, waived its right to assert the claim of misrepresentation and therefore cannot deny coverage or rescind the policy on this ground.

Since this is a case for property damage rather than personal injury, this case does not fall within the ambit of Insurance Law section 3420(d). The plaintiff, therefore, has to show proof of prejudice from the delay in order for the defendant to be estopped from disclaiming coverage or rescinding the policy based on the misrepresentation (Topliffe v US Art Co., Inc., 40 AD3d 967 [2nd Dept. 2007]; Only Natural, Inc. v Realm Natl. Ins. Co., 37 AD3d 436 [2nd Dept. 2007]; Scappatura v Allstate Ins. Co., 6 AD3d 692 [2nd Dept. 2004]). Inasmuch as the plaintiff did not submit any proof of prejudice, the plaintiff is not entitled to summary judgment.

Turning to the defendant's cross motion, in light of the discussion above, the defendant cannot deny coverage based on a violation of the Protective Safeguard Provision as a result of a lack of a smoke detector and thus is not entitled to summary judgment on this ground.

The defendant U.S. Underwriters did establish its prima facie entitlement to summary judgment on the ground that the plaintiff made a material misrepresentation on her application for insurance by stating that she had operational smoke detectors in the premises. In opposition to the cross motion, the plaintiff submitted the affidavit of the manager of the store. The manager stated, in his affidavit, that at the time of the application for insurance there was an operable smoke detector affixed to the ceiling. A triable issue of fact, therefore, exists as to whether the plaintiff had operable smoke detectors at the time the application for insurance was filled out and the cross motion for summary judgment must be denied.

Accordingly, the plaintiff's motion for summary judgment is denied. The cross motion by the defendant U.S. Underwriters for summary judgment is denied.

The foregoing constitutes the decision, order, and opinion of the Court.

Dated: February 10, 2011

J.S.C.

Appearances of Counsel:

For the Plaintiff: Greenblatt & Agulnick, by Scott E. Agulnick, Esq., 55 Northern Blvd., Great Neck, New York 11021

For the Defendant Nicholas Gomez and Teodora Gomez: Miranda, Sambursky, [*5]Slone, Sklarin, Vereniotis, LLP, by Ondine Slone and Gabriella Camiglia, Esqs., 240 Mineola Blvd., Mineola, New York 11501

For the Defendant U.S. Underwriters Insurance Co.: Martyn, Toher & Martin, by Joseph S. Holotka, Esq., 330 Old Country Rd., Mineola, NY 11501-4187