360 F. Supp. 3d 172
S.D. Ill.2018Background
- BankUnited hired environmental consultants MECC (to perform a Phase I ESA) and LCS (to review the ESA) before making a $3,225,000 loan secured by commercial property in Mount Kisco, NY. The contracts required performance to professional standards and maintenance of specified insurance with BankUnited as an additional insured.
- MECC's Phase I (Nov. 2013) and LCS's review (Mar. 2014) failed to disclose decades-old radiological contamination from historical operations (Canrad). BankUnited claims the reports omitted available indicia of contamination and did not follow ASTM standards.
- EPA investigations in 2015–2016 confirmed radionuclide contamination and large remediation costs; the borrower defaulted on the loan in Dec. 2016 and the property was later appraised as worthless.
- BankUnited sued MECC, LCS and insurers (Great Divide, Beazley, Crum) asserting breach of contract, professional malpractice, negligent misrepresentation, and declaratory relief against insurers for coverage. Defendants moved to dismiss; Crum moved for judgment on the pleadings.
- The court considered whether MECC and LCS are “professionals” under N.Y. C.P.L.R. § 214(6), whether claims accrued and were time‑barred, whether negligent misrepresentation was grounded in fraud, and whether insurer declaratory claims survive absent viable underlying claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MECC/LCS are "professionals" under CPLR § 214(6) (affecting limitations) | MECC/LCS are not professionals because they lack formal engineering licenses/credentials | They are professionals: extensive experience, performed work as "Environmental Professionals," contracts invoked professional standards | Court: MECC and LCS are professionals under § 214(6) (environmental experience, CERCLA EP definition, trust relationship) |
| Applicable statute of limitations for breach, malpractice, negligent misrep. | Claims tolled until discovery of contamination (or until property became worthless); negligent misrep. governed by 6‑yr if constructive fraud pleaded | Claims governed by 3‑yr malpractice period; negligent misrep. 3‑yr absent fraud; accrual at time actionable loss/detrimental reliance | Court: Professional malpractice and related breach claims governed by 3‑year § 214(6); negligent misrep. 3‑yr (no plausible constructive fraud) |
| When claims accrued | Accrual should be tolled until BankUnited discovered contamination or until actual injury (2015 EPA / publicity) | Claims accrued when malpractice/contract breach occurred / when plaintiff could have sued (by closing date Mar. 20, 2014) | Court: Claims accrued by closing (Mar. 20, 2014); discovery‑rule (§ 214‑c) not applicable because no latent exposure injury; suit filed July 13, 2017 is time‑barred |
| Viability of declaratory insurance claims given dismissal of underlying claims | Insurer coverage disputes should be decided on the merits | Insurer obligations depend on insureds' liability; if underlying claims dismissed insurers may have no exposure | Court: Insurance declaratory claims cannot survive absent viable underlying claims; insurer counts held in abeyance — plaintiff may show cause to keep them alive |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6) pleading)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state plausible claim; labels and conclusions insufficient)
- Chase Sci. Research, Inc. v. NIA Grp., Inc., 96 N.Y.2d 20 (2001) (factors defining "professionals" under CPLR § 214(6))
- Williamson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1 (2007) (professional malpractice accrues when malpractice is committed)
- Germantown Cent. Sch. Dist. v. Clark, Clark, Millis & Gilson, AIA, 100 N.Y.2d 202 (2003) (interpretation of § 214‑c; discovery rule for latent exposure claims)