30 F. Supp. 3d 166
E.D.N.Y2014Background
- Sikarevich Family L.P. owned commercial property in Brooklyn insured by Nationwide under a policy effective Oct. 12, 2012–Oct. 12, 2013; plaintiff alleges Hurricane Sandy caused property damage and business income loss.
- Plaintiff submitted a claim; Nationwide denied coverage in a November 17, 2012 letter, attributing the loss to flood/storm surge, which the policy excludes.
- Plaintiff sued in state court and Nationwide removed to federal court; the Amended Complaint pleads breach of contract, breach of the implied covenant of good faith and fair dealing (and bad faith), and unjust enrichment, and seeks declaratory relief, consequential and punitive damages.
- Nationwide moved under Rule 12(b)(6) to dismiss the implied-covenant/bad-faith and unjust enrichment claims, related declaratory requests, and requests for punitive and certain consequential damages; case was subject to the district’s Hurricane Sandy case management orders.
- The court treated pleaded facts as true for the motion and focused on whether the non-contract claims were duplicative or permissible in light of the existing insurance contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach of implied covenant / bad‑faith claim can proceed separately from breach of contract | Nationwide acted in bad faith (failed to investigate/value, denied claim) creating independent tort claim | Such allegations are duplicative of breach of contract and do not create an independent tort under NY law | Dismissed: good‑faith/bad‑faith claim is duplicative of contract claim; related declaratory, consequential, and punitive relief tied solely to that claim dismissed |
| Whether unjust enrichment may be pleaded alongside enforceable insurance contract | Nationwide was unjustly enriched by keeping premiums and refusing coverage | There is an express, enforceable policy governing the dispute, so quasi‑contract recovery is barred | Dismissed: unjust enrichment and related relief dismissed because policy governs the dispute |
| Whether consequential (extra‑contractual) damages are available | Sikarevich seeks business‑interruption/consequential damages from Nationwide’s bad‑faith denial/delay | Nationwide argues contractual limits/control remedies to policy terms | Denied as to consequential damages tied to breach of contract: plaintiff may pursue consequential damages if alleged insurer bad faith made such damages foreseeable; leave to amend breach‑of‑contract claim to include factual allegations supporting consequential damages |
| Whether punitive damages are available | Plaintiff seeks punitive damages for Nationwide’s allegedly egregious conduct | Nationwide contends punitive damages require an independent tort and public‑directed pattern; here conduct is contract‑based | Dismissed: punitive damages denied because plaintiff failed to plead an independent tort meeting New York’s test (including public harm/pattern) |
Key Cases Cited
- Cleveland v. Caplaw Enters., 448 F.3d 518 (2d Cir. 2006) (standard for treating factual allegations as true on motion to dismiss)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must do more than state labels and conclusions)
- New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308 (1995) (no separate tort for bad‑faith denial of insurance; punitive damages require independent tort/public harm)
- Bi‑Econ. Mkt., Inc. v. Harleysville Ins. Co. of New York, 10 N.Y.3d 187 (2008) (consequential damages may be recoverable for insurer’s bad faith where such damages were foreseeable to the parties)
- TVT Records v. Island Def Jam Music Group, 412 F.3d 82 (2d Cir. 2005) (application of punitive‑damages independent‑tort requirement)