21 F. Supp. 3d 206
E.D.N.Y2014Background
- Fire on Nov. 10, 2011 destroyed the Primary building and damaged a nearby Secondary building in an Ohio apartment complex owned by The Wingates, LLC; Matrix Realty Group was the named policyholder on a Commonwealth Insurance Company policy covering the complex.
- Policy (June 23, 2011–June 23, 2012) required examinations under oath (EOUs), production of books/records, and contained a Misrepresentation/Fraud clause and a $100,000 deductible; action had a one-year contractual suit limitation.
- Plaintiffs submitted sworn proofs of loss prepared by their public adjuster Steven Hess and estimates from Zendler Construction, but Hess never personally inspected the premises and Zendler could not verify pre-loss contents or conditions.
- Commonwealth repeatedly requested EOUs and pre-loss documentation; Plaintiffs never appeared for EOUs (despite advice from Hess to do so) and provided minimal pre-suit documentary cooperation; Commonwealth later deposed Plaintiff representatives during litigation.
- Plaintiffs sued Commonwealth in state court July 2012 (removed to federal court); during discovery Plaintiffs conducted no discovery, made no expert disclosures, and sought to designate Hess and Zendler as experts only after discovery closed and summary judgment was filed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Motion to re-open discovery and designate Hess/Zendler as experts | Plaintiffs need more discovery because fraud and non-cooperation issues surfaced in Commonwealth's summary judgment motion; late disclosure excusable | Discovery already closed; Plaintiffs had notice of fraud/non-cooperation issues and ample opportunity to disclose experts earlier | Denied — no good cause under Fed. R. Civ. P. 16(b) for reopening discovery |
| Motion to strike Hess affidavit for failure to disclose as expert | Hess was disclosed as a lay witness and deposed; affidavit is admissible | Portions of Hess affidavit are undisclosed expert opinion in violation of Rule 26 | Granted in part and denied in part — strike expert-opinion portions but retain factual/lay portions |
| Summary judgment: whether plaintiffs' failure to submit EOUs and cooperate bars recovery under the policy | Plaintiffs argue they cooperated sufficiently and depositions during litigation cure any pre-suit non-cooperation; counsel advised non-cooperation | Commonwealth argues failure to submit EOUs is a willful breach that bars coverage regardless of later depositions or prejudice | Granted for Commonwealth — Plaintiffs’ willful refusal to sit for EOUs is an absolute defense; complaint dismissed |
| Claim for bad faith/breach of covenant of good faith and fair dealing | Plaintiffs assert bad-faith refusal to adjust claims merits extra-contractual damages | Commonwealth contends New York law does not recognize an independent bad-faith tort for first-party claim denials | Dismissed — New York does not recognize a separate bad-faith tort here; claim duplicative of contract claim |
Key Cases Cited
- Grochowski v. Phoenix Constr., 318 F.3d 80 (2d Cir. 2003) (Rule 16(b) good-cause/diligence standard for schedule modification)
- Parker v. Columbia Pictures Indus., 204 F.3d 326 (2d Cir. 2000) (scheduling orders fix parties and pleadings; limited modifications)
- Trebor Sportswear Co. v. The Limited Stores, 865 F.2d 506 (2d Cir. 1989) (denying further discovery when party had adequate opportunity)
- Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919 (2d Cir. 1985) (ample time to pursue discovery justified denial of additional discovery)
- Lentini Bros. Moving & Storage Co. v. New York Prop. Ins. Underwriting Ass'n, 53 N.Y.2d 835 (N.Y. 1981) (insured’s unexcused refusal to submit to EOU justified dismissal)
- Abudayeh v. Fair Plan Ins. Co., 105 A.D.2d 764 (N.Y. App. Div.) (failure to submit to EOU is absolute defense; pretrial examinations do not cure)
- New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308 (N.Y. 1995) (New York does not recognize independent tort damages for insurer bad faith in first-party insurance denials)