282 Mountainview Drive LLC v. Norguard Insurance Co.

282 MOUNTAINVIEW DRIVE LLC, Plaintiff/Counterclaim Defendant, v. NORGUARD INSURANCE COMPANY, Defendant/Counterclaimant.

NORGUARD INSURANCE COMPANY, Third-Party Plaintiff, v. INFINITY INSURANCE BROKERAGE INC., now known as SKYSCRAPER INSURANCE SERVICES, INC., Third-Party Defendant.

No. 19-CV-2048 (CS)

United States District Court, S.D. New York

July 12, 2021

Yale Glazer Lazare Potter Giacovas & Moyle LLP Counsel for Defendant/Counterclaimant/Third-Party Plaintiff.

Robert M. Sullivan Sullivan & Klein, LLP New York, New York Counsel for Third-Party Defendant.

OPINION & ORDER

CATHY SEIBEL, U.S.D.J.

Before the Court are cross-motions for summary judgment filed by Third-Party Plaintiff Norguard Insurance Company (“Norguard”) and Third-Party Defendant Infinity Insurance Brokerage Inc., now known as Skyscraper Insurance Services, Inc. (“Skyscraper”). (Docs. 58, 65.) For the following reasons, Norguard's motion is GRANTED and Skyscraper's motion is DENIED.

I. BACKGROUND

The following facts are undisputed except where noted.

A. Facts

1. Skyscraper's Relationship to Plaintiff

Skyscraper was originally formed in July 2016 under the name of Infinity Insurance Brokerage Inc. (See Docs. 74-5; 74-6 (“Fisch Dep.”) at 16:21-17:9.) Because another brokerage was using a similar name, Skyscraper changed its name in January 2018. (Doc. 74-5; Fisch Dep. at 16:21-18:2.)^[1]

Skyscraper's principals are Chaim Berkovic and Joseph Fisch, and its offices are in Spring Valley, New York. (Fisch Dep. at 14:10-15:9, 19:6-9.) The principal of the plaintiff in this action, 282 Mountainview Drive LLC, is Joel Reisman, who is Berkovic's first cousin. (Doc. 74-20 (“Berkovic Dep.”) at 27:17-28:11; Doc. 74-8 (“Reisman Dep.”) at 11:7-12:13.) Berkovic and Fisch developed a professional relationship with Reisman by writing and reviewing insurance policies for some of his business ventures, including, eventually, 282 Mountainview Drive LLC. (Berkovic Dep. at 28:17-30:12, 36:16-37:16.)

2. Skyscraper's Agency Agreement with Norguard

In September 2016, Norguard's affiliate Westguard Insurance Company entered into an agency agreement (the “Agreement” or the “Agency Agreement”) with Skyscraper. (Doc. 70-1 (“Agreement”); Fisch Dep. at 129:10-130:20.) The Agreement gave Skyscraper the ability to solicit, and, in some circumstances, bind coverage via Norguard's automated system. (Agreement ¶ 1; Fisch Dep. at 137:5-138:19.) The Agreement contained a provision requiring Skyscraper to abide by a “Duty to Investigate Insurability, ” which required Skyscraper to “acquaint [Norguard] with all facts relevant to insurability of the risk, ” “not knowingly bind the Companies on any prohibited risk . . . nor withhold any material information pertinent to underwriting a policy, ” and “diligently and to the best of its ability ensure that the facts set forth by any applicant in any application it solicits are true, correct and contain no misrepresentation or incorrect characterizations.” (Agreement ¶ 8.) Additionally, the Agreement required Skyscraper to “report promptly all losses or claims, ” (id. ¶ 10), and contained an indemnification provision requiring Skyscraper to defend and indemnify Norguard for, and hold it harmless from, any costs or expenses, including attorneys' fees, “arising out of or resulting from any negligence, error, omission or intentional act of [Skyscraper], ” (id. ¶ 16).

3. Plaintiff's Norguard Policy

Plaintiff's property at 282 Mountainview Drive (the “Property”) was insured by Travelers Casualty Insurance Company of America (“Travelers”) for the policy period February 13, 2018 to February 13, 2019. (Doc. 70-7 (“Travelers Policy”).) The Travelers Policy contained a protective safeguard endorsement (“PSE”) requiring Plaintiff to maintain automatic sprinklers in the Property, (Travelers Policy at 142-43^[2]), but the Property never had sprinklers, (Reisman Dep. at 74:14-75:11, 92:4-95:4; Doc. 74-7 (“Reisman EUO”) at 61:15-19.)

In 2018, Reisman provided Berkovic and Fisch a copy of the Travelers Policy via email and permitted Skyscraper to try to replace this coverage on the Property. (Reisman Dep. at 26:16-28:11.) Reisman told Skyscraper to make sure that the Property was inspected by any new insurance company, but he did not discuss any PSE. (Id. at 31:25-33:10.) Fisch did not look at any documents other than the Travelers Policy before submitting to the Norguard system the application for replacement coverage for the Property. (Fisch Dep. at 53:13-16.) Fisch believed the Property had automatic sprinklers based on the Travelers Policy's inclusion of a PSE, and indicated in the submission to Norguard that the Property had such a system. (Id. at 57:8-13, 82:21-83:19, 86:23-87:22; Doc. 74-15 (“Janecek Dep.”) at 54:24-55:8.) Based on the representation that the Property had automatic sprinklers, the system generated a $313 discount on Plaintiff's premium and added a PSE for automatic sprinklers to the insurance quote. (See Fisch Dep. at 86:23-87:22; Janecek Dep. at 54:24-55:8, 55:16-25.)

Skyscraper's submission on Plaintiff's behalf was reviewed by Norguard's underwriting department, (Fisch Dep. at 142:19-24, 304:7-18; Janecek Dep. at 79:2-80:20), after which Norguard created an insurance proposal based on Skyscraper's submission, (Doc. 70-9; Fisch Dep. at 139:10-143:17; Janecek Dep. at 95:2-22). The proposal listed the PSE among the “Policy Forms To Be Attached at Issuance.” (Doc. 70-9 at 84.) It also contained a notice entitled “IMPORTANT INFORMATION, ” which stated that a PSE was included in the proposal, that it required the insured to maintain an automatic sprinkler system, and that failing to comply with that requirement could result in denial of a claim under the policy. (Id. at 86.)

Skyscraper forwarded portions of the Norguard proposal to Plaintiff, but - for reasons that are unexplained - removed the forms list, which listed the PSE, and the “IMPORTANT INFORMATION” notice specifically addressing the existence of the PSE and 282 Mountainview's obligations in connection with that endorsement. (See Doc. 70-10; Fisch Dep. at 157:23-159:4; 163:23-164:6.) Reisman signed the proposal. (Doc. 70-10; Fisch Dep. at 168:19-169:2.)

After receiving Reisman's approval, Norguard issued a policy effective from March 21, 2018 to March 21, 2019 (the “Policy” or the “Norguard Policy”), which contained the automatic sprinkler PSE and another “IMPORTANT INFORMATION” notice about the PSE. (Doc. 70-11 (“Norguard Policy”) at 5, 33; Fisch Dep. at 71:20-23.) The PSE specifically stated that “As a condition of this insurance, you are required to maintain [an Automatic Sprinkler System], ” and that “[Norguard] will not pay for loss or damages caused by or resulting from fire if, prior to the fire, you . . . [k]new of any suspension or impairment in any protective safeguard listed . . . above and failed to notify us of that fact” or “[f]ailed to maintain any protective safeguard listed . . . above, and over which you had control, in complete working order.” (Norguard Policy at 33.) The Travelers Policy was never canceled. (Reisman Dep. at 88:13-89:21.)

Prior to May 29, 2018, neither Skyscraper nor Plaintiff raised any issues with Norguard concerning the Policy or the fact that it contained the sprinkler PSE. (Fisch Dep. at 91:6-23; Reisman Dep. at 90:7-10, 112:23-113:2, 120:22-121:12.) Reisman testified that he did not review the Policy or discuss sprinklers or the PSE with Skyscraper prior to the fire loss. (Reisman Dep. at 39:8-40:4, 90:7-10, 112:23-113:2; Reisman EUO at 65:21-66:8.)

4. The Fire and Attempts to Remove the PSE

On May 29, 2018, the Property sustained a fire (the “Fire Loss”). (Fisch Dep. at 92:693:7; Reisman EUO at 68:8-69:2.) Berkovic and Fisch learned of the fire in the early afternoon from Berkovic's mother. (Berkovic Dep. at 81:23-83:8.) Berkovic then contacted Reisman to advise him and to see if he needed a public adjuster's services. (Id. at 83:13-85:9; Reisman EUO at 79:5-80:18.) Reisman was already aware of the fire and had already engaged a public adjuster, his neighbor Ben Itzkowitz. (Reisman Dep. at 69:14-70:7; 70:23-71:12; Berkovic Dep. at 84:7-85:9.) Reisman claims that neither Berkovic nor Fisch mentioned the PSE and that he never asked Skyscraper to attempt to remove the PSE. (Reisman EUO at 79:5-82:20; Reisman Dep. at 76:2-21.) After the fire, Itzkowitz told Fisch and Berkovic to attempt to remove the PSE effective at inception of the Policy. (Fisch Dep. at 181:14-25; Berkovic Dep. at 91:16-92:19, 97:24-98:10, 270:24-271:20.) Fisch was aware that if the PSE remained on the Policy, coverage for the Fire Loss could be denied. (Fisch Dep. at 180:22-181:13, 202:13-25.)

At 2:46 p.m. on the day of the fire, Fisch sent Norguard a “conversation” via the agency portal, stating “this building does not have a sprinkler system.” (Doc. 70-13; Fisch Dep. at 189:7-190:20). Fisch then sent a second conversation and an email at 3:40 p.m., stating “Please remove the sprinkler system and the Central Station system as the insure[d] doesn't have [it.] Please remove it as [of] inception[.] I just found out because I quoted his personal policy.” (Docs. 70-13; 70-14; see Fisch Dep. at 190:24-195:13.) The statement that Fisch had learned of the absence of the sprinkler system while quoting a personal policy was false. (Fisch. Dep. at 179:10-181:13, 205:4-20.) Fisch also placed three separate calls to Norguard, at 2:44, 2:49 and 2:52 p.m., each time seeking removal of the PSE, (Doc. 70-15; Fisch Dep. at 200:7- 202:25), and also pursued a series of online chats, (Docs 70-16; 70-17). Fisch chatted with “Tim” starting at 3:06 p.m., and with “Chris” starting at 4:09 p.m. (Docs. 70-16; 70-17.) “Tim” advised that Fisch's request was “in our workflow now” and...