AB Oil Servs., Ltd. v. TCE Ins. Servs., Inc.

188 A.D.3d 624

133 N.Y.S.3d 638

AB OIL SERVICES, LTD., etc., et al., Appellants,

v.TCE INSURANCE SERVICES, INC., et al., Respondents.

2018–01323

2018–06999

Index No. 603133/17

Supreme Court, Appellate Division, Second Department, New York.

Argued - March 23, 2020

November 4, 2020

Paula Schwartz Frome, Garden City, NY, for appellants.

Trivella & Forte, LLP, White Plains, N.Y. (Arthur J. Muller III of counsel), for respondents.

LEONARD B. AUSTIN, J.P., JEFFREY A. COHEN, ANGELA G. IANNACCI, LINDA CHRISTOPHER, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for fraud and negligent misrepresentation and for declaratory relief, the plaintiffs appeal from (1) an amended order of the Supreme Court, Suffolk County (W. Gerard Asher, J.), dated December 11, 2017, and (2) an order of the same court (Sanford Neil Berland, J.), dated May 24, 2018. The amended order dated December 11, 2017, granted the defendants' motion pursuant to CPLR 3211(a) to dismiss the complaint. The order dated May 24, 2018, insofar as appealed from, denied that branch of the plaintiffs' motion which was for leave to amend the complaint and, in effect, upon reargument, adhered to the original determination in the amended order dated December 11, 2017.

ORDERED that the appeal from the amended order dated December 11, 2017, is dismissed, as that order was superseded by so much of the order dated May 24, 2018, as was made upon reargument; and it is further,

ORDERED that the order dated May 24, 2018, is modified, on the law, by deleting the provisions thereof, in effect, upon reargument, adhering to the determination in the amended order dated December 11, 2017, granting those branches of the defendants' motion which were pursuant to CPLR 3211(a) to dismiss the second and third causes of action in the complaint, and substituting therefor provisions, in effect, upon reargument, denying those branches of the motion; as so modified, the order dated May 24, 2018, is affirmed insofar as appealed from, without costs or disbursements.

The plaintiffs are in the business of environmental remediation. The defendants are insurance brokers who procured insurance for the plaintiffs covering the period from July 1, 2015, through June 30, 2016. The plaintiffs commenced this action against the defendants, asserting causes of action to recover damages for fraud and negligent misrepresentation, breach of contract, and negligent procurement, and for declaratory relief.

According to the complaint, in September 2015, the plaintiffs became interested in performing gas main repair work for Consolidated Edison (hereinafter Con Ed). The proposed agreement with Con Ed required that the plaintiffs have insurance, so the plaintiffs asked the defendants for a quote. The plaintiffs supplied a description of the job, a copy of the draft agreement, and the insurance requirements. In October 2015, the defendants informed the plaintiffs that their existing insurance policy already covered the proposed gas main repair work. The defendants provided a certificate of insurance naming Con Ed as an additional insured under that existing policy. The plaintiffs thereafter entered into the agreement, as proposed, with Con Ed on October 13, 2015.

The complaint alleges that the agreement the plaintiffs made with Con Ed was, in essence, a pilot program having three consecutive one-year terms, with the option to renew vested solely with Con Ed. In June 2016, a time well into the latter half of the first one-year term of the pilot program, the plaintiffs decided to bid for a permanent three-year contract to perform the same work. That same month, the defendants presented the plaintiffs with a quote for renewal of the existing insurance policy for the period from July 2016 through June 2017. The new quote increased the annual premium from $380,951.70 to $397,377. At some later point in June 2016, the plaintiffs submitted an irrevocable bid for the new contract with Con Ed. The plaintiffs allege that they priced their bid in part based on the increased rate that the defendants had quoted for the renewal of the existing insurance policy.

The plaintiffs further allege that they decided to shop for a lower insurance rate, but while doing so they discovered that the insurer had never been informed about the gas main repair work that the plaintiffs were performing. The insurer subsequently disavowed both coverage for that work under the existing policy as well as the $397,377 renewal quote. The plaintiffs allege that they obtained substitute coverage for one quarter from a different insurer at an annual rate of $691,595, and thereafter obtained more permanent coverage "with reduced protection" for an annual rate of approximately $650,000.

The defendants moved pursuant to CPLR 3211(a) to dismiss the complaint, and that motion was granted by the Supreme Court in an amended order dated December 11, 2017. The plaintiffs then moved for leave to reargue their opposition to the defendants' motion or, in the alternative, for leave to amend the complaint. In an order dated May 25, 2018, the court, in effect, upon reargument, adhered to the prior determination. The court also denied that branch of the plaintiffs' motion which was for leave to amend the complaint. The plaintiffs appeal.

" ‘On a motion pursuant to CPLR 3211(a)(7) to dismiss [a complaint] for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory’ " ( Murphy v. Department of Educ. of City of N.Y., 155 A.D.3d 637, 638, 64 N.Y.S.3d 237, quoting Phillips v. Taco Bell Corp., 152 A.D.3d 806, 807, 60 N.Y.S.3d 67 ).

"In order to be amenable to declaratory relief, ‘[a] dispute must be real, definite, substantial, and sufficiently matured so as to be ripe for judicial determination’ " ( Matter of Enlarged City School Dist. of Middletown v. City of Middletown, 96 A.D.3d 840, 841, 946 N.Y.S.2d 208, quoting Waterways Dev. Corp. v. Lavalle, 28 A.D.3d 539, 540, 813 N.Y.S.2d 485 ). "Consequently, the request for a declaratory judgment is premature ‘if the future event is beyond the control of the parties and may never occur’ " ( Matter of Enlarged City School Dist. of Middletown v. City of Middletown, 96 A.D.3d at 841, 946 N.Y.S.2d 208, quoting New York Pub. Interest Research Group v. Carey, 42 N.Y.2d 527, 531, 399 N.Y.S.2d 621, 369 N.E.2d 1155 ). "The threat of a hypothetical, contingent, or remote prejudice to a party does not represent a justiciable controversy" ( Matter of Enlarged City School Dist. of Middletown v. City of Middletown, 96 A.D.3d at 842, 946 N.Y.S.2d 208 ). Here, in their first cause of action, the plaintiffs sought a judgment declaring, "that, if a claim is made or an action is commenced against [the plaintiffs] for repair work done during the period that [they] were not insured, defendants are obligated to defend and indemnify [the plaintiffs] for any such claim and/or action." "[T]he future event which would give rise to indemnification" under this requested declaration is "beyond the control of the parties and may never occur" ( Kings Park Indus., Inc. v. Affiliated Agency, Inc., 22 A.D.3d 466, 467, 802 N.Y.S.2d 202 ). Accordingly, we agree with the Supreme Court's adherence to the original determination directing dismissal of the first cause of action as premature (see id. at 467–468, 802 N.Y.S.2d 202 ).

We also agree with the Supreme Court's decision to adhere to the original determination dismissing the fourth cause of action, sounding in negligent procurement. "Generally, insurance brokers ‘have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so’ " ( Joseph v. Interboro Ins. Co., 144 A.D.3d 1105, 1108, 42 N.Y.S.3d 316, quoting Murphy v. Kuhn, 90 N.Y.2d 266, 270, 660 N.Y.S.2d 371, 682 N.E.2d 972 ). Damages, however, "are a necessary element of a negligence cause of action" ( Bonded Waterproofing Servs., Inc. v. Anderson–Bernard Agency, Inc., 86 A.D.3d 527, 530, 927 N.Y.S.2d 133 ; see Lewiarz v. Travco Ins. Co., 82 A.D.3d 1464, 1466, 919 N.Y.S.2d 227 ). A cause of action sounding in negligent procurement thus accrues "when coverage [is] denied" ( Lewiarz v. Travco Ins. Co., 82 A.D.3d at 1466, 919 N.Y.S.2d 227 ). "Any loss of ‘an intangible property right’ that may have been sustained by the plaintiff does not constitute an actual injury" ( Bonded Waterproofing Servs., Inc. v. Anderson–Bernard Agency, Inc., 86 A.D.3d at 530, 927 N.Y.S.2d 133, quoting Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 95, 595 N.Y.S.2d 931, 612 N.E.2d 289 ). Here, neither the complaint nor the proposed amended complaint allege a loss and resulting denial of coverage under the insurance policy that the defendants procured for the plaintiffs. The court therefore properly directed dismissal of the fourth cause of action as premature (see Bond v. Progressive Ins. Co., 82 A.D.3d 1318, 1320–1321, 917 N.Y.S.2d 756 ).

"Although leave to amend should be freely given in the absence of prejudice or surprise to the opposing party (see CPLR 3025[b] ), the motion should be denied where the proposed amendment is palpably insufficient or patently devoid of merit" ( J.W. Mays, Inc. v. Liberty Mut. Ins. Co., 153 A.D.3d 1386, 1387, 61 N.Y.S.3d 144 ). Here, the plaintiffs' proposed amendments to the complaint were palpably insufficient and patently devoid of merit insofar as they restated the same premature causes of action to recover damages for negligent procurement and for declaratory relief (see Land v. Forgione, 177 A.D.3d 862, 864, 114 N.Y.S.3d 464 ). Accordingly, we agree with the Supreme Court's determination to deny that branch of the plaintiffs' motion which...