Summerwind W. Condo. Owners Ass'n v. Mt Hawley Ins. Co.

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SUMMERWIND WEST CONDOMINIUM OWNERS ASSOCIATION, INC., Plaintiff, v. MT HAWLEY INSURANCE CO. and SYNDICATE 1458 AT LLOYD'S OF LONDON, Defendants.

No. 22 Civ. 3165 (JPC)

United States District Court, S.D. New York

December 1, 2023

OPINION AND ORDER

JOHN P. CRONAN, UNITED STATES DISTRICT JUDGE:

Plaintiff Summerwind West Condominium Owners Association brings a breach of contract claim against Defendants Mt. Hawley Insurance (“Mt. Hawley”) and Syndicate 1458 at Lloyd's of London in this insurance coverage dispute over damage to Plaintiff's property purportedly caused by Hurricane Sally in September 2020. Defendants answered the Complaint in September 2021, and the Court-ordered deadline to amend pleadings expired in December that same year. Discovery concluded on February 1, 2023. Defendants have now moved for leave to amend their Answer to add a new affirmative defense premised on Plaintiff's fraudulent conduct, urging that evidence uncovered in discovery revealed Plaintiff's scheme to defraud Defendants and that such fraud voids the subject insurance policy. Plaintiff opposes the motion on futility and prejudice grounds. The Court finds that good cause exists to modify its scheduling order, that Defendants have adequately pleaded their proposed affirmative defense, and that any prejudice arising from the prospect of additional discovery is insufficient to warrant denial of leave to amend. Accordingly, the Court grants Defendants' motion.

I. Background

A. Plaintiff's Underlying Claim^[1]

Plaintiff is a Florida corporation that operates Summerwind West Condominium, a building in Santa Rosa County, Florida, which was insured from August 2020 to August 2021 under a commercial property policy issued by Mt. Hawley^[2] and Syndicate 1458 at Lloyd's of London, a United Kingdom corporation. Complaint ¶¶ 3-7; see also Dkt. 44-2 (“Policy”). The subject property-one of three adjacent buildings, all managed by Anne Malone of Virtuous Management Group-was allegedly damaged by Hurricane Sally on September 16, 2020. Complaint ¶ 9; see also Motion at 2; Opposition at 2.

In November 2020, Plaintiff sent Mt. Hawley an estimate of over four million dollars of repairs for damages purportedly caused by the hurricane. Dkt. 1 ¶ 8; see also Dkt. 1-5. On December 11, 2020, Mt. Hawley's engineer determined that there was no wind damage to the subject property in excess of the Policy's deductible and thus Mt. Hawley denied coverage. See Dkt. 44-3. The next month, Plaintiff's public adjuster countered that he had documented extensive storm-created damage to the property's roofs, and that Plaintiff had also incurred over $500,000 in emergency elevator repairs from Cavinder Elevator Company due to the “considerable storm damages.” Dkt. 44-6 at 105-07. But in March 2021, after its engineer reinspected the property, Mt. Hawley reaffirmed its denial. Dkt. 44-7.

B. Procedural History

Plaintiff commenced this action in Florida state court in August 2021, asserting a breach of contract claim against Defendants for their denial of coverage. Within the next month, Defendants removed the action to the United States District Court for the Northern District of Florida, Dkt. 1, and thereafter moved to transfer the case to this District pursuant to 28 U.S.C. § 1404, citing the Policy's mandatory forum-selection clause requiring that any litigation by Plaintiff be initiated in New York, Dkt. 7. On September 24, 2021, Defendants filed their Answer, in which they asserted thirteen affirmative defenses based on various coverage provisions and exclusions under the Policy. See Dkt. 8.

In November 2021, while the action continued in the Northern District of Florida before the Honorable M. Casey Rodgers, the parties submitted a joint status report proposing a plan for discovery pursuant to Federal Rule of Civil Procedure 26(f) including, among other deadlines, a December 3, 2021 deadline for amending their pleadings. See Dkt. 15 at 5. In January 2022, the parties jointly moved to extend the discovery deadline to August 5, 2022 (presumably from March 28, 2022, as provided in Judge Rodgers's initial scheduling order, Dkt. 6). Dkt. 16 at 3. On February 3, 2022, Judge Rodgers granted the parties' extension requests, and issued a Final Scheduling Order. Dkt. 17. As relevant here, that Final Scheduling Order also adopted the parties' original proposed deadline for amendment of pleadings:

In circumstances when the Federal Rules of Civil Procedure would require leave of court for adding parties or amending pleadings, parties may be added or pleadings amended only with leave of court. The deadline to seek leave to join additional parties and to amend pleadings is December 3, 2021, for all parties.

Id. ¶ 3.

On April 18, 2022, the action was transferred to this District and assigned to the undersigned, who ordered that “all prior orders, dates, and deadlines shall remain in effect notwithstanding the case's reassignment.” Dkt. 20. In May 2022, the parties submitted a joint request for a ninety-day extension of all outstanding discovery and pre-trial deadlines, which the Court granted, thereby extending the discovery deadline from August to November 2022. Dkts. 25, 29, 30. In October 2022, the parties again requested more time for discovery, and, again, the Court granted their request, extending the deadline to February 2023. Dkts. 33, 34. Discovery concluded on February 1, 2023, and the parties participated in a mediation conference on March 2, 2023, at which they were unable to reach a settlement. Dkts. 35, 38.

On March 7, 2023, Defendants filed a pre-motion letter concerning their anticipated motion for leave to amend their Answer, Dkt. 37, and Plaintiff responded on March 22, 2023, Dkt. 42. Upon consideration of those submissions, the Court set a briefing schedule for that motion. Dkt. 43. Defendants filed their motion on April 6, 2023, Dkts. 44-45, Plaintiff opposed on April 20, 2023, Dkt. 46, and Defendants replied on April 27, 2023, Dkt. 47. In support of their motion, Defendants have submitted their proposed First Amended Answer, which includes a fourteenth affirmative defense premised on Plaintiff's fraudulent conduct. Dkt. 44-16 (“Proposed Amendment”) at 9.

C. Defendants' Instant Motion

In their motion for leave to amend, Defendants contend that they uncovered evidence in discovery revealing Plaintiff's fraudulent scheme to recover repair costs for damage incurred before Hurricane Sally to the subject property's roofs and elevators. Specifically, Defendants point to minutes from a July 2020 condominium board meeting indicating that Plaintiff's property manager, Anne Malone, was instructed to solicit bids to replace both the elevators and roofs two months before the hurricane. Motion at 4; see also Dkt. 44-9. Apparently, Malone did solicit the elevator bids that month, and-in a July 2020 email to Matthew Cavinder (of Cavinder Elevator Company)-disclosed that the subject property's elevators were “declining considerably and [we]re past their life expectancy” because they had taken “a significant hit when Hurricane Ivan hit back in 2004.” Motion at 4; see also Dkt. 44-10. Defendants urge that Malone's position there stands in “stark contrast” with Malone's deposition testimony, in which she described only “minor” problems with the elevators before Hurricane Sally, and expressly denied that there was any need to modernize the elevators before that storm. Motion at 4-5 (quoting Dkt. 44-11 (Malone Dep. Tr.) at 95:23-96:3, 114:3-5).

Next, Defendants learned that in October 2020 (after Hurricane Sally), Malone emailed Cavinder to ask him to change the dates on the July 2020 elevators bids to October 2020. Id. at 56. In that email, Malone wrote: “Can you send that for the inn but change the date to today. Trying to push it under hurricane claim.” Dkt. 44-12 at 3; Motion at 5-6, 14-15. Cavinder replied that same day, attaching the pre-storm bids, but now with the post-storm dates, for all three Summerwind buildings. Motion at 5; see Dkt. 44-12 at 2-3. Then, on November 17, 2020, Malone forwarded the updated elevator replacement bids to the public adjuster to include in the estimate submitted to Mt. Hawley. Motion at 6; see Dkt. 44-12 at 1.

Defendants explain that they repeatedly requested production of the Cavinder elevator bids generated for Plaintiff before Hurricane Sally, and that they rescheduled Cavinder's deposition multiple times so that he could bring those documents with him. Motion at 6. But at his January 2023 deposition, Cavinder ultimately testified that documentation of the July 2020 bids did not exist. Dkt. 44-13 (Cavinder Dep. Tr.) at 23:23-24:24); see Motion at 6. Defendants thus argue that the “mysterious disappearance of Cavinder's pre-storm bid” forms the “final piece of this fraudulent plan” concerning the elevator repairs. Motion at 6. Finally, Defendants contend that the absence of any pre-storm bids for the subject property's roofs similarly suggests fraud on Plaintiff's part, in light of the July 2020 condominium board meeting minutes instructing Malone to solicit bids to replace the roofs as well. Id. at 7.

As a result, Defendants request leave to add an affirmative defense premised on Plaintiff's purported fraudulent misrepresentation and concealment “regarding major components of this insurance claim and the condition of Plaintiff's Property prior to the reported date of loss.” Proposed Amendment at 9. Defendants argue that Plaintiff's conduct voids the Policy altogether, pursuant to its “Concealment, Misrepresentation or Fraud” provision:

This policy is void in any case of fraud by [the Named Insured] as it relates to this Coverage at any time. It is also void if [the Named Insured] or any other insured, at any time, intentionally

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