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Preferred Display Inc. v. Great American Insurance Company of New York

United States District Court, D. Connecticut

January 18, 2018




         This case arises out of an insurance coverage dispute between Preferred Display, Inc. (“PDI”), and Great American Insurance Company of New York (“Great American”). The loss at issue resulted from a fire at PDI's premises, and Great American acknowledges that there is coverage for that loss. The parties' disagreement revolves around the amount payable for the loss pursuant to the terms of the Great American policy.

         The principal issue raised by this case is whether the “Other Insurance” and “Coinsurance” clauses of the Great American policy operate in combination to cumulatively reduce the amount payable to PDI. At my suggestion, the parties filed cross-motions for summary judgment addressing that issue. Great American also seeks dismissal of various claims in PDI's complaint for failure to state a claim.

         For the reasons set forth below, I grant summary judgment in favor of PDI on the declaratory judgment and breach of contract claims (Counts One and Two) and deny in substantial part Great American's cross-motion for summary judgment, a portion of which I treat as a motion to dismiss certain of the causes of action in PDI's complaint.

         I. Standard of Review

         A. Summary Judgment

         Summary judgment is appropriate when the record demonstrates that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

         When ruling on a summary judgment motion, the court must construe the facts of record in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the moving party. Anderson, 477 U.S. at 255; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970); see also Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d. 520, 523 (2d Cir. 1992) (court is required to “resolve all ambiguities and draw all inferences in favor of the nonmoving party”).

         In the context of cross-motions for summary judgment, the same standard is applied. See Scholastic, Inc. v. Harris, 259 F.3d 73, 81 (2d Cir. 2001). However, in deciding each motion, the court must construe the evidence in the light most favorable to the non-moving party. Id.

         B. Motion to Dismiss

         A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is designed “merely to assess the legal feasibility of a complaint, not to assay the weight of evidence which might be offered in support thereof”. Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984) (quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980)).

         When deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must accept the material facts alleged in the complaint as true, draw all reasonable inferences in favor of the plaintiff, and decide whether it is plausible that the plaintiff has a valid claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996).

         Under Twombly, “[f]actual allegations must be enough to raise a right to relief above the speculative level”, and assert a cause of action with enough heft to show entitlement to relief and “enough facts to state a claim to relief that is plausible on its face”. 550 U.S. at 555, 570; see also Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”). The plausibility standard set forth in Twombly and Iqbal obligates the plaintiff to “provide the grounds of his entitlement to relief” through more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action”. Twombly, 550 U.S. at 555 (quotation marks omitted). Plausibility at the pleading stage is nonetheless distinct from probability, and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of [the claims] is improbable, and . . . recovery is very remote and unlikely.” Id. at 556 (quotation marks omitted).

         II. Background

         In or about 2015, Great American issued its Select Business Policy (the “Policy”) to PDI. At the relevant point in time, the Policy provided up to $4, 000, 000 in coverage for damage to business personal property in PDI's possession at 32 Roaring Brook Plaza, East Glasonbury, Connecticut (the “Property”). PDI also purchased $2, 000, 000 of similar insurance from The Hartford Insurance Company.

         On or about November 11, 2015, during the coverage period of both policies, a fire caused damage to and destruction of PDI's business personal property located at the Property. For the purposes of this motion, the parties agree that the value of the covered property at the time of the loss was $7, 907, 217, and the actual cash value (“ACV”) of the loss to PDI's covered property was $6, 392, 119. Def.'s Local Rule 56(a)1 Stmt. at ¶¶ 14-15 (doc. # 56-16); Pl.'s Local Rule 56(a)2 Stmt. at ¶¶ 14-15 (doc. # 58-1). Great American has taken the position that, under the terms of the Policy, it owes PDI substantially less than the $4, 000, 000 coverage limit of the Policy.

         Great American's coverage position relies on two policy provisions, namely the “Other Insurance” and “Coinsurance” clauses. The Other Insurance clause provides:

         G. Other Insurance

1. You may have other insurance subject to the same plan, terms, conditions and provisions as the insurance under this Coverage Part. If you do, we will pay our share of the covered loss or damage. Our share is the proportion that the applicable Limit of Insurance under this Coverage Part bears to the Limits of Insurance of all insurance covering on the same basis.
2. If there is other insurance covering the same loss or damage, other than that described in 1. above, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance or more than the actual amount of loss or damage.

         Policy, Select Business Policy Conditions, Form SB 86 01 (Ed. 07 02) XS at 1 (doc. # 56-5).

         The Coinsurance clause provides:

         A. Coinsurance

         1. If a Coinsurance percentage is shown in the Declarations for Building, Personal Property or Personal Property of Others, the following condition applies:

a. We will not pay the full amount of any loss if the value of Covered Property at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property.
Instead, we will determine the most we will pay using the following steps:
(1) multiply the value of Covered Property at the time of the loss by the Coinsurance percentage;
(2) divide the Limit of Insurance of the property by the figure determined in Step (1);
(3) multiply the total amount of loss, before the application of any deductible, by the figure determined ...

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