Joseph F. Bianco, United States District Judge:
Plaintiff Garden City Apartments, LLC ("plaintiff") brings this diversity action against Xcel Plumbing of New York, Inc. ("defendant") for breach of contract and negligence under New York law.
The following facts are taken from the parties' affidavits and exhibits, as well as their respective Rule 56.1 statements of fact ("Def.'s 56.1," ECF No. 61-1; "Pl.'s 56.1" and "Pl.'s 56.1 Counterstatement," ECF No. 67-2; and "Def.'s 56.1 Counterstatement Resp.," ECF No. 71). Unless otherwise noted, the facts are either undisputed or uncontroverted. Upon consideration of the motion for summary judgment, the Court shall construe the facts in the light most favorable to plaintiff as the nonmoving party, and will resolve all factual ambiguities in its favor. See Capobianco v. New York, 422 F.3d 47, 50 n.1 (2d Cir. 2005).
This action arises out of property damage from a fire at an apartment home community owned by plaintiff. (Def.'s 56.1 ¶ 1; Pl.'s 56.1 ¶ 1.) Pursuant to two trade contracts dated August 17, 2011 (the "Trade Contracts"), defendant contracted with AvalonBay Communities, Inc. ("AvalonBay") to perform plumbing and fire protection work (the "Work") at a project located at 998 Stewart Avenue, Garden City, New York (the "Property"). (Def.'s 56.1 ¶¶ 2, 5; Pl.'s 56.1 ¶¶ 2, 5.) Plaintiff is a third-party beneficiary of the Trade Contracts. (Def.'s 56.1 ¶ 3; Pl.'s 56.1 ¶ 3.)
Both Trade Contracts include the following provision:
(Def.'s 56.1 ¶ 8; Pl.'s 56.1 ¶ 8; Def.'s 56.1 Ex. B, ECF No. 61-3, at 19; Def.'s 56.1 Ex. C, ECF No. 61-4, at 19.) AvalonBay carries an insurance policy (the "Policy")
On April 11, 2012, a fire broke out and damaged the Property, resulting in a loss valued at $2,399,846. (Def.'s 56.1 ¶¶ 10, 12; Pl.'s 56.1 ¶¶ 10, 12.) Pursuant to the Policy, AvalonBay paid a deductible of $254,301 and received reimbursement for the remainder from its insurer. (Def.'s 56.1 ¶¶ 13-14; Pl.'s 56.1 ¶¶ 13-14.) The total cost to repair the plumbing and fire protection work was $159,775. (Pl.'s 56.1 Counterstatement ¶¶ 17-18; Def.'s 56.1 Counterstatement Resp. ¶¶ 17-18.)
Plaintiff commenced this action on March 17, 2015. (ECF No. 1.) On March 1, 2016, defendant moved for summary judgment. (ECF No. 61.) Plaintiff filed its opposition on April 1, 2016 (ECF No. 67), and defendant filed its reply on April 18, 2016 (ECF No. 70). The Court held oral argument on May 4, 2016 (ECF No. 72) and has carefully considered the parties' submissions.
The standard for summary judgment is well-settled. Pursuant to Federal Rule of Civil Procedure 56(a), a court may grant a motion for summary judgment only if "the movant shows 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 Gonzalez v. City of Schenectady, 728 F.3d 149, 154 (2d Cir. 2013). The moving party bears the burden of showing that it is entitled to summary judgment. See Huminski v. Corsones, 396 F.3d 53, 69 (2d Cir. 2005). Rule 56(c)(1) provides that a
Fed. R. Civ. P. 56(c)(1). The court "`is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments.'" Amnesty Am. v. Town of W. Hartford, 361 F.3d 113, 122 (2d Cir. 2004) (quoting Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996)); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (summary judgment is unwarranted if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party").
Once the moving party has met its burden, the opposing party "`must do more than simply show that there is some metaphysical doubt as to the material facts.... [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial.'" Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (alteration and emphasis in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). As the Supreme Court stated in Anderson, "[i]f the evidence is merely colorable, or is
Defendant moves for summary judgment and requests that the Court determine, as a matter of law, that the subrogation waiver in the Trade Contracts limits plaintiff's recovery from defendant to, at most, the $254,301 deductible paid for the fire damage to the Property. For the reasons set forth below, the Court disagrees.
Subrogation "allows an insurer to stand in the shoes of its insured and seek indemnification from third parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse." Kaf-Kaf, Inc. v. Rodless Decorations, Inc., 90 N.Y.2d 654, 660, 665 N.Y.S.2d 47, 687 N.E.2d 1330 (1997). The "parties to an agreement may waive their insurer's right of subrogation...." Id. However, "a waiver of subrogation clause cannot be enforced beyond the scope of the specific context in which it appears." Id. (citing S.S.D.W. Co. v. Brisk Waterproofing Co., 76 N.Y.2d 228, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (1990)).
In S.S.D.W., the New York Court of Appeals construed a subrogation waiver provision in a "contract in which the owner agreed to waive all rights against the contractor for damages caused by fire `to the extent covered by insurance obtained pursuant to [the contract] or any other property insurance applicable to the work'." 76 N.Y.2d at 232, 557 N.Y.S.2d 290, 556 N.E.2d 1097. The plaintiff argued, based on this language, that the
Id. at 232-33, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (citations omitted). Accordingly, the plaintiff contended that, "[a]s to such damage [outside of the Work], there can be no subrogation," and
Id. at 233, 557 N.Y.S.2d 290, 556 N.E.2d 1097.
Id. at 233-34, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (emphasis added).
In addition, the Court concluded that this holding comported with its precedent recognizing "the respective interests of the owner and contractor under an owner's property insurance policy during the course of construction." Id. at 234, 557 N.Y.S.2d 290, 556 N.E.2d 1097. Under New York law, "the contractor's insurable interest in the insured building extends only to the tools, labor and materials which it has furnished and the owner's insured's right of subrogation is barred only to the extent of that insurable interest." Id. (citing Paul Tishman, Co. v. Carney & Del Guidice, Inc., 34 N.Y.2d 941, 942-43, 359 N.Y.S.2d 561, 316 N.E.2d 875 (1974), aff'g 36 A.D.2d 273, 320 N.Y.S.2d 396 (1st Dep't 1971)). In other words, the "owner's insurer is barred from subrogation only to the extent of property in which the contractor has an insurable interest: i.e., its tools and the labor and materials which it has furnished." Id. at 235, 557 N.Y.S.2d 290, 556 N.E.2d 1097.
Defendant argues that S.S.D.W.'s holding is "particularly limited to the specific contract language applicable in that case," and that the "contractual language in S.S.D.W. is completely distinguishable from the language at issue herein...." (Def.'s Mem. of Law in Supp. of Mot. for Summ. J. ("Def.'s Br."), ECF Nos. 61-14 and 62, at 8.) Defendant contends that the S.S.D.W. "waiver of subrogation provision was specifically and inextricably tied to the owner's insurance procurement obligations under the contract, which was an obligation limited to an all-risk policy for the `Work,'" and that, in contrast, the Trade Contracts' subrogation waiver "is exceedingly broader ... insofar as its application is not linked to the owner's insurance procurement obligation at all." (Id. at 8-9.)
Plaintiff argues that this action is "on `all fours' with S.S.D.W., both in terms of the operative contract language, as well as in terms of the operative facts." (Pl.'s Mem. in Opp'n to Def.'s Mot. for Summ. J. ("Pl.'s Br."), ECF No. 67, at 9.) Specifically, plaintiff asserts that "the relevant contract language in the S.S.D.W. case is substantially identical to the contract language in this case," and that the Court of Appeals' holding cabining the S.S.D.W. subrogation waiver to damages stemming from the work performed by the contractor should obtain to the same result here. (Id. at 2.)
The Court agrees with plaintiff that S.S.D.W. is dispositive of defendant's motion in plaintiff's favor. The similarities between the S.S.D.W. waiver and the analogous provisions in the Trade Contracts are striking. As noted, the S.S.D.W. contract "waive[d] all rights against the contractor for damages caused by fire `to the extent covered by insurance obtained pursuant to [the contract] or any other property insurance applicable to the Work'." 76 N.Y.2d at 232, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (emphasis added). Likewise, in the instant case, the Trade Contracts state that the
(Def.'s 56.1 ¶ 8; Pl.'s 56.1 ¶ 8; Def.'s 56.1 Ex. B at 19; Def.'s 56.1 Ex. C at 19 (emphasis added).) The Work under the Trade Contracts consisted of plumbing and fire protection improvements to the Property. (Def.'s 56.1 ¶¶ 2, 5; Pl.'s 56.1 ¶¶ 2, 5.)
Thus, the analysis under S.S.D.W. is straightforward. The Trade Contracts prevent plaintiff from recovering from defendant any loss to the Work to the extent that those damages are reimbursed by Builder's Risk or other insurance. However, loss to the Property other than damages to the Work — such as the destruction of the Property by fire — exceeds "the scope of the specific context in which [the subrogation waiver] appears," Kaf-Kaf, 90 N.Y.2d at 660, 665 N.Y.S.2d 47, 687 N.E.2d 1330, and, therefore, the waiver does not bar recovery from defendant for those
Accordingly, there is no merit to defendant's argument that the scope of the subrogation waiver in the Trade Contracts is "exceedingly broader than that contained in S.S.D.W. insofar as its application is not linked to the owner's insurance procurement obligation at all." (Def.'s Br. at 9.) Like the contract in S.S.D.W., the insurance obligation here required that any "Builder's Risk or property insurance provide[] coverage for CONTRACTOR and OWNER for loss or damage to the Work," and the Trade Contracts waived claims "for loss or damage to the extent reimbursed by Builder's Risk or any other property or equipment insurance applicable to the Work ...." (Def.'s 56.1 ¶ 8; Pl.'s 56.1 ¶ 8; Def.'s 56.1 Ex. B at 19; Def.'s 56.1 Ex. C at 19 (emphasis added).) Thus, there is a clear nexus between the scope of the insurance obligation and the subrogation waiver in the Trade Contracts and the Work performed by defendant under those agreements, and this linkage tracks the facts in S.S.D.W. See 76 N.Y.2d at 231, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (noting that "Article 17.3 requires that the owner: `purchase and maintain property insurance upon the entire Work at the site to the full insurable value thereof,'" and that "Article 17.6 provides: `[t]he Owner and Contractor waive all rights against each other for damages caused by fire or other perils to the extent covered by insurance obtained pursuant to this Article or any other property insurance applicable to the Work'").
Further, defendant's attempt to distinguish S.S.D.W., by citing a non-binding intermediate appellate decision from New York and a federal case that reached the opposite conclusion, is unavailing because those decisions concerned contracts with materially different waiver language reflecting a post-S.S.D.W. change in a model contract formulated by the American Institute of Architects. See Allianz Ins. Co. of Canada v. Structure Tone (UK), Inc., No. 03 CIV. 0833 (KMW), 2005 WL 2006701, at *8 (S.D.N.Y. Aug. 15, 2005) ("Here, because the contract at issue is significantly different from the one considered in [S.S.D.W.] — indeed, it contains changes effectuated specifically in response to [S.S.D.W.] — this court is not similarly constrained."); Mu Chapter Of Sigma Pi Fraternity Of U.S. Inc. v. Ne. Const. Servs. Inc., 273 A.D.2d 579, 709 N.Y.S.2d 677, 677 n.2 (3rd Dep't 2000) ("To the extent defendant relies upon [S.S.D.W.] in urging a contrary result, we need note only that the Court of Appeals in [S.S.D.W.] was considering the effect of a waiver clause contained in the 1976 version of the American Institute of Architect's contract. Such clause has since been amended for the express purpose of overcoming the holding in [S.S.D.W.].").
Although the parties dispute whether the insurance Policy covering the Property is a "Builder's Risk Policy" (Def.'s 56.1 ¶ 9) or an "All-Risk" general property insurance policy (Pl.'s 56.1 ¶ 9), that distinction is immaterial under S.S.D.W. As noted, the Court of Appeals held that
76 N.Y.2d at 233-34, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (emphasis added).
So, too, do the Trade Contracts explicitly link the subrogation waiver with "Builder's Risk or any other property or equipment insurance applicable to the Work...." (Def.'s 56.1 ¶ 8; Pl.'s 56.1 ¶ 8; Def.'s 56.1 Ex. B at 19; Def.'s 56.1 Ex. C at 19 (emphasis added).) In other words, it does not matter whether the Property carried Builder's Risk insurance applicable only to the Work or a broader form of insurance that ensured other risks in addition to damage to the Work; in either case, the subrogation waiver is limited to compensable damages or loss to the Work. Accordingly, defendant is wrong to assert that "by the plain terms of the waiver subrogation clause, plaintiff has waived all of its rights with respect to such damages reimbursed by plaintiff's policy regardless of what it would now like to call this policy...." (Def.'s Reply Br. at 9.)
Finally, defendant contends that the Trade Contracts are materially different from the agreement in S.S.D.W. because they provide that "CONTRACTOR shall be responsible for the insurance policy deductible amount applicable to damage to the Work and/or damage to other work caused by CONTRACTOR." (Def.'s 56.1 ¶ 8; Pl.'s 56.1 ¶ 8; Def.'s 56.1 Ex. B at 19; Def.'s 56.1 Ex. C at 19.) Defendant argues that this language shows that "the parties clearly contemplated the allocation of risk for property damage to both `Work" and non-work caused by [defendant], and only assigned [defendant] the obligation to pay
Applying these principles, it is clear that the deductible provision operates separately from the subrogation waiver and imposes an obligation on defendant — irrespective of its liability for other loss — to re-pay the Policy deductible "applicable to damage to the Work and/or damage to other work caused by" defendant. However, limiting plaintiffs recovery in this action to the deductible amount would render the subrogation waiver meaningless. As discussed, that provision only bars claims for damage to the Work insofar as insurance compensates that loss, and it thus contemplates a non-waiver of liability for damages to non-Work aspects of the Property. Therefore, the subrogation waiver does not preclude plaintiff from asserting claims for non-Work damages, and the deductible provision merely requires defendant to pay the Policy deductible notwithstanding the merits of those claims; it does not constrain plaintiff's recovery in an action such as the instant case. In other words, the deductible provision in the Trade Contracts sets a floor, rather than a ceiling, when plaintiff seeks recovery for damages to the Property other than loss to the Work.
In sum, S.S.D.W. compels the conclusion that the subrogation waiver in the Trade Contracts does not prevent plaintiff from recovering from defendant more than the deductible amount paid under the Policy because the plain language of the Trade Contracts limits the waiver to any loss to the Work performed by defendant.
For the foregoing reasons, the Court denies defendant's motion for summary judgment (ECF No. 61) in its entirety.
SO ORDERED.
Further, the non-New York cases upon which defendant relies, and that explicitly or implicitly disagree with S.S.D.W., are of no moment in this diversity action, where this Court is obligated, under the Erie doctrine, to apply substantive state precedent "to any issue or claim which has its source in state law." In re Gaston & Snow, 243 F.3d 599, 607 (2d Cir. 2001). Because the breach of contract and negligence claims in this case arise under New York law, this Court must apply the principles articulated by New York's paramount tribunal, the Court of Appeals. Fabozzi v. Lexington Ins. Co., 601 F.3d 88, 91-92 (2d Cir. 2010) ("The holdings of New York's highest court, which it has never repudiated, presumptively control. Where lower state courts appear to have misconstrued or ignored binding precedent, we are obliged to follow the Court of Appeals." (citing, inter alia, Erie R. Co. v. Tompkins, 304 U.S. 64, 79, 58 S.Ct. 817, 82 S.Ct. 1188 (1938))). The Court of Appeals has not abrogated S.S.D.W., and there is thus no merit to defendant's effort to cast doubt on the "purported strength of S.S.D.W.'s legal precedent...." (Def.'s Reply Br., ECF No. 70, at 7; see also Tr. of May 4, 2016 Oral Arg., ECF No. 75, at 6:17-19 ("S.S.D.W. has been highly criticized for the findings based upon the facts of that case.").)
