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3064Hurricane Sandy - Auto Dealers - DJ Action

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  • insurancelawyer
    Apr 29 9:09 AM
    • 0 Attachment

      AUTO DEALER'S HURRICANE SANDY DJ ACTION SURVIVES DISMISSAL MOTION, WITHOUT 

      PUNITIVE DAMAGE CLAIMS


      Kings Infiniti Inc. v Zurich Am. Ins. Co.
      2014 NY Slip Op 50515(U) [43 Misc 3d 1207(A)]
      Decided on April 3, 2014
      Supreme Court, Kings County
      Demarest, J.
      Edited by Lawrence N. Rogak



      In this action by plaintiffs Kings Infiniti Inc. (Kings Infiniti), Kings Nissan, Inc. (Kings Nissan), and Foreign Car Center, Inc. d/b/a Kings Volkswagen (Kings Volkswagen) (collectively, plaintiffs) for a declaratory judgment and alleging breach of an insurance contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligence, fraud, conversion, and violation of Insurance Law § 2601 and seeking compensatory and punitive damages and attorneys' fees and the costs of this lawsuit, defendants Zurich American Insurance Co., sued herein as Zurich American Insurance Co. d/b/a Zurich North America (Zurich), and Universal Underwriters Insurance Co. (Universal) (collectively, defendants) move for an order, pursuant to CPLR 3211 (a) (7), dismissing the first, fifth, and tenth causes of action of plaintiffs' first amended complaint, and those portions of plaintiffs' first amended complaint that demand an award of punitive damages, attorneys' fees, and the costs of this lawsuit. 

      BACKGROUND

      Plaintiffs are all engaged in the business of operating car dealerships and service centers, in Brooklyn, New York. Kings Infiniti operates its dealership at 20 Neptune Avenue (less than 700 feet from Sheepshead Bay), and its service center at 2885 Coney Island Avenue. Kings Infiniti's dealership and service center are both located in New York City's Flood Zone A, which has been designated by the New York City Office of Emergency Management as having the highest risk of flooding from a hurricane storm surge on New York City's Flood Zone Map. Kings Nissan operates its dealership at 2758 Coney Island Avenue, and its service center at 2885 Coney Island Avenue, which are also both located in New York City's Flood Zone A. Kings Volkswagen operates its service center at 100 Neptune Avenue, (less than 1,000 feet from Sheepshead Bay) in New York City's Flood Zone A, and operates its dealership at 2448 Coney Island Avenue, in New York City's Flood Zone B, which is designated as an area that can expect a moderate likelihood of mandatory evacuation if a hurricane is expected to reach New York City. 


      Zurich is a provider of multi-line insurance in the State of New York. According to Zurich's website, it has a range of products and services, and "can help find the coverage that is right for [a business]" whether it "needs property, casualty, automobile or other types of insurance." Zurich, on its website, states that its independent agent will help "guide [a business] through the risk prevention strategies" that it can provide for it. Universal is licensed to write insurance policies in New York, and is the nation's oldest and largest insurer of automobile dealerships. Universal specializes in insurance products and services for automobile dealers and is part of or is a subsidiary, affiliate, and/or agent of Zurich. Universal underwrites Zurich's insurance policies for the automotive industry in New York.


      In or about 2004, plaintiffs contacted Zurich and requested a quote for insurance coverage to protect them for losses to their car dealerships and service center properties and businesses at such properties. In response to plaintiffs' request, Zurich dispatched an employee to the properties to inspect them and conduct a comprehensive risk assessment to determine what insurance coverage would be necessary and sufficient in order to protect plaintiffs from losses at the properties. Plaintiffs did not use an insurance broker or agent in connection with procuring a policy with Zurich, but, instead, worked directly with the employees from Zurich in connection with such procurement. After Zurich's employee met with plaintiffs for such risk assessment, Zurich, by and through Universal, agreed to insure plaintiffs against losses to their properties (the insured property), and issued policy number 315112 (the policy) to plaintiffs, as the insureds under the policy. At the same time, Zurich also insured plaintiffs' automobile inventory, stored at 2nd and 33rd Street, in Brooklyn, under a separate policy (the Floor Plan Policy).


      The initial policy period for plaintiffs' insurance coverage with Zurich was from July 1, 2004 through June 30, 2005, and the policy was thereafter renewed in each subsequent year through June 30, 2013. According to plaintiffs, prior to each renewal of the policy, at the behest of Zurich, an employee of Zurich met with them, and examined the insured property and conducted an annual comprehensive review and risk assessment of the property to determine if they had sufficient insurance coverage to protect them in the event of a casualty in the upcoming policy year. Plaintiffs allege that Zurich's employees would recommend if any additional insurance coverage were needed based on such annual review. They assert, however, that between the policy years July 1, 2004 through June 30, 2013, Zurich, during these annual risk assessments, only recommended to them that they purchase coverage for acts of terrorism and employee theft, which they rejected, and that Zurich made no other recommendations regarding the purchase of additional coverage.


      In or about February 2012, Zurich allegedly conducted its annual review and assessment for the insured property in anticipation of the upcoming policy renewal on July 1, 2012, and, at that time, defendants did not recommend that plaintiffs purchase any additional insurance coverage for the insured property or make any changes to the policy for the period covering July 1, 2012 to June 30, 2013. Specifically, plaintiffs assert that defendants did not recommend that they purchase flood insurance even though Zurich insured their automobile inventory against flood loss under the Floor Plan Policy, the majority of the insured property (i.e., all of the insured property except Kings Volkswagen's dealership on Coney Island Avenue) was located in Flood Zone A, and on August 27 and 28, 2011 (approximately five months earlier), Hurricane Irene had hit Brooklyn, and a mandatory evacuation order was issued by New York City's Office of Emergency Management for all residents and businesses located in Flood Zone A.


      On or about July 1, 2012, Zurich, by and through Universal, renewed the policy, insuring plaintiffs for losses at the insured property for the policy period from July 1, 2012 through June 30, 2013. Plaintiffs claim that at all times, they believed that the policy covered them for losses at the insured property resulting from flooding.


      On October 28, 2012, New York City's Office of Emergency Management issued a mandatory evacuation order for Flood Zone A, and on October 29, 2012, Hurricane Sandy (Sandy) hit the tri-state area. Plaintiffs claim that they sustained extensive damage to the buildings and contents at the insured property, totaling in excess of $1,000,000, and that they could not conduct business at the insured property from October 28, 2012 through on or about December 1, 2012.


      Plaintiffs timely notified defendants of their losses resulting from Sandy, and filed a claim with Zurich for insurance coverage under the policy for such losses.[FN1] On November 1, 2012, Zurich sent its employees to the insured property to assess the damages. By a letter dated November 2, 2012, defendants denied plaintiffs' claim for losses at the insured property resulting from Sandy. Defendants, in this letter, stated that after inspecting the property, it was determined that flood waters caused the damage to plaintiffs' buildings and contents, and that Property Coverage, which is provided under "Part 330 Property" of the policy, in Unicover V pages 7-9 Exclusions-Perils, states as follows:

      "WE will not pay for LOSS caused directly or indirectly by any of the following; such LOSS is excluded regardless of any other cause or event that takes place at the same time or sequence to such LOSS:
      "U. flood, surface water, waves, tidal waves, storm surge, tsunami, overflow of streams or other bodies of water, or their spray, all whether or not driven by wind; underground water that exerts pressure on, flows, seeps or leaks through foundations, walls, basement and other floors, or through doors, windows or any opening in any of them . . ."

      Plaintiffs contacted defendants and requested a copy of the policy. By an e-mail sent on November 19, 2012, Mark Sienkiewicz, a Zurich account executive, forwarded a copy of the policy to plaintiffs. Plaintiffs claim that the copy of the policy received by them (exhibit B to their opposition papers) did not contain Unicover V pages 7-9, and that it contained no exclusion for losses at the insured property resulting from water, wind, rain or flooding or any combination thereof. Plaintiffs further claim that Zurich had never sent them a policy containing Unicover V pages 7 through 9, and that they, at all times, believed that Zurich had provided them with comprehensive insurance coverage for the insured property, including flood insurance. Defendants have not paid plaintiffs for the damages to the buildings and their contents at the insured property or for income losses relating to loss of use of the insured property resulting from Sandy.


      On April 16, 2013, plaintiffs commenced this action against defendants. Plaintiffs' first amended complaint alleges 10 causes of action. Plaintiffs' first cause of action for declaratory relief seeks a declaratory judgment that the policy did not contain Unicover V pages 7 through 9, that their losses incurred as a result of Sandy are not excluded and, therefore, are covered under the policy and that defendants are obligated to pay them for their losses.


      Plaintiff's second cause of action for breach of contract alleges that defendants failed to pay them for the losses to their buildings and contents and business income losses at the insured property, resulting in damages in an amount of not less than $1,500,000. Plaintiffs' third cause of action for breach of contract alleges that they were prohibited from accessing the insured property from October 28, 2012 through December 1, 2012 as a result of the evacuation order, and that defendants breached their insurance contract with them by failing to pay them for business income losses incurred due to the mandatory evacuation order in an amount not less than $200,000. Plaintiffs' fourth cause of action for breach of contract alleges that they incurred losses because their customers, employees, and distributors could not access the insured property after Sandy because of damage to premises in close proximity to the insured property, and that defendants breached the policy by failing to provide compensation for their business income losses at the insured property resulting from the lack of ingress/egress to the insured property in an amount of not less than $200,000.


      Plaintiffs' fifth cause of action for breach of the implied covenant of good faith and fair dealing alleges that defendants breached this covenant by: (1) refusing to pay them for covered losses under the policy without regard to the policy, the relevant law, and the specific facts of the claim, (2) interpreting the terms and conditions of the policy in an unreasonable manner solely in an effort to avoid providing them with the coverage to which they are entitled under the policy, (3) refusing to acknowledge coverage or withdraw or alter their denials of coverage, (4) inventing spurious grounds for avoiding coverage, (5) failing to provide them with a prompt, reasonable explanation of the basis relied upon for the denial of coverage, (5) not attempting to negotiate a prompt, fair, and reasonable settlement within the policy limits of their claim, and (6) forcing them to file this litigation to obtain the rights and benefits to which they are entitled under the policy. Plaintiffs seek, by this cause of action, to recover compensatory damages in an amount of not less than $1,500,000, as well as punitive damages in an amount of not less than $750,000, and also to recover all attorneys' fees and expenses that they have reasonably incurred and will incur in their efforts to obtain the benefits of insurance that have allegedly been withheld by defendants in bad faith.


      Plaintiffs' sixth cause of action for breach of fiduciary duty alleges that defendants knew or should have known that they were located in a flood zone and were subject to flood or water damage to their business lines, and that defendants failed to notify them that they did not have flood insurance coverage at the insured property or advise them that it was available in any year from 2004 through the renewal of the policy on July 1, 2012 through June 30, 2013. Plaintiffs assert that Zurich, therefore, breached its fiduciary duty to them, as a risk consultant and advisor, by failing to procure, advise, or otherwise assure adequate insurance coverage for the insured property, including flood insurance, and by failing to disclose the limitation of the insurance offered, i.e., that it did not provide them with flood insurance covering the insured property. Plaintiffs seek compensatory damages in an amount of not less than $1,500,000 and punitive damages in an amount appropriate to punish Zurich, but not less than $750,000.


      Plaintiffs' seventh cause of action for negligence alleges that Zurich had a duty, as their risk consultant and advisor, to procure sufficient and adequate insurance for the insured property in situations such as Sandy, and that as a result of the breach of this duty, they have been damaged in an amount of not less than $1,500,000. They seek compensatory damages in at least this amount.


      Plaintiffs' eighth cause of action for fraud alleges that Zurich held itself out to them as an expert in the field of property, casualty, automobile, and other types of insurance, and that Zurich represented to them that it would act as their risk adviser to obtain necessary and sufficient insurance coverage to protect them from any and all losses at the insured property. It further alleges that Zurich failed to disclose to them that Zurich did not write flood insurance policies in its own name until at least March 2012. Plaintiffs, in this cause of action, assert that they reasonably relied upon Zurich's statements of expertise and ability to procure insurance coverage which would protect them from any and all losses at the insured property in purchasing insurance coverage from defendants and were deprived of the benefits of insurance coverage for which they paid substantial premiums. They seek, based upon this cause of action, $1,500,000 in compensatory damages and punitive damages in an amount of not less than $750,000.


      Plaintiffs' ninth cause of action for conversion alleges that Zurich accepted their insurance premiums, totaling in excess of $2,160,000 in the years in which they made these regular payments of insurance premiums, and that Zurich converted such monies to its own use without providing them with necessary and sufficient insurance coverage for the insured property. Plaintiffs assert that they were damaged in an amount of not less than $2,160,000.


      Plaintiffs' tenth cause of action for damages under Insurance Law § 2601 alleges that defendants have engaged in unfair claims settlement practices, in violation of this section, by committing, among other things, the following acts without just cause and with such frequency as to constitute unfair general business practices: (1) misleading them into thinking that they were fully insured against losses in situations such as Sandy, (2) misleading them into believing that they did not need flood insurance because Zurich did not write flood insurance policies in its own name prior to May 2012, and (3) refusing to pay them for covered losses under the policy, without regard to the relevant insurance policy, relevant law, and the specific facts of the claim. Plaintiffs, in this cause of action, seek compensatory damages in an amount of not less than $1,500,000 and punitive damages in an amount of not less than $1,500,000.


      Plaintiffs, in addition to seeking compensatory damages in all of their causes of action and punitive damages with respect to their fifth, sixth, eighth, and tenth causes of action, additionally seek, in the "wherefore clause" of their first amended complaint, attorneys' fees and the costs of this action with respect to all of their causes of action. On August 8, 2013, defendants e-filed their instant motion to dismiss, which is opposed by plaintiffs. 

      DISCUSSION


      It is well settled that, as a general rule, on a motion to dismiss any cause of action in a complaint for failure to state a cause of action under CPLR 3211 (a) (7), "the complaint must be construed in the light most favorable to the plaintiff[s]" (Gruen v County of Suffolk, 187 AD2d 560, 562 [2d Dept 1992]). The court must also accept the facts as alleged in the complaint as true and "accord [the] plaintiffs the benefit of every possible favorable inference" (Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]). Thus, when evaluating whether a complaint is sufficient to survive a motion to dismiss pursuant to CPLR 3211 (a) (7), initially, " the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail'" (Ruffino v New York City Tr. Auth., 55 AD3d 817, 818 [2d Dept 2008], quoting Morris v Morris, 306 AD2d 449, 451 [2d Dept 2003]).


      Defendants assert that plaintiffs' first cause of action for a declaratory judgment fails to state a cognizable claim because it is duplicative of plaintiffs' second, third, and fourth causes of action for breach of contract. They state that plaintiffs' first cause of action both incorporates by reference and is predicated upon all of the factual allegations contained with respect to their breach of contract claims. They contend that if plaintiffs ultimately were to succeed on these breach of contract claims, plaintiffs would secure complete relief against them.


      Plaintiffs, in opposition, argue that their first cause of action is not duplicative of their breach of contract causes of action because it addresses a different question of law. Specifically, plaintiffs assert that they are contending that the policy provided to them under cover of the November 19, 2012 e-mail, which contains no exclusions for water, rain, wind, or flooding, is controlling, whereas defendants are contending that a certified policy provided to their counsel after they denied coverage is the controlling policy. Plaintiffs maintain that in order for their breach of contract claims to be adjudicated, there must first be a determination as to which of these policies controls, and that, therefore, their first cause of action for a declaratory judgment as to the controlling policy should not be dismissed.In addressing defendants' motion with respect to this cause of action, it is noted that it is true that a plaintiff may not seek a declaratory judgment when other remedies are available, such as a breach of contract action, which affords the plaintiff an adequate remedy (see Singer Asset Fin. Co., LLC v Melvin, 33 AD3d 355, 358 [1st Dept 2006]; Artech Info. Sys. v Tee, 280 AD2d 117, 125 [1st Dept 2001]; Apple Records v Capitol Records, 137 AD2d 50, 54 [1st Dept 1988]). Thus, where a plaintiff's cause of action for a declaratory judgment simply parallels a breach of contract claim and merely seeks a declaration of the same rights and obligations as will be determined under the breach of contract claim, dismissal of the cause of action for a declaratory judgment is warranted (see Apple Records, 137 AD2d at 54).


      However, just as an insurer may seek a declaration that it is has no coverage obligation to its insured under a policy based upon an exclusion contained in it (see Essex Ins. Co. v Mondone, 106 AD3d 1045, 1046-1047 [2d Dept 2013]), an insured may bring a claim against its insurer, seeking a declaration that the loss to its property was covered under the insurance policy issued by the insurer (see Papadopoulos v Cambridge Mut. Fire Ins. Co., 104 AD3d 659, 659-660 [2d Dept 2013]). Therefore, a declaratory judgment may properly be sought for a declaration as to what version of the policy was in effect at the time of an insured's loss and whether the policy in effect contained an exclusion endorsement, and, thus, whether coverage for an insured's loss is excluded under the policy (see Harleysville Ins. Co. of NY v Potamianos Props.LLC, 108 AD3d 1110, 1111-1112 [4th Dept 2013]).


      CPLR 3001 provides that the court "may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is . . . claimed." In the insurance context, insureds have been permitted to simultaneously seek a judgment declaring the insurer's obligations to them as well as the further relief of damages for breach of contract (see Roman Catholic Diocese of Brooklyn v National Union Fire Ins. Co. of Pittsburgh, Pa., 87 AD3d 1057, 1057-1059 [2d Dept 2011], affd 21 NY3d 139 [2013]).


      Here, plaintiffs allege that the policy in effect at the time of their loss did not contain Unicover V pages 7-9 as referred to by Zurich in its November 2, 2012 denial letter and that, therefore, a justiciable controversy exists as to the terms of the policy that were in effect at the time of their loss. Plaintiffs' first cause of action seeks a judgment declaring that their losses are not excluded and are covered under the policy that was in effect at the time of their loss, and that defendants are obligated to pay them for their losses under the policy. Plaintiffs' second, third, and fourth causes of action, on the other hand, seek to recover damages for breach of the policy once the applicable terms and exclusions are determined. Thus, plaintiffs' first cause of action is not duplicative or redundant of their breach of contract claims, and dismissal of such first cause of action must be denied.


      Defendants further contend that plaintiffs' fifth cause of action for breach of the implied covenant of good faith and fair dealing, in which plaintiffs contend that there was a bad faith denial of insurance coverage, is redundant of plaintiffs' claims for breach of contract, which allege that they breached the insurance policy by denying coverage. Defendants assert that this cause of action is grounded in plaintiffs' dissatisfaction with their refusal to pay their claims for flood related property damage and other losses and must, therefore, be dismissed as duplicative of plaintiffs' breach of contract claims.


      It is well established that all contracts, including a contract of insurance coverage, "imply a covenant of good faith and fair dealing in the course of performance" (511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 153 [2002]). While plaintiffs argue that this claim is somehow distinct from their breach of contract claims, the conduct of which they complain is also the predicate for their breach of contract claims and alleges the same damages. "A cause of action to recover damages for breach of the implied covenant of good faith and fair dealing cannot be maintained where the alleged breach is intrinsically tied to the damages allegedly resulting from a breach of the contract'" (Deer Park Enters., LLC v Ail Sys., Inc., 57 AD3d 711, 712 [2d Dept 2008], quoting Canstar v Jones Constr. Co., 212 AD2d 452, 453 [1st Dept 1995]).


      Thus, claims of breach of the covenant of good faith and fair dealing that arise from the same set of facts and seek identical damages as a breach of contract claim do not give rise to an independent cause of action (see Amcan Holdings, Inc. v Canadian Imperial Bank of Commerce, 70 AD3d 423, 426 [1st Dept 2010], lv denied 15 NY3d 704 [2010]; Paterra v Nationwide Mut. Fire Ins. Co., 38 AD3d 511, 512-513 [2d Dept 2007]). Moreover, allegations of bad faith in the insurance context fail to state a cause of action as " there is no separate cause of action in tort for an insurer's bad faith failure to perform its obligations' under an insurance contract" (Zawahir v Berkshire Life Ins. Co., 22 AD3d 841, 842 [2d Dept 2005], quoting Continental Cas. Co. v Nationwide Indem. Co., 16 AD3d 353, 354-355 [1st Dept 2005]; see also Paterra, 38 AD3d at 513; Johnson v Allstate Ins. Co., 33 AD3d 665, 666 [2d Dept 2006]; Royal Indem. Co. v Salomon Smith Barney, 308 AD2d 349, 350 [1st Dept 2003]; Bettan v Geico Gen. Ins. Co., 296 AD2d 469, 470 [2d Dept 2002], lv dismissed 99 NY2d 552 [2002]). However, although a "plaintiff's cause of action alleging bad faith conduct on the part of the insurer cannot stand as a distinct tort cause of action, . . . its allegations may be employed to interpose a claim for consequential damages beyond the limits of the policy for the claimed breach of contract" (Acquista v New York Life Ins. Co., 285 AD2d 73, 82 [1st Dept 2001]; see also Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of NY, 10 NY3d 187, 194-195 [2008], rearg denied 10 NY3d 890 [2008] [where a claim for breach of the implied covenant of good faith and fair dealing with respect to a policy of business interruption coverage was not dismissed where the insured alleged consequential damages arising from the demise of its business due to the insurer's failure to timely pay its claim]). Here, however, plaintiffs do not allege that they sustained any consequential damages as a result of defendants' breach of the insurance contract which would entitle them to recovery beyond the limits of the policy, but only that they were deprived of the benefits of insurance coverage under the policy and have incurred attorneys' fees and costs in bringing this action (see Paterra, 38 AD3d at 513). Thus, plaintiffs' fifth cause of action fails to state a viable independent cause of action and is redundant and duplicative of their breach of contract claims, mandating its dismissal (see CPLR 3211 [a] [7]; New York Univ. v Continental Ins. Co., 87 NY2d 308, 319-320 [1995]; Paterra, 38 AD3d at 513; Johnson, 33 AD3d at 666; Zawahir, 22 AD3d at 842; Continental Cas. Co., 16 AD3d at 354-355).


      Plaintiffs' tenth cause of action seeks compensatory and punitive damages under Insurance Law § 2601, which prohibits insurers from engaging in "unfair claim settlement practices." Insurance Law § 2601 (a) defines "unfair claim settlement practices" as "the following acts by an insurer, if committed without just cause and performed with such frequency as to indicate a general business practice:

      "(1) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issue;
      (2) failing to acknowledge with reasonable promptness pertinent communications as to claims arising under its policies;
      (3) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policies;
      (4) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonably clear, except where there is a reasonable basis supported by specific information available for review by the department that the claimant has caused the loss to occur by arson. After receiving a properly executed proof of loss, the insurer shall advise the claimant of acceptance or denial of the claim within thirty working days;
      (5) compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them; or
      (6) failing to promptly disclose coverage pursuant to subsection (d) or subparagraph (A) of paragraph two of subsection (f) of section three thousand four hundred twenty of this chapter."

      Plaintiffs allege that defendants have engaged in unfair claims settlement practices by, without just cause and with such frequency as to constitute unfair general business practices, (1) misleading them into thinking that they were fully insured against losses in situations such as Sandy, (2) misleading them into believing that they did not need flood insurance because Zurich did not write flood insurance policies in its own name prior to May 2012, and (3) refusing to pay them for covered losses under the policy, without regard to the relevant insurance policy, relevant law, and the specific facts of the claim. In substance, plaintiffs are alleging that defendants have violated Insurance Law § 2601 by having knowingly misrepresented to them the pertinent facts or policy provisions relating to the coverages at issue and by not attempting in good faith to effectuate prompt, fair and equitable settlements of their insurance claims.


      Insurance Law § 2601 (c) authorizes the imposition of a monetary penalty pursuant to Insurance Law § 109 (b) for its violation. However, "this State does not currently recognize a private cause of action under Insurance Law § 2601" (Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 614 [1994]; see also New York Univ., 87 NY2d at 317-318; Dinstber v Allstate Ins. Co., 110 AD3d 1410, 1411 [3d Dept 2013]; Kantrowitz v Allstate Indem. Co., 48 AD3d 753, 754 [2d Dept 2008]; Zawahir, 22 AD3d at 842;Cicchetti v General Acc. Ins. Co. of NY, 272 AD2d 500, 501 [2d Dept 2000]). Thus, even if plaintiffs' allegations are liberally construed as alleging unfair claim settlement practices under Insurance Law § 2601, plaintiffs cannot maintain a private right of action under this section.


      Plaintiffs argue, however, that New York Assembly Bill 5780 (Bill 5780), if passed as a law, would create a private cause of action for a violation of Insurance Law § 2601. Bill 5780 was introduced to the New York Assembly by Assemblywoman Helene E. Weinstein on March 6, 2013, and it passed the New York Assembly by a vote of 108 to 34. Bill 5780 was then delivered to the Senate on June 4, 2013, and was referred to the Insurance Committee for consideration on June 4, 2013.

      Bill 5780 would amend Insurance Law § 2601 by adding a subdivision (d), which would provide as follows:

      "Where the governor has declared a disaster emergency pursuant to section twenty-eight of the Executive Law, in addition to the right of action granted to the Department pursuant to this section, any person who has suffered loss or injury by reason of any violation of this section relating to any insurance claim for property damage in an affected area encompassed by the executive order declaring the disaster emergency may bring an action in his or her own name as a plaintiff to enjoin such unlawful act or practice and an action to recover his or her actual damages. The court may, in its discretion, award punitive damages, if the court finds that the defendant insurer willfully or knowingly violated this section. The court may award reasonable attorney's fees to a prevailing plaintiff."

      Thus, Bill 5780 would create a private right of action for a violation of Insurance Law § 2601, and would apply to claims arising from certain disasters that are declared to be such by the governor. The remedies available, as set forth above, would include actual damages, punitive damages for "willfully or knowingly" violating Insurance Law § 2601, and reasonable attorneys' fees to a prevailing plaintiff. Bill 5780 provides that "[t]his act shall take effect immediately." According to Assemblyman Matthew Titone, a co-sponsor of Bill 5780, this bill was proposed to help reform the insurance process in the wake of the widespread damages caused by Sandy in order to help affected parties seek an immediate and definite resolution of their claims against unresponsive insurers in court.


      Defendants point out that Bill 5780 has not been signed into law, and that since this bill was not passed in 2013, it will have be reintroduced in the Assembly in 2014. They assert that Bill 5780 may not become law at all and may not be passed in its current form. Defendants further contend that amendments to a statute are to be construed as prospective in the absence of an unequivocal expression of a legislative intent to the contrary (see Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 584 [1998]), and that Bill 5780 may not apply retroactively since it states that it would "take effect immediately" (see State of New York v Daicel Chem. Indus., Ltd., 42 AD3d 301, 302 [1st Dept 2007] ["(l)anguage in the statute that it shall take effect immediately' does not support retroactive application"]). Thus, since plaintiffs' tenth cause of action is contingent upon the enactment of legislation in the future, the court cannot apply this proposed bill to afford plaintiffs a private right of action because this is a remedy which does not presently exist. Consequently, plaintiffs' tenth cause of action must be dismissed (see CPLR 3211 [a] [7]).


      Defendants also seek dismissal of plaintiffs' demand for an award of punitive damages contained in their fifth cause of action for breach of the implied covenant of good faith and fair dealing, their sixth cause of action for breach of fiduciary duty, their eighth cause of action for fraud, and their tenth cause of action for unfair claims and settlement practices under Insurance Law § 2601.


      As to plaintiffs' fifth cause of action for a breach of the implied covenant of good faith and fair dealing, this cause of action has been dismissed because it does not allege a tort independent of the contract, and, it, therefore, cannot support a demand for punitive damages (see New York Univ., 87 NY2d at 319-320; Paterra, 38 AD3d at 513; Johnson, 33 AD3d at 666; Teig v First Unum Ins. Co., 282 AD2d 669, 669-670 [2d Dept 2001], lv dismissed 97 NY2d 700 [2002]; Logan v Empire Blue Cross & Blue Shield, 275 AD2d 187, 194 [2d Dept 2000], lv dismissed 96 NY2d 823 [2001]).


      As to plaintiffs' sixth cause of action for breach of fiduciary duty and plaintiffs' eighth cause of action for fraud, it is noted that punitive damages are only available in limited circumstances where it is necessary to deter conduct which may be characterized as "a fraud evincing a high degree of moral turpitude'" or " such wanton dishonesty as to imply a criminal indifference to civil obligations'" directed " at the public generally'" (Rocanova, 83 NY2d at 613, quoting Walker v Sheldon, 10 NY2d 401, 404-405 [1961]; see also New York Univ., 87 NY2d at 315-316; Alexander v GEICO Ins. Co., 35 AD3d 989, 990 [3d Dept 2006]; Varveris v Hermitage Ins. Co., 24 AD3d 537, 538 [2d Dept 2005]; Logan, 275 AD2d at 194).


      While plaintiffs purport to allege a claim of fraud, they merely allege, in their fraud claim, that Zurich falsely represented that it was an expert and would procure insurance coverage to protect it. Similarly, plaintiffs' claim for breach of fiduciary duty simply alleges that Zurich breached its alleged fiduciary duty to advise them of any insurance coverage that they needed to protect them from loss. Notably, plaintiffs do not allege that they specifically requested that Zurich provide coverage for a flood and /or water damage and that Zurich did not provide it (see generally Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152, 155 [2006]; Murphy v Kuhn, 90 NY2d 266, 270-271 [1997]). Thus, plaintiffs do not allege that defendants' conduct evinced such a high degree of moral turpitude or such wanton dishonesty as to imply a criminal indifference to civil obligations as is required in order to permit an award of punitive damages as to these claims.


      Moreover, in order to recover punitive damages, conduct must be alleged which is part of a pattern directed at the public generally (see New York Univ., 87 NY2d at 316; Johnson, 33 AD3d at 666). An insured may not obtain punitive damages for an insurer's wrongful conduct where the conduct alleged was focused upon the insured and not aimed systematically at the general public (see American Tr. Ins. Co. v Associated Intl. Ins. Co., 261 AD2d 251, 252 [1st Dept 1999]). Here, plaintiffs do not allege conduct that was part of a pattern directed at the public generally or seek to vindicate a public right (see New York Univ., 87 NY2d at 315). Consequently, plaintiffs' claims cannot support an award of punitive damages under the sixth or eighth causes of action.


      As to plaintiffs' demand for punitive damages with respect to their tenth cause of action, which the court has dismissed, the court notes that, while the proposed amendment to Insurance Law § 2601 would permit the recovery of punitive damages for willfully or knowingly violating that section, punitive damages are not currently available for a violation of Insurance Law § 2601, and a private party may not recover punitive damages for unfair claim settlement practices by an insurer (see New York Univ., 87 NY2d at 319-320). Rather, the punishment of an offending insurer, pursuant to Insurance Law § 2601, as presently enacted, is within the sole province and jurisdiction of the state superintendent of insurance (see Warhoftig v Allstate Ins. Co., 199 AD2d 258, 259 [2d Dept 1993]; Mavroudis v State Wide Ins. Co., 121 AD2d 433, 434 [2d Dept 1986], appeal dismissed 68 NY2d 997 [1986]). Thus, dismissal of plaintiffs' claims for punitive damages must be granted (see CPLR 3211 [a] [7]).


      Plaintiffs' demand for attorneys' fees and costs must also be dismissed. "Attorneys' fees and disbursements are incidents of litigation which the prevailing party may not collect from the loser unless such an award is authorized by agreement between the parties, by statute, or by court rule" (Siamos v 36-02 35th Ave. Dev., LLC, 54 AD3d 842, 842 [2d Dept 2008]; see also U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d 592, 597 [2004]; Hooper Assoc. v AGS Computers, 74 NY2d 487, 491 [1989]; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21-22 [1979]).


      Although it is true that an insured is allowed to recover its legal fees in an action brought against it by an insurer "in an effort to free itself from its policy obligations," the recovery of attorneys' fees "may not be had in an affirmative action by [the insured] to settle its rights" (Mighty Midgets, 47 NY2d at 21; see also New York Univ., 87 NY2d at 324; Stein, LLC v Lawyers Title Ins. Corp., 100 AD3d 622, 623 [2d Dept 2012]). Thus, even where an insurer improperly disclaims coverage, it is not liable for attorneys' fees expended in suing the insurer to establish coverage (see Mighty Midgets, 47 NY2d at 21; Kramarik v Travelers, 25 AD3d 960, 963 [3d Dept 2006]; Chase Manhattan Bank v Each Individual Underwriter Bound to Lloyd's Policy No. 790/004A89005, 258 AD2d 1, 4 [1st Dept 1999]).


      Here, plaintiffs have affirmatively brought this action against defendants to establish and demand coverage, and, thus, have not alleged any basis upon which they may recover their attorneys' fees or costs. While proposed Bill 5780 provides that "[t]he court may award reasonable attorney's fees to a prevailing plaintiff" where a plaintiff brings a claim for a violation of Insurance Law § 2601, this cannot provide a basis for an award of attorneys' fees to plaintiffs since this bill has not been enacted. 

      CONCLUSION


      Accordingly, defendants' motion is granted insofar as it seeks dismissal of plaintiffs' fifth and tenth causes of action and those portions of plaintiffs' first amended complaint that demand an award of punitive damages, attorneys' fees, and the costs of this lawsuit, and such motion is otherwise denied insofar as it seeks dismissal of plaintiffs' first cause of action.


      Defendants shall serve and file their answer within 20 days. The matter is calendared in Commercial Part 1 for May 21, 2014.


      This constitutes the decision and order of the court.


      Footnotes



      Footnote 1:Plaintiffs also filed a claim with Zurich under the Floor Plan Policy for damages to its automobile inventory sustained as a result of Sandy, and Zurich paid plaintiffs for these losses on or about December 14, 2012.