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Breitman v. National Surety Corp.

United States District Court, D. New Jersey

March 28, 2018

STEVEN BREITMAN, Plaintiff,
v.
NATIONAL SURETY CORPORATION, one of the Fireman's Fund Insurance Companies, Defendant.

          MEMORANDUM OPINION

          JEROME B. SIMANDLE, U.S. DISTRICT JUDGE.

         Superstorm Sandy in October, 2012, left a path of devastation in coastal communities in New Jersey and elsewhere, and it resulted in about 2, 000 lawsuits between homeowners and their insurance companies seeking coverage for the storm-related damages. A typical area of dispute can arise when the cause of property damage must be ascribed either to wind and wind-driven rain (generally covered by a standard homeowners policy) or by flood and surges of a body of water (generally covered by a flood insurance policy under the National Flood Insurance Program and excluded by the standard homeowners policy). In this case, the plaintiff-homeowner submitted claims under both his homeowner's policy and his flood insurance policy, and the respective carriers each paid part of his claim. The insurer for homeowner's coverage denied a substantial part of his claim, however, on the basis that the unpaid loss was caused by flooding or otherwise not covered by the policy, and plaintiff alleges this denial was made in bad faith, and in breach of the covenant of good faith and fair dealing implied in the homeowner's policy under New Jersey law.

         In this action, Plaintiff Steven Breitman alleges, inter alia, that Defendant National Surety Corporation breached the covenant of good faith or fair dealing “and has otherwise acted in bad faith” in its response to his insurance claim arising out of Superstorm-Sandy-related damage to a house Plaintiff owned on the waterfront in Rumson, New Jersey, and is liable for that breach pursuant to New Jersey common law. [Docket Item 16, Am. Compl., Count Two, ¶¶ 83, 91-104.] Plaintiff also alleges, in Count One, that National Surety Corporation owes coverage for losses under the policy, and that claim is not the subject of the present motion; indeed, neither party has moved for summary judgment on the contract claim in Count One. Pending before the Court is Defendant's motion for partial summary judgment as to Count Two pursuant to Fed.R.Civ.P. 56. [Docket Item 57.] Plaintiff has filed a Response in Opposition [Docket Item 59], but failed to file any response to Defendant's Statement of Undisputed Material Facts, in violation of L. Civ. R. 56.1(a), and Defendant has filed a Reply [Docket Item 60]. For the reasons discussed below, the Court will grant Defendant's motion for summary judgment as to the claim of bad faith and its related arguments to strike certain claims for consequential damages.

         The principal issue presented is whether Plaintiff has adduced factual evidence from which a reasonable jury could find that National Surety Corporation lacked a fairly debatable reason for denying the disputed portion of the claim. Because in this summary judgment motion National Surety has set forth the factual basis for its determinations of coverage and loss, and because Plaintiff has not come forward with evidence that Plaintiff's entitlement to recover for these losses was so clear that it was not fairly debatable, Plaintiff will be unable to prove its bad faith claim in Count 2 and summary judgment will be granted, as now discussed. The Court finds as follows:

         1. Factual and Procedural Background.[1]

         As this Court previously stated, “Defendant denied Plaintiff's claim for loss and damage to Plaintiff's property caused by flood, not wind, as a result of Superstorm Sandy. Plaintiff asserts that the full amount of loss and damages was $711, 798.55[], but Defendant only paid $114, 181.06, and he alleges that Defendant conducted an improper adjustment, wrongfully denied his claim, and delayed payment.” Breitman v. Nat'l Surety Corp., No. 14-7843, 2015 WL 5723141, *1 (D.N.J. Sept. 29, 2015).

         2. In its well-documented Statement of Uncontested Material Facts [SUMF] filed with this motion and referencing each claimed fact to the record [Docket Item 57-2], Defendant sets forth the detailed basis for its determination to pay a total amount of $152, 195.84 consisting of emergency repairs ($38, 014.78) and permanent repairs ($114, 181.06) attributable to wind and wind-driven rain from Superstorm Sandy. Because the Statement of Material Facts is uncontested, SUMF ¶¶ 1-39 will be set forth herein as follows:

1. Steven Breitman (“Plaintiff”) is the owner of the home and real property located at 12 Broadmoor Drive in Rumson, New Jersey (the “Premises”). (Am. Compl. ¶ 1, Kuehn Decl., Ex. 1.)
2. National Surety insured the Premises subject to the terms, limitations, conditions, and exclusions of policy number NZD2525628 (the “Policy”) with the policy period August 17, 2012 through August 17, 2013. (Am. Compl. ¶¶ 13 - 16.)
3. On October 29, 2012, the Premises was damaged by the effects of the metorological [sic] event known as “Superstorm Sandy.” (“Sandy”) (Id. ¶ 23.) Specifically, Sandy affected the Premises in three ways. First, the garage and crawlspace of Plaintiff's home were inundated by water from the adjacent Navasink River. (Breitman Tr. at 107:24 - 108:2.) Second, high winds damaged portions of the exterior of the home. Third, wind-driven rain penetrated the home through openings in the roof, openings around windows, and openings around sliding doors. (Breitman Tr. 110:9 - 14; Paradis Decl., ¶ 8)
4. Plaintiff notified National Surety of the damage on November 1, 2012. (Am. Comp. ¶ 37; Breitman Tr. at 101:22 - 102:9.) Plaintiff also notified his flood insurance carrier, American Bankers Insurance Company of Florida (“ABIC”), of the flood damage.
5. ABIC paid Plaintiff a total of $202, 381.18 for flood damage to the Premises caused by Sandy on or around May 21, 2013. (Kuehn Decl., ¶¶ 12 - 15, Exs. 11 - 5; Breitman Tr. at 122:15 - 123:11, 134:1 - 23; 138:19 - 139:18).
6. Robert Paradis, an employee of National Surety, was eventually assigned to handle claim [sic] for damage to the Premises. (Paradis Decl., ¶ 6.)
7. Paradis inspected and photographed the Premises on November 7 and 20, 2012. (Paradis Decl., ¶ 10.)
8. Paradis sent Plaintiff a letter dated November 18, 2012, that set forth, inter alia, the exclusions and limitations on coverage that might apply to Plaintiff's claim. (Paradis Decl., ¶ 11, Ex. 1.) The letter advised Plaintiff that flood damage to the Premises would not be covered by the Policy.
9. In November 2012, Paradis retained the engineering firm Douglas G. Peterson and Associates (“DGPA”) to inspect the Premises [sic] determine the cause of the damage related to Sandy, and to identify and segregate damage caused by flood from wind and rain damage, (Paradis Decl., ¶¶ 10, 12, 15.)
10. In December 2012, Paradis prepared an initial estimate to repair the damages to the Premises from wind and wind-driven rain. Paradis sent a copy of the estimate to Plaintiff on or about December 11, 2012. (Paradis Decl., ¶ 16, Ex. 2.)
11. On or about November 26, 2012, a Servpro franchise from Kentucky (“Servpro Kentucky”) began performing emergency water extraction and dry-out at the Premises. National Surety eventually paid Servpro Kentucky $13, 014.78 for the work it performed at the Premises, after Plaintiff approved that payment. (Paradis Decl., ¶ 10.)
12. Keith Kallberg, P.E., an engineer affiliated with DGPA, inspected the Premises on December 7, 2012, and issued a report dated December 17, 2012 (the “DGPA Report”). (See Paradis Decl., ¶ 18, Ex. 3.) The DGPA Report concluded that:
a. Sandy caused the adjacent river to overflow its natural boundaries an [sic] inundate portions of the Premises. The water entered the garage and crawlspace but did not reach the living area of the Premises;
b. Wind-driven rain and water pooling on the surface of the roof penetrated the building envelope through pre-existing openings in the building, including cracks in the roof membrane and areas around windows and skylights;
c. The pre-existing openings allow [sic] rain to enter the building before, after and during Sandy, as evinced [sic] by wet and dry water stains, as well as long term rot around certain windows and door trim;
d. The roof was not damaged by wind, except for two window shutter housing on the second floor; and
e. The roof membrane had multiple pre-existing cracks and was in poor overall condition and near the end of its service life.
13. Thereafter, Plaintiff retained a Servpro franchise from New Jersey (“ServPro New Jersey”) to complete the emergency dry-out and mitigation started by Servpro Kentucky, and to remediate mold that had developed at the Premises. (Paradis Decl., ¶ 17.) National Surety directly paid Servpro New Jersey $25, 000.00 for its work at the Premises. (Paradis Decl., ¶ 20.)
14. Based upon the DGPA Report, on or about December 27, 2012, Paradis prepared a revised estimate using Xactimate software for the repair of damage to the Premises caused by wind and wind-driven rain. The supplemental estimate totaled $57, 065.03. (Paradis Decl., ¶ 19, Ex. 4.)
15. Paradis sent the revised repair estimate to Plaintiff on December 27, 2012, and in his cover e-mail, requested that Plaintiff review and advise of any questions or approve payment. (See Paradis Decl., ¶ 19, Ex. 4.)
16. Paradis sent a follow-up email to Plaintiff on January 23, 2013 asking if Plaintiff had reviewed the revised estimate or obtained invoices for other damages items. (Paradis Decl., ¶ 21, Ex. 5.)
17. Between January of 2012 and August of 2013, Paradis attempted to contact Plaintiff on twelve occasions by telephone and e-mail about the revised estimate and invoices and/or to request repairs to the Premises. Paradis sent Plaintiff emails on the following dates:
a. January 23, 2013 (Paradis Decl., ΒΆ 21, ...

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