New York University v. Factory Mutual Insurance Company ( 2021 )

20-1093-cv
New York University v. Factory Mutual Insurance Company
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 26th day of July, two thousand twenty-one.
PRESENT: JOHN M. WALKER, JR.
JOSÉ A. CABRANES,
RICHARD C. WESLEY,
Circuit Judges.
NEW YORK UNIVERSITY,
Plaintiff-Counter-Defendant-Appellant, 20-1093-cv
v.
FACTORY MUTUAL INSURANCE COMPANY,
Defendant-Counter-Claimant-Appellee.
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FOR PLAINTIFF-COUNTER-DEFENDANT APPELLANT:
EDWARD FLANDERS (Joseph
D. Jean, Jeffrey P. Metzler, Jay
D. Dealy, on the brief), Pillsbury
Winthrop Shaw Pittman LLP,
New York, NY.
FOR DEFENDANT-COUNTER-CLAIMANT-APPELLEE: LINDA COBERLY (Harvey
Kurzweil, Kelly A. Librera,
George E. Mastoris, Matthew
A. Stark, and Mark E. Rizik,
Jr., on the brief), Winston &
Strawn LLP, Chicago, IL and
New York, NY.
Appeal from March 19, 2019 judgment of the United States District Court for the Southern
District of New York (Naomi Reice Buchwald, Judge).
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the District Court be, and hereby is,
AFFIRMED.
Plaintiff-Counter-Defendant-Appellant New York University (“NYU”) filed this lawsuit
against its insurer, Defendant-Counter-Claimant-Appellee Factory Mutual Insurance Company
(“Factory Mutual”), bringing five declaratory judgment claims as to the scope and meaning of its
2011 insurance policy (the “2011 Policy”) and one breach-of-contract claim. Factory Mutual filed a
counterclaim. The parties filed cross-motions for summary judgment on NYU’s declaratory
judgment claims, and Factory Mutual also moved for summary judgment on NYU’s claim for extra-
contractual damages based on bad faith. 1 The District Court denied NYU’s motion, granted Factory
Mutual’s motion, construing it as having sought summary judgment on NYU’s complaint in its
entirety, and entered judgment on March 19, 2019. NYU then moved pursuant to Federal Rules of
Civil Procedure 59 and 60 to alter the judgment with respect to its breach-of-contract claim, which
the District Court also denied. NYU timely appealed. We assume the parties’ familiarity with the
1 Joint App’x 231 (Factory Mutual’s Mot. for Summary Judgment); id. at 271 (Factory Mutual’s Mem.
of Law in support of its Mot. for Summary Judgment) (arguing that “[t]o the extent NYU asserts, as part of
its breach of contract claim, a claim for consequential damages based on [Factory Mutual]’s purported breach
of its ‘implied duties’ of good faith and fair dealing, that claim fails”).
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underlying facts, the procedural history of the case, and the issues on appeal, which we reference
only as necessary to explain our decision.
On appeal NYU challenges the District Court’s decision granting summary judgment in
favor of Factory Mutual on two of NYU’s declaratory judgment claims as well as on NYU’s breach-
of-contract claim. This Court reviews a grant of summary judgment de novo, construing the evidence
in the light most favorable to the non-movant and drawing all reasonable inferences in the non-
movant’s favor. 2 “Because interpretation of an insurance agreement is a question of law, we [also]
review the district court’s construction of [the policy] de novo.” 3
I.
NYU argues that the District Court erred in concluding that the 2011 Policy’s additional
coverages are unambiguously subject to the limit of liability for flood. We do not agree. “Insurance
contracts are governed by the general rules of contract interpretation.” 4 “[I]t is axiomatic that a
contract is to be interpreted so as to give effect to the intention of the parties as expressed in the
unequivocal language employed.” 5 Thus, “[t]he language of a policy, when clear and unambiguous,
must be given its plain and ordinary meaning.” 6
Here, the 2011 Policy’s limit of liability section clearly states that “[l]imits of liability in an
occurrence apply to the total loss of damage at all locations and for all coverages involved[.]” 7 Further, the
2011 Policy’s section on additional coverages for insured physical loss or damages, such as costs
incurred to remove debris from an insured location that remains as a direct result of insured physical
loss or damage like a flood, expressly states that the additional coverages “are subject to the
applicable limit of liability[.]” 8 The 2011 Policy’s language thus makes plain that any costs incurred
from flood that would qualify as additional coverages are part of, not in addition to, the $250 million
limit of liability for loss or damage from flood.
Accordingly, the District Court did not err in concluding that the 2011 Policy’s language
unambiguously provided that additional coverages are subject to, not in addition to, the applicable
limit of liability for loss or damage caused by flood.
2 See Natofsky v. City of New York, 921 F.3d 337, 344 (2d Cir. 2019).
3 U.S. Fid. & Guar. Co. v. Fendi Adele S.R.L., 823 F.3d 146, 149 (2d Cir. 2016) (emphasis added).
4 Jin Ming Chen v. Ins. Co. of the State of Pennsylvania, 36 N.Y.3d 133, 138 (2020).
5 Id. (quoting Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355 (1978)).
6 Id.
7 Joint App’x 333 (emphasis added).
8 Joint App’x 350.
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II.
Next, NYU argues that the District Court erred in concluding that the 2011 Policy was
ambiguous as to what property was covered by the $40 million flood sublimit of liability. We again
do not agree. On summary judgment, the determination of whether a contract term is ambiguous “is
a threshold question of law for the court.” 9 “[A]mbiguity exists where the terms of the contract
could suggest more than one meaning when viewed objectively by a reasonably intelligent person
who has examined the context of the entire . . . agreement.” 10
The 2011 Policy states that the $40 million flood sublimit is “for property located at the
NYU Hospital Center and School of Medicine located at 550-580 First Avenue, 401 & 435 E 30th
Street, 317 & 400 E. 34th Street and 3010 FD Roosevelt Drive, New York, NY,” the flood sublimit’s
“address clause.” 11 The parties disagree as to whether this flood sublimit applies only to buildings
with street addresses that fall within this “address clause.” 12 In one literal reading of this “address
clause” the flood sublimit applies exclusively to buildings with the specific street addresses. But
reading the “address clause” as referring to properties beyond those buildings with street addresses
literally specified therein is the only way to reconcile the flood sublimit with the 2011 Policy as a
whole and, specifically, with the 2011 Policy’s Schedule of Locations in Appendix A. Indeed, the
Schedule of Locations provides several addresses for one of the three properties at issue, the Skirball
Institute—some of which fall within the flood sublimit’s “address clause” and some of which fall
entirely outside the “address clause.” 13 Because the text of the flood sublimit could be understood to
be referring to all “property located at the NYU Hospital Center and School of Medicine” or to a
subset of those buildings with street addresses that fall within the range of the “address clause,” the
flood sublimit cannot properly be characterized as “capable of only one reasonable interpretation.” 14
9 Walk-In Med. Ctrs., Inc. v. Breuer Cap. Corp., 818 F.2d 260, 263 (2d Cir. 1987).
10 Peterson v. Islamic Republic of Iran, 876 F.3d 63, 83 (2d Cir. 2017) (quoting Law Debenture Tr. Co. of
N.Y. v. Maverick Tube Corp., 595 F.3d 458 (2d Cir. 2010)). In interpreting an insurance agreement, this Court
must “read[ ] the contract as a whole,” Ellington v. EMI Music, Inc., 24 N.Y.3d 239, 244 (2014), and do so by
placing words and phrases in their proper contexts, see Parks Real Estate Purchasing Grp. v. St. Paul Fire &
Marine Ins. Co., 472 F.3d 33, 44 (2d Cir. 2006).
11 Joint App’x 335.
12 Specifically, NYU argues that three buildings—the Skirball Institute, Smilow, and HCC—are not
covered by the flood sublimit because their street addresses are outside of the range set forth in the flood
sublimit’s “address clause.”
13 In the Schedule of Locations, the Skirball Institute is listed as having the following addresses: “540,
562, 564, 584 First Avenue,” Joint App’x 418; “540, 562, 584 First Avenue,” Joint App’x 421. One of
Skirball’s addresses is further listed for “Resident/Staff” in another part of the Schedule of Locations. Joint
App’x 422.
14 VKK Corp. v. Nat’l Football League, 244 F.3d 114, 129 2d Cir. 2001) (quoting K. Bell & Assoc., Inc. v.
Lloyd’s Underwriters, 97 F.3d 632, 637 (2d Cir. 1996)).
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The District Court thus did not err in concluding, at the threshold, that the flood sublimit
was ambiguous as to whether it applied to only the buildings specified by the “address clause” or
whether it included other buildings listed in Appendix A.
III.
NYU argues that the District Court erred in going on to conclude that the parties intended
that the 2011 Policy’s flood sublimit of liability to apply to more properties than those literally
specified by the “address clause.” We do not agree. “Once a court concludes that an insurance
provision is ambiguous, ‘the court may accept any available extrinsic evidence to ascertain the
meaning intended by the parties during the formation of the contract.’” 15
Here, the extrinsic evidence indicates that the parties intended the flood sublimit in the 2011
Policy to operate the way it had in NYU’s previous insurance policies with Factory Mutual—namely,
to apply to properties identified by “Index 21374.00” in the Schedule of Locations. 16 Although NYU
takes the position that the removal of the reference to Index 21374.00 in the 2011 Policy reflected
the parties’ mutual intent to remove the three disputed buildings from the $40 million flood sublimit
(which would have the effect of increasing the flood limit of liability for those three buildings to
$210 million), NYU adduced no evidence to this effect. 17 In contrast, NYU’s broker sent to NYU a
summary of the 2011 Policy, which included a chart that compared each limit of liability in the 2010
insurance policy (the “2010 Policy”) to the limit of liability in the 2011 Policy. That summary chart
identified the flood sublimit as “$40,000,000” in 2010 and “$40,000,000” in 2011—and the chart
also described that particular sublimit as “Flood – SoM/ NYUMC Index 21374.00.” 18 This
15 Parks, 472 F.3d at 43 (quoting Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275–76
(2d Cir. 2000)).
16 The flood sublimit was included for the first time in NYU’s 2006 insurance policy (the “2006
Policy), which applied to a set of properties identified by “Index 21374.00” and which were set forth in
Appendix A. The addition of the flood sublimit was prompted by NYU’s completion of the Smilow building,
one of the three disputed buildings, which was located near the East River. In NYU’s 2006 Policy, Factory
Mutual thus included a flood sublimit of $10 million that applied to the complex of which Smilow was a part
in the 2006 Policy; in other words, Smilow was plainly included in the flood sublimit at its inception. This
flood sublimit was raised to $25 million in NYU’s 2008 insurance policy, and the 2009 insurance policy (the
“2009 Policy”) added an “address clause” for the flood sublimit while retaining the reference to Index
21374.00 alongside it. This inclusion of the “address clause” alongside the Index 21374.00 in the 2009 Policy
supports an interpretation that the flood sublimit was intended to apply to all properties identified with Index
21374.00. The flood sublimit in NYU’s 2010 insurance policy (the “2010 Policy”) included the same “address
clause” as well as the reference to Index 21374.00. The only change to the flood sublimit in the 2011 Policy
from the 2010 Policy was the removal of the reference to “Index 21374.00” alongside the “address clause.”
17 Indeed, NYU’s broker—after negotiating the 2011 Policy on NYU’s behalf—explained to NYU
that Factory Mutual was “unable at this time to provide additional limits for Flood…: the limit remains
$40,000,000 in the annual aggregate.” Confidential App’x 169.
18 Confidential App’x 188.
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contemporaneous summary, which showed both changes and similarities between the 2011 Policy
and the 2010 Policy, is strongly indicative of the parties’ intent that the flood sublimit in the 2011
Policy should continue to apply to a larger set of buildings than what the “address clause” literally
identified, despite the removal of the reference to “Index 21374.00.” 19
The District Court did not err in concluding that, in the absence of NYU presenting
evidence of the parties’ intent otherwise, such that the material facts were in dispute, no reasonable
jury could conclude that the parties intended to change how the flood sublimit operated in the 2011
Policy and that Factory Mutual was entitled to summary judgment on the issue.
CONCLUSION
We have reviewed all of the other arguments raised by NYU on appeal and find them to be
without merit. For the foregoing reasons, the judgment of the District Court is AFFIRMED. The
District Court’s order entered March 3, 2020 denying NYU’s motion to amend the judgment and/or
for relief from the judgment under Federal Rules of Civil Procedure 59 and 60 is also AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
19 See Confidential App’x 188–190.
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