Malewich et al v. Peninsula Insurance Bureau et al

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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JOSEPH MALEWICH and PATRICIA
MALEWICH,
Plaintiffs,
-against-
INDIAN HARBOR INSURANCE CO.,
NEPTUNE FLOOD INC., XL
SPECIALTY INSURANCE
COMPANY, WRIGHT FLOOD, GEICO
INSURANCE AGENCY LLC,
GOVERNMENT EMPLOYEES
INSURANCE CO., PENINSULA
INSURANCE BUREAU, INC. and
PARKER LOSS CONSULTANTS,
Defendants.
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MEMORANDUM AND ORDER
Case No. 1:24-CV-7406-FB-VMS
Appearances:
For the Plaintiffs:
DEAN T. CHO
10217 72nd Avenue
Forest Hills, New York 11375
For Defendants GEICO Insurance
Agency LLC and Government
Employees Insurance Co.:
LAURA J. GINDELE
Rivkin Radler LLP
926 RXR Plaza
Uniondale, New York 11556
For Defendants Peninsula Insurance
Bureau, XL Specialty Insurance
and Parker Loss Consultants
ALEXANDER WALKER COGBILL
Zelle LLP
45 Broadway, Suite 920
New York, New York 10006
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For Defendant Neptune Flood Inc.
KAREN I. BRAY
Greenberg Traurig LLP
One Vanderbilt Avenue
New York, New York 10017
BLOCK, Senior District Judge:
Joseph and Patricia Malewich own property in Long Island City that was
damaged during Hurricane Ida. They assert claims for breach of contract against
Indian Harbor Insurance Co., Neptune Flood Inc., Wright Flood, and GEICO
Insurance Agency LLC (collectively, “Insurer Defendants”) and for tortious
interference against Peninsula Insurance Bureau Inc., Parker Loss Consultants, XL
Specialty Insurance Company, and Government Employees Insurance Co.
(collectively, “Administrator Defendants”). Because Wright Flood participates in
the National Flood Insurance Program, this Court has jurisdiction pursuant to 42
U.S.C. § 4072. See Palmieri v. Allstate Ins. Co., 445 F.3d 179, 187 (2d Cir. 2006).
Neptune Flood Inc., XL Specialty Insurance Company, GEICO Insurance
Agency LLC, Government Employees Insurance Co., Peninsula Insurance Bureau,
Inc., and Parker Loss Consultants move to dismiss for failure to state a claim
pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons,
the motion is denied in part and granted in part.
Breach of Contract
Two of the four Insurer Defendants—Neptune Flood and GEICO Insurance
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Agency LLC (“GIA”)—argue that the only policies covering the plaintiffs’
property were issued by the other two Insurer Defendants (which have not moved
to dismiss). They describe themselves, respectively, as only an agent and a broker
for policies issued by others. Under New York law, such intermediaries
“generally owe[] the insured no more than the common-law duty to procure the
insurance coverage that the insured requests.” GlobalNet Financial.Com, Inc. v.
Frank Crystal & Co., 449 F.3d 377, 383 (2d Cir. 2006) (citing Murphy v. Kuhn, 90
N.Y.2d 266, 269-70 (1997)).
While Neptune Flood and GIA correctly state the law, they ignore the
allegations that “Plaintiffs purchased, maintained and paid monies to Defendants
Indian Harbor, Neptune Flood, Wright Flood and GIA for insurance policies that
covered the damages to the Premises,” Second Am. Compl. ¶ 30 (emphasis added),
and that “[t]hose Defendants have acknowledged that Plaintiffs’ claims fall within
their insurance coverage and are not subject to any exclusion,” id. ¶ 32. The
plaintiffs must eventually prove those allegations—and may be subject to sanctions
if they turn out to be frivolous—but at this stage, the Court must accept them as
true. The only question is whether they and the other allegations of the complaint
make out a claim for breach of contract.
In that regard, “to plead a cause of action for breach of contract, a plaintiff
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usually must allege that: (1) a contract exists; (2) plaintiff performed in accordance
with the contract; (3) defendant breached its contractual obligations; and (4)
defendant’s breach resulted in damages.” 34-06 73, LLC v. Seneca Ins. Co., 39
N.Y.3d 44, 52 (2022) (citations omitted). With respect to the first element, “[t]he
contract itself need not be attached to the complaint, but the pleading must at least
set forth the terms by express reference to satisfy this requirement.” Kilgore v.
Ocwen Loan Servicing, LLC, 89 F. Supp. 3d 526, 533 (E.D.N.Y. 2015).
Here, however, the plaintiffs allege that the policies were “[a]mong the
many items destroyed by the flooding.” Second Am. Compl. ¶ 12. “[A]n insured
may rely on secondary evidence (i.e., evidence other than the policy itself) to prove
the existence and terms of an insurance policy only where the insured demonstrates
that it has made a diligent but unsuccessful search and inquiry for the missing
policy.” Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83, 91 (2d
Cir. 2002) (cleaned up). Standard policy language is acceptable as secondary
evidence. See Glew v. Cigna Group Ins., 590 F. Supp. 2d 395, 413 (E.D.N.Y.
2008) (citing Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 975 F.2d 1130, 1132
(5th Cir. 1992)).
Since plaintiff may prove the existence and terms of a policy with secondary
evidence in certain circumstances, it follows that they may allege the existence of
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such evidence and the circumstances allowing its use at the pleadings stage. As
noted, the plaintiffs allege that the policies at issue were destroyed by flooding,
which is certainly grounds for the use of secondary evidence. See Glew, 590 F.
Supp. 2d at 412 (“[Federal Rule of Evidence 1004] allows admission of secondary
evidence offered by a party who destroyed the original as long as the action was
not taken in bad faith.”). They go on to allege that the Insurer Defendants’ failure
to pay their claims in full and in a timely manner breached “the provisions denoted
Flood Coverage A, Flood Coverage B, Flood Coverage C and Flood Coverage D
set for in the standard flood insurance policy form.” Second Am. Compl. ¶ 34. In
addition, they allege that they “paid all required insurance policy premiums to each
of [the Insurer] Defendants,” id. ¶ 11, suffered “severe structural damages to the
Premises . . . and to the fixtures and personal property located therein,” id. ¶ 12,
and “promptly and timely provided actual and constructive notice of such damage
to the Insurer Defendants,” id. ¶ 13.
Those allegations are sufficient to state a claim for breach of contract in the
circumstances. Insurance policies almost always use standard language to set out
straightforward contractual obligations: the insurer’s duty to pay claims in
accordance with the coverage clause(s) and the insured’s duty to pay premiums
and provide timely notice of those claims. While Neptune Flood and GIA
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obviously dispute having entered into any such contract with the plaintiffs, that
dispute cannot be resolved until there is a motion for summary judgment after full
discovery, which will presumably identify the terms of the “standard flood
insurance policy form” referenced in the complaint and the basis for plaintiffs’
assertion that Neptune Flood and GIA provided them coverage under that or some
other policy. Plaintiffs are once again warned to carefully reconsider their claims if
discovery does not yield any such evidence.
Tortious Interference
“It is well established that only a stranger to the contract, such as a third
party, can be liable for tortious interference.” Koret, Inc. v. Christian Dior, S.A.,
554 N.Y.S.2d 867, 869 (1st Dep’t 1990). Parent companies are not “third parties”
to the contracts of their subsidiaries, see id., unless the parent acts “[with] malice
on the one hand, or [through] fraudulent or illegal means on the other.” Foster v.
Churchill, 87 N.Y.2d 744, 750 (1996). Similarly, “[i]t is well settled that an agent
cannot be held liable for inducing its principal to breach a contract with a third
person, at least where it is acting on behalf of its principal and within the scope of
its authority.” Nu-Life Constr. Corp. v. Bd. of Educ. of City of N.Y., 611 N.Y.S.2d
529, 530 (1st Dep’t 1994).
The plaintiffs allege that XL is the “direct corporate parent” of Indian
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Harbor, Second Am. Compl. ¶ 3, while GEICO is the “direct corporate parent” of
GIA, id. ¶ 7. Absent, however, is any allegation that those defendants acted
maliciously, fraudulently, or illegally. At most, the plaintiffs allege that XL and
Geico induced their respective subsidiaries to delay and deny payment of valid
claims “to wrongfully increase [their] revenues, profits, and/or financial
performance.” Id. ¶¶ 50, 58. This is insufficient. See In Chu Trading Co. v. Sara
Lee Corp., 810 F. Supp. 501, 506 (S.D.N.Y. 1992) (“[T]he only motive which
plaintiff ascribes to [the corporate parent] is economic gain, which alone does not
constitute malice.”).
The plaintiffs allege that PIB and Parker provided “insurance claims
management services.” Second Am. Compl. ¶¶ 8, 9. It is clear that claims
adjusters are agents of the insurer, even when they are contractors rather than
employees. See OneBeacon Am. Ins. Co. v. Colgate-Palmolive Co., 995 N.Y.S.2d
35, 39 (2014) (“An agency relationship existed because [the claims administrator]
is [the insurer’s] agent with respect to the Policies and, under the Services
Agreement, [the insurer] authorized [the claims administrator] to appoint agents to
perform [its] obligations under the contract.”). As with XL and GEICO, the
plaintiffs allege that PIB and Parker induced the Insurer Defendants not to pay
valid claims “to wrongfully increase [their] revenues, profits, and/or financial
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performance.” Second Am. Compl. ¶ 42. But they do not—and could not—
allege that PIB and Parker were acting outside of the scope of their authority to
manage claims on behalf of those defendants.
Personal Jurisdiction and Service of Process
In addition to moving to dismiss for failure to state a claim, XL and GIA
move to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil
Procedure 12(b)(2) and insufficient service of process pursuant to Federal Rule of
Civil Procedure 12(b)(5). The plaintiffs concede that they have not served those
defendants.
Conclusion
The motion to dismiss is denied with respect to breach of contract and
granted with respect to tortious interference. In addition, XL and GIA are
dismissed without prejudice. See Fed. R. Civ. P. 4(m). Thus, the case proceeds
only on the breach of contract claims against Neptune Flood and the non-moving
defendants, Indian Harbor and Wright Flood
SO ORDERED.
_/S/ Frederic Block___________
FREDERIC BLOCK
Senior United States District Judge
Brooklyn, New York
February 20, 2026
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