Supreme Court, Niagara County, January 3, 2022

Duke Holzman Photiadis & Gresens LLP, Buffalo (Christopher M. Berloth and Thomas D. Lyons of counsel), for plaintiff.

Mura Law Group, PLLC, Buffalo (Ryan M. Mura of counsel), for defendant.

Plaintiff has applied for an order (NY St Cts Elec Filing [NYSCEF] Doc No. 39, mot seq No. 2) granting, inter alia, summary judgment against defendant on plaintiff's first cause of action for breach of the underlying insurance contract, and on plaintiff's second cause of action for breach of the insurance contract, for lost rent, in an amount to be determined at trial. Defendant has cross-moved for an order (NYSCEF Doc No. 58, mot seq No. 3) granting, inter alia, summary judgment and dismissing the complaint (NYSCEF Doc No. 1) in its entirety.

This action arises out of a fire that occurred on March 30, 2020, at the real property [*2]located at 1142 LaSalle Avenue, Niagara Falls, New York, which caused damage to the improvement thereon. At the time of the fire, the property was improved by a one-to-two-family residence that sustained damage as a result thereof (NYSCEF Doc No. 75 ¶ 2).

Plaintiff hired nonparty, Eyah Cohen, principal of Cohen & Arkin 2204, to manage the property and provide maintenance and renovation services (id. ¶¶ 4, 6).

In January 2020, Cohen hired approximately seven or eight out-of-town workers for certain construction projects, and plaintiff agreed to permit them to reside at the property's first and second floor apartments while they were in town (id. ¶ 8).

On March 30, 2020, one of these workers, nonparty, Reymi Alberto Brito-Acosta, intentionally set fire to the property. Acosta pleaded guilty to a reduced charge of attempted second-degree arson in connection with the fire (id. ¶¶ 17-18).

Defendant issued an insurance policy to plaintiff, as the named insured, in connection with the property for the period covering the fire; policy number 10-2019-8291 (NYSCEF Doc Nos. 45, 75 ¶ 5).

Defendant has disclaimed coverage for the fire.

Defendant's denial letter, dated November 12, 2020 (NYSCEF Doc No. 46), cites the "Dishonest or Criminal Acts" exclusion in the policy, which provides, in relevant part, as follows: "Dishonest or Criminal Acts—means loss caused by or {**74 Misc 3d at 575}resulting from any dishonest or criminal act by you, any of your partners, employees, directors, trustees, authorized representatives or anyone, to whom you entrust property for any purpose" (id. at 2 [emphasis added and omitted]).

Defendant denied coverage for the loss based on its contention that plaintiff knowingly "entrusted" the property to the person who set the fire—Acosta, thus triggering the policy exclusion.

The policy limit for damage to the property is $120,000 (NYSCEF Doc No. 45 at 1).

Plaintiff retained National Fire Adjustment Company, Inc. (NFA) to value the loss to the property. NFA calculated a replacement cost value for the property (RCV), in the amount of $246,777.40 (NYSCEF Doc No. 53 at 45). NFA did not calculate an actual cash value (ACV) for the property, because it was clear to NFA that the damage to the property exceeded the policy limit. Thus, plaintiff contends that its reasonable calculation of damage to the property exceeds the $120,000 policy limit.

Defendant retained Fort Orange Claims Unlimited Services (FOCUS) as its independent adjuster to value the loss to the property. FOCUS issued a "Final Report" setting forth an RCV and ACV for the property (NYSCEF Doc No. 49). FOCUS' Final Report sets the RCV for the property at $162,935.90, and the ACV for the property at $131,024.53 (id. at 1), both values being in excess of the policy limit.

The policy exclusion is not contained in the standard fire insurance policy statutorily set forth in New York Insurance Law § 3404, and provides substantially less favorable coverage to an insured than the standard fire insurance policy. Accordingly, plaintiff seeks summary judgment on the basis that defendant's denial of coverage violates the statutory standard fire insurance policy set forth in Insurance Law § 3404 and fails to grant plaintiff the minimum standard of coverage required therein.

New York has codified a standard fire insurance policy at Insurance Law § 3404 (e). Any policy that insures against the peril of fire, such as the policy herein, must incorporate "terms and provisions no less favorable to the insured than those contained in the [standard policy]," as required by Insurance Law § 3404 (b) (1) (Lane v Security Mut. Ins. Co., 96 NY2d 1, 5 {**74 Misc 3d at 576}[2001]). Section 3404 (b) (1) provides, in relevant part, as follows: "No policy or contract of fire insurance shall be made, issued or delivered by any insurer . . . on any property in this state, unless it shall conform as to all provisions, stipulations, agreements and conditions with such form of policy [as set forth at subsection (e) hereof]."

Thus, "to the extent a particular policy omits or detracts from the minimum protections afforded by the standard fire policy, the provisions of the standard policy control and the non-compliant policy is 'enforceable as if it conformed with [the] requirements or prohibitions' of the standard policy" (SR Intl. Bus. Ins. Co. Ltd. v World Trade Ctr. Props., LLC, 381 F Supp 2d 250, 257 [SD NY 2005], quoting Bersani v General Acc. Fire & Life Assur. Corp., 36 NY2d 457, 460 [1975]; see also Lane, 96 NY2d at 5 ["The standard policy is the minimum level of coverage permissible for an insurance company to issue"]).

While the standard policy includes several exclusions, it does not include the policy exclusion upon which defendant relies (or its equivalent). Where, as here, "the subject exclusion impermissibly restricts the coverage mandated by statute" it violates the New York Insurance Law (Lane, 96 NY2d at 5 [an innocent insured cannot be imputed with the liability of another for incendiary acts]).

For these reasons, the court rejects defendant's contentions grounded in the plain language of the policy. The court agrees that the policy exclusion is clear on its face, and does not require an interpretation beyond the plain and ordinary meaning of its terms (State of New York v Home Indem. Co., 66 NY2d 669, 672 [1985]). The court declines to enforce the policy exclusion not because it is unclear, but rather, because it is in violation of Insurance Law § 3404 (e), as such section applies to losses caused by fires. While policy exclusions grounded in negligent entrustment have been held to apply to losses arising out of theft and vandalism (Crown Jewels Estate Jewelry, Inc. v Underwriters at Interest at Lloyd's London, 194 AD3d 514 [1st Dept 2021] [theft loss]; Winking Group, LLC v Aspen Am. Ins. Co., 2018 WL 485974, *1, 2018 US Dist LEXIS 8241, *1 [SD NY, Jan. 18, 2018, 16 Civ. 7401 (LGS)] [vandalism loss]), such exclusions do not apply to losses caused by fire (Insurance Law § 3404 [e]).

In addition to being entitled to judgment as a matter of law as to liability, plaintiff is also entitled to judgment as a matter of law with respect to the value of the damages to the property{**74 Misc 3d at 577} resulting from the fire. It is undisputed that both parties' independent adjusters valued the damages attributed to the fire in amounts that exceed $120,000, which is the policy limit for damage to the building at the property.

In light of the foregoing, it is hereby ordered that plaintiff's application for summary judgment is granted and plaintiff hereby has judgment against defendant in the amount of $120,000 in connection with plaintiff's [*4]first cause of action; and it is further ordered that defendant's cross-application is denied, as moot.