425 WEST MAIN ASSOCIATES LP, Petitioner,
v.
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, Respondent.
Supreme Court, Genesee County.
HENRY J. NOWAK, J.
Petitioner 425 West Main Associates LP (425 West Main) petitions this court to compel an appraisal of its strip mall located at 4152 West Main Street in Batavia, New York. From December 26, 2016 through December 26, 2017, respondent Selective Insurance Company of South Carolina (Selective), insured the property, providing coverage for specified causes of loss or damage. 425 West Main claims that on March 8, 2017, the roof of the premises was damaged as a result of wind and weight of ice and snow, which resulted in further damage to the interior of the premises. The insurance policy at issue provides coverage for such a loss.
425 West Main hired National Fire Adjustment Company, Inc. (NFA) to assist in determining the damage and submitting claims to Selective for replacement of the roof and repair for the interior of the building. After NFA's analysis, 425 West Main claimed damages of more than $530,000.00.
425 West Main's wind damage claim was tendered to Selective on March 22, 2017. Before Selective's inspection of the property, a roofer had already removed the allegedly wind-damaged roofing and made temporary repairs. Selective inspected the roof on March 28, 2017. Associate General Adjuster Craig McNeil indicated that tenants of the property had advised him that they were experiencing leaking and staining of ceiling tiles before the date of loss. Furthermore, a forensic engineer concluded the defects in the roofing system were caused by long-term deterioration as opposed to a wind event.
On April 12, 2017, McNeil sent 425 West Main a detailed letter and the engineering report advising 425 West Main of the basis for covering only a portion of the roof. Selective denied coverage for the full replacement of the roof on the ground that the damage was not caused by wind, but rather wear and tear or deterioration. Selective would only cover the cost to tarp and patch one section of the roof, and replace only the membrane of that section.
On October 24, 2017, 425 West Main demanded an appraisal pursuant to the policy. The policy provides:
If we and you disagree on the value of the property, the extent of the loss or damage or the amount of the loss or damage, either may make a written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser and notify the other of the appraiser selected within twenty days of such demand.
After 425 West Main demanded the appraisal on October 24, 2017, Selective advised 425 West Main in a November 6, 2017 letter that it would not proceed with appraisal. McNeil further claimed that the dispute between Selective and 425 West Main is not subject to the appraisal condition in the policy, because it does not involve the value of the property or the extent or amount of the loss or damage. Instead, the dispute centers on the cause of the loss or damage and whether it is covered under the policy.
425 West Main claims that Selective's refusal is a mere pretext to refuse to engage in the appraisal pursuant to the policy and unnecessarily delay providing 425 West Main the insurance proceeds to which it is entitled. Selective contends that the property is not an appropriate candidate for appraisal because the very legitimacy of 425 West Main's claim remains in dispute. Insurance Law § 3408(c) provides that the appraisal provision in a policy triggers only where there is a "covered loss," and specifically prohibits appraisal to "determine whether the policy actually provides coverage for any portion of the claimed loss or damage" (see also Pilkenton v New York Cent. Mut. Fire Ins. Co., 112 AD3d 1327 [4th Dept 2013]). 425 West Main claims that because Selective agreed to cover a portion of the roof, it constitutes a "covered loss" thereby subjecting Selective to the appraisal provision.
In Louati v State Farm Fire & Cas. Co., 161 AD3d 701, 702 (1st Dept 2018), the parties disputed whether water damage on the floor of a bathroom at the petitioner's premises "was caused by a burst pipe (a covered cause of loss) or by another, excluded cause." The parties also disputed whether it was necessary to retile the entire first floor when the covered loss directly affected only the bathroom (id.). The petitioner sought to conduct an appraisal for the property, all while respondent opposed the appraisal until the cause of the damage could be resolved (id.). The trial court denied the motion to compel the appraisal in order to await resolution of the coverage issues in a plenary action, and the Appellate Division unanimously affirmed (id.).
Similarly, in this action, significant coverage issues exist as to the cause of the loss in this case — whether it was damage created as a result of the windstorm or long-term water infiltration. As in Louati, this court denies the petition to compel the appraisal and dismisses the proceeding without prejudice after resolution of the coverage issues in a plenary action.
Submit order.
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