12-1470-cv
Executive Plaza, LLC v. Peerless Ins. Co.
U NITED S TATES C OURT OF A PPEALS
F OR THE S ECOND C IRCUIT
August Term 2012
(Argued: February 20, 2013 Decided: May 23, 2013)
Docket No. 12-1470-cv
_____________________
E XECUTIVE P LAZA , LLC,
Plaintiff-Appellant,
V.
P EERLESS I NSURANCE C OMPANY ,
Defendant-Appellee.
_____________________
Before:
W INTER , C HIN , and D RONEY , Circuit Judges.
_____________________
Appeal from a judgment of the United States
District Court for the Eastern District of New York
(Seybert, J.) dismissing with prejudice plaintiff-
appellant's complaint seeking, pursuant to an insurance
policy, indemnification for property loss caused by fire.
Q UESTION C ERTIFIED .
_____________________
D AVID T OLCHIN , Jaroslawicz & Jaros LLC, New
York, New York, for Plaintiff-
Appellant.
S COTT D. S TORM , Mura & Storm, PLLC,
Buffalo, New York, for Defendant-
Appellee.
_____________________
C HIN , Circuit Judge:
This case asks us to consider the interplay
between two provisions in a fire insurance policy. One
requires the insured to file suit on the policy within two
years. The second requires the insured, when seeking
replacement costs, to replace the damaged property before
bringing suit, and to complete the replacement work "as
soon as reasonably possible." What happens to insured
property that cannot reasonably be replaced within two
years? As New York case law does not clearly resolve the
question raised by this appeal, we conclude that
certification to the New York State Court of Appeals is
appropriate.
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BACKGROUND
A. The Facts
The facts relevant to this appeal are not in
dispute. Plaintiff-appellant Executive Plaza, LLC
("Executive") owns a building insured at all relevant times
by defendant-appellee Peerless Insurance Co. ("Peerless").
The property was insured by a policy providing up to $1
million of coverage (the "Policy"). On February 23, 2007,
a fire destroyed the building. Executive promptly notified
Peerless of the damage. Within days, Executive had
retained both an architect and a construction company. By
July 2007, Peerless had paid Executive the actual cash
value of the property, $757,812.50, less certain
adjustments.
In the years after the building was originally
erected, zoning laws had changed. To rebuild, Executive
needed a variance and other forms of consent from local
governmental entities. Despite first submitting its
application for review in June 2007, a final building
permit was not granted until November 2008, seventeen
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months later. By October 2010, Executive had
"substantially replaced" the property.
Two Policy provisions are the focus of this
appeal. First, section E.4 required Executive to file suit
to recover unpaid losses within two years of the fire:
No one may bring a legal action against us under
this insurance unless:
a. There has been full compliance with all
of the terms of this insurance; and
b. The action is brought within 2 years
after the date on which the direct
physical loss or damage occurred.
Second, section E.6 of the Policy provided that Peerless
would pay either the actual cash value or the replacement
cost of the property, up to the policy limit. It further
provided that an insured could first receive the actual
cash value of the property and then later seek the
replacement cost. If, however, an insured sought the
replacement cost, section E.6(d)(1)(b) imposed two
additional caveats:
(b) We will not pay on a replacement cost basis
for any loss or damage:
(i) Until the lost or damaged property is
actually repaired or replaced; and
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(ii) Unless the repairs or replacement are
made as soon as reasonably possible after
the loss or damage.
B. Procedural History
On February 23, 2009, before it had completed
rebuilding the property but within the two-year limitations
period, Executive filed suit in New York State Supreme
Court, Nassau County, to recover replacement costs under
the Policy. Peerless removed the case to the Eastern
District of New York on diversity grounds (the "First
Action"). As construction on the property had not yet been
completed, the district court (Wexler, J.) dismissed the
claim as not yet ripe. Executive did not appeal this
decision.
After having substantially replaced the property,
on October 5, 2010, more than two years after the loss,
Executive sent Peerless a demand letter to recover an
additional $242,087.50 (the replacement cost permitted by
the Policy, less what Peerless had already paid). Peerless
rejected the demand. Executive filed suit in New York
State Supreme Court, Nassau County, and Peerless again
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removed the action to the Eastern District of New York on
diversity grounds (the "Second Action"). The district
court below (Seybert, J.) dismissed the Second Action as
time-barred. This appeal followed.
DISCUSSION
Peerless argues that "full compliance" with the
terms of the Policy, see Policy § E.4, requires that
Executive both (1) rebuild the property "as soon as
reasonably possible" but also (2) before the two-year
limitations period for filing suit. By contrast, Executive
contends that it defies logic to require an insured to
fully rebuild an insured property before filing a claim and
to bring suit within two years when rebuilding the property
within two years is not reasonably possible. For the
reasons that follow, we conclude that certification to the
New York State Court of Appeals is appropriate. See
Country Wide Ins. Co. v. Nat'l R.R. Passenger Corp. , 407
F.3d 84, 85-86 (2d Cir. 2005).
A. Applicable Law
Under Second Circuit Local Rule 27.2, we may
"certify a question of state law to that state's highest
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court." Local R. 27.2(a); see also N.Y. Comp. Codes R. &
Regs. tit. 22, § 500.27(a) (allowing courts to certify
"determinative questions of New York law . . . for which no
controlling precedent of the Court of Appeals exists").
Our decision to certify is made after considering three
questions:
(1) whether the New York Court of Appeals has
addressed the issue and, if not, whether the
decisions of other New York courts permit us to
predict how the Court of Appeals would resolve it;
(2) whether the question is of importance to the
state and may require value judgments and public
policy choices; and (3) whether the certified
question is determinative of a claim before us.
Osterweil v. Bartlett, 706 F.3d 139, 142 (2d Cir. 2013)
(quoting Barenboim v. Starbucks Corp., 698 F.3d 104, 109
(2d Cir. 2012)).
B. Application
First, we note that the New York State Court of
Appeals has not resolved this question. It has interpreted
the suit limitations provision alone, see Blitman Const.
Corp. v. Ins. Co. of N. Am., 66 N.Y.2d 820, 822 (1985)
(twelve-month suit limitations clauses was enforceable);
Proc v. Home Ins. Co., 17 N.Y.2d 239, 243-46 (1966)
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(holding that limitations period begins to run on date of
fire), but never the replacement cost provision. 1 More
importantly, however, no controlling precedent interprets
the suit limitations clause in light of the replacement
cost provision.
While we may "predict what the New York Court of
Appeals will do from the decisions of other New York
courts," see Osterweil, 706 F.3d at 143 (quoting Barenboim,
698 F.3d at 109) (internal quotation marks and emphasis
omitted), the few courts to have read the provisions
together have reached different conclusions. Compare Bakos
v. N.Y. Cent. Mut. Fire Ins. Co., 920 N.Y.S.2d 552, 554
(4th Dep't 2011) (mem.) (denying insurer's motion to
dismiss because replacement cost provision was not
1
Based, however, on unanimous authority from the
appellate division, we acknowledge that actual repair of the
property is a condition precedent to recovering on a replacement
cost basis. See, e.g., Todd v. Wayne Coop. Ins. Co., 819
N.Y.S.2d 179, 180 (3d Dep't 2006) ("Under the terms thereof,
replacement cost value cannot be awarded without plaintiff first
actually repairing or replacing the property."); Harrington v.
Amica Mut. Ins. Co., 645 N.Y.S.2d 221, 225 (4th Dep't 1996)
(absent a repair requirement, the replacement cost provision
becomes a "mere wager"); Ferrara v. Ins. Co. of N. Am., 521
N.Y.S.2d 668 (1st Dep't 1987) (mem.) ("unambiguous" replacement
cost provision requires that repairs be made before
indemnification).
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circumscribed by a temporal limitation), with Il Cambio,
Inc. v. U.S. Fid. & Guar. Co., 920 N.Y.S.2d 305, 305-06
(1st Dep't 2011) (insured barred from asserting a
replacement cost claim when it had not rebuilt insured
property and because complaint was barred by two-year
limitations period). Hence, we conclude that the cases
available provide little predictive value as to how the
Court of Appeals would resolve this issue. Cf. Amerex
Grp., Inc. v. Lexington Ins. Co., 678 F.3d 193, 200 (2d
Cir. 2012) (where precedents can sufficiently support a
determination, we need not certify).
Second, the question certified implicates
important matters of state law. These include identifying
the contours of property insurance policies, see Georgitsi
Realty, LLC v. Penn-Star Ins. Co., 702 F.3d 152, 158-59 (2d
Cir. 2012), and the state's "strong interest in supervising
highly regulated industries," Benesowitz v. Metro. Life
Ins. Co., 471 F.3d 348, 352 (2d Cir. 2006); see also Golden
v. Winjohn Taxi Corp., 311 F.3d 513, 524 (2d Cir. 2002)
(interpreting insurance relationships in the highly -
regulated taxicab industry). Moreover, the policy here
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insures against fire-related losses, and the legislature's
codification of a standard fire insurance policy --
creating a floor for fire insurance coverage throughout New
York State -- underscores its concern for coverage in this
field. N.Y. Ins. Law. § 3404(e), (f)(1)(A); see also Dean
v. Tower Ins. Co. of N.Y., 19 N.Y.3d 704, 709 (2012).
State courts, we believe, are better equipped to consider
the ramifications of these issues.
Third, the question we certify is purely legal,
and an answer would resolve this appeal. If the Court of
Appeals were to decide that the suit limitations clause and
the replacement value provision, read together, were
unenforceable as a matter of public policy, then we would
be obliged to remand to the district court to determine
whether Executive rebuilt the insured property "as soon as
reasonably possible." Policy § E.6(d)(1)(b); cf. Bersani
v. Gen. Accident Fire & Life Assurance Corp., 36 N.Y.2d
457, 460 (1975) (agreements that violate public policy are
unenforceable). If, however, the Court of Appeals were to
decide that, read together, the provisions raise no such
concerns and unambiguously require that an insured property
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be rebuilt within a reasonable time that in no event
exceeds two years, then Executive's claim would be
foreclosed. Finally, the Court of Appeals may conclude
that the suit limitations clause and the replacement cost
provision, read together, create an ambiguity. Depending
on whether (and, if so, how) the court resolves the
ambiguity, we would remand for further proceedings in the
district court or decide the appeal, as appropriate.
CONCLUSION
Accordingly, we reserve decision and respectfully
certify the following question to the New York State Court
of Appeals:
If a fire insurance policy contains
(1) a provision allowing reimbursement of
replacement costs only after the property
was replaced and requiring the property to
be replaced "as soon as reasonably possible
after the loss"; and
(2) a provision requiring an insured to bring
suit within two years after the loss;
is an insured covered for replacement costs if the
insured property cannot reasonably be replaced
within two years?
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We invite the New York State Court of Appeals to expand or
reformulate the certified question as it deems appropriate.
This panel retains jurisdiction and will consider any
issues that remain on appeal after the New York State Court
of Appeals has either offered its guidance or declined
certification.
CERTIFICATE
The following question is hereby certified to the
Court of Appeals of the State of New York pursuant to
Second Circuit Local Rule 27.2 and New York Codes, Rules,
and Regulations, Title 22, § 500.27(a), as ordered by the
United States Court of Appeals for the Second Circuit:
If a fire insurance policy contains
(1) a provision allowing reimbursement of
replacement costs only after the property
was replaced and requiring the property to
be replaced "as soon as reasonably possible
after the loss"; and
(2) a provision requiring an insured to bring
suit within two years after the loss;
is an insured covered for replacement costs if the
insured property cannot reasonably be replaced
within two years?
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