Opinion
01 Civ. 5987 (AJP)
May 14, 2002
OPINION ORDER
Plaintiff St. Paul Insurance Company, as subrogee of Designs by RJR Limited and Mijas Fashion Corp., sues defendant Metro Builders Associates for water damage to Designs/Mijas fabrics. Metro Builders has conceded that its negligence caused the rupture of the water pipe. The remaining issue is the amount of damages to which plaintiff is entitled, and Metro Builders' affirmative defense that Designs/Mijas fraudulently inflated their property damages claim by intentionally ruining their own property after the flood.
Plaintiff has moved for summary judgment for $127,253.98, arguing that defendant has not proved its affirmative defense.
For the reasons set forth below, there are disputed issues of material fact that preclude summary judgment.
DISCUSSION
Defendant's evidence that plaintiff's insureds inflated their insurance claim is largely circumstantial. It is principally based on an alleged statement by Ms. Rahm, the principal of the insureds, that she and Larry Mufson, the owner of the premises, could "make some money off this." (Marinello Dep. at 28, quoting Ms. Rahm.) In addition, Mr. Ramos (an employee of defendant Metro Builders), testified that he overheard the shop owner say, "We can really make a lot of money on this." (Ramos Dep. at 105.) Finally, Mark Holzwarth saw the insureds putting material into piles as "not good," i.e., damaged, that did not appear to him to be damaged. (Holzwarth Dep. at 91-98; see also Ramos Dep. at 96-100.) St. Paul Insurance Company stands in the shoes of its insureds. See, e.g., American Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir. 1999) ("It is clearly established that `an insurer-subrogee stands in the shoes of its insured.'"); Gibbs v. Hawaiian Eugenia Corp., 966 F.2d 101, 106 (2d Cir. 1992) ("Since an insurer-subrogee stands in the shoes of its insured, any defenses that are valid against the insured are also applicable against the insurer."); Farrell Lines Inc. v. Columbus Cello-Poly Corp., 32 F. Supp.2d 118, 126 (S.D.N.Y. 1997), aff'd, 161 F.3d 115 (2d Cir. 1998); Niemann v. Luca, 168 Misc.2d 1023, 1027, 645 N.Y.S.2d 401, 404 (Sup.Ct. Suffolk County 1996). If the insureds inflated their claim, St. Paul cannot recover the inflated amount, even if St. Paul paid that amount. Defendant Metro Builders has presented circumstantial evidence from which a jury could conclude that St. Paul's insureds inflated their losses. The Court therefore denies St. Paul's summary judgment motion.
For discussion of the standards for a summary judgment motion, see, e.g., Hogan v. Metromail, 99 Civ. 1204, 2002 WL 373245 at *11-12 (S.D.N.Y. Mar. 8, 2002) ( cases cited therein).
The Court, however, grants St. Paul summary judgment striking defendant's affirmative defense alleging that St. Paul's investigation of the insurance claim was insufficient. As the Court previously informed the parties, since St. Paul stands in the shoes of its insureds, any "fraud" or improper damage inflation by the insureds provides defendant with a defense to St. Paul's claim. The sufficiency or insufficiency of St. Paul's investigation therefore does not provide defendant with any greater rights or defenses. The "insufficient investigation" defense, therefore, is dismissed.
CONCLUSION
For the reasons set forth above, St. Paul Insurance's summary judgment motion is DENIED, except with respect to dismissal of defendant's "insufficient investigation" defense.
SO ORDERED.