Archdiocese of N.Y. v. Century Indem. Co.

2025 NY Slip Op 31673(U)

• Court: New York Supreme Court, New York County
• Decided: May 6, 2025
• Docket: Index No. 652825/2023
• Status: Unpublished

Opinion

Archdiocese of N.Y. v Century Indem. Co. 2025 NY Slip Op 31673(U) May 6, 2025 Supreme Court, New York County Docket Number: Index No. 652825/2023 Judge: Lori S. Sattler Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. FILED: NEW YORK COUNTY CLERK 05/07/2025 12:35 PM INDEX NO. 652825/2023 NYSCEF DOC. NO. 407 RECEIVED NYSCEF: 05/07/2025

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 02M -----------------------------------------------------------------------------------X The Archdiocese of New York et al INDEX NO. 652825/2023

Plaintiff, MOTION DATE 08/16/2024 -v- MOTION SEQ. NO. 011 Century Indemnity Company, as successor to CCI Insurance Company, as successor to Insurance Co. of North America and as successor to Indemnity Insurance Company of North America et al DECISION + ORDER ON MOTION Defendant. -----------------------------------------------------------------------------------X

HON. LORI S. SATTLER:

The following e-filed documents, listed by NYSCEF document number (Motion 011) 133, 134, 135, 136, 137, 138, 177, 193, 194, 195, 208 were read on this motion to/for DISMISS .

Defendants Century Indemnity Company, Insurance Company of North America,

Indemnity Insurance Company of North America, Great Northern Insurance Company,

Westchester Fire Insurance Company, Pacific Employers Insurance Company, Federal Insurance

Company, Illinois Union Insurance Company, and Vigilant Insurance Company (collectively the

“Moving Insurers”) move to dismiss, pursuant to CPLR 3211(a)(7), plaintiffs’ the Archdiocese

of New York and its associated policyholders (collectively the “Archdiocese”) sixth cause of

action, alleging breach of the covenant of good faith and fair dealing, and seventh cause of

action, alleging violations of General Business Law (“GBL”) § 349. The Archdiocese opposes

the motion.

This is a declaratory judgment action in which the parties seek a determination of the

scope of insurance coverage owed by the Moving Insurers and other defendants to the

Archdiocese. Between 1956 and 2003, the Archdiocese purchased certain general and excess 652825/2023 THE ARCHDIOCESE OF NEW YORK ET AL vs. CENTURY INDEMNITY COMPANY, Page 1 of 11 AS SUCCESSOR TO CCI INSURANCE COMPANY, AS SUCCESSOR TO INSURANCE CO. OF NORTH AMERICA AND AS SUCCESSOR TO INDEMNITY INSURANCE COMPANY OF NORTH AMERICA ET AL Motion No. 011

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liability insurance policies (the “subject policies”) from the Moving Insurers. In 2019 and 2022,

New York enacted the Child Victims Act (“CVA”) and Adult Survivors Act, respectively. These

statutes provided for a revival period in which survivors of alleged sexual abuse could bring civil

lawsuits that would otherwise have been time-barred by the statute of limitations. Since the

statutes’ enactment, nearly 1,700 lawsuits have been brought against the Archdiocese alleging

sexual abuse by members of the clergy and other employees against people, many of them

minors, at the Archdiocese’s churches, schools, and other facilities during the period in which

the subject policies were in effect (collectively the “underlying claims”) (NYSCEF Doc. No.

196, Amended Complaint § 578).

The Moving Insurers have agreed to defend the Archdiocese in the underlying claims,

subject to a reservation of rights. The Archdiocese maintains that it is entitled to indemnification

from the Moving Insurers under the subject policies for liabilities it may incur from judgments or

settlements in the underlying claims. It claims that the subject policies cover the types of injuries

alleged in the underlying claims, namely the negligent hiring, supervision, or retention of

individuals that physically or sexually abused individuals during the periods in which the subject

policies were in effect (id. § 564-568, 583). However, the Moving Insurers have denied

coverage for the Archdiocese’s liabilities, despite having initially agreed to defend them, on the

grounds that the abuse alleged “was expected and/or intended from the standpoint of the

Archdiocese” (id. §§ 586-589).

The Archdiocese maintains that the Moving Insurers’ denial of coverage has undermined

its efforts to settle the underlying claims, as the Moving Insurers have engaged in a “wait and

see” strategy wherein they refuse to participate in mediation with claimants, grant settlement

authority to resolve certain underlying claims, waive consent to settle provisions in the subject

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policies, or indemnify the Archdiocese for settlement payments it has made (id. §§ 588, 616,

619, 622, 625-626). It alleges that the Moving Insurers have engaged in a pattern of

obstructionist behavior over the timely and fair resolution of claims to safeguard their own

financial interests to the detriment of their policyholders (id. §§ 597-603, 608-612).

The Moving Insurers initiated this declaratory judgment action in June 2023 to resolve

the coverage dispute. The caption was amended on July 30, 2024, pursuant to a so-ordered

stipulation in which the Archdiocese and its affiliates were designated as plaintiffs, and the

Moving Insurers and other insurers were designated as defendants (NYSCEF Doc. No. 120).

The Archdiocese’s operative pleading (NYSCEF Doc. No. 196) is therefore referred to as the

“Amended Complaint” in this decision.

The Moving Insurers and Archdiocese seek competing declaratory judgments about the

scope of the subject policies’ coverage for the underlying claims. The Moving Insurers seek a

declaration that they have no duty to cover the underlying claims to the extent that, inter alia, the

damages were the result of negligence the Archdiocese expected or intended or were otherwise

subject to policy exclusions. The Archdiocese seeks a declaratory judgment directing, inter alia,

that the Moving Insurers are obligated to pay all defense costs and to indemnify all settlements

and judgments for each of the underlying claims.

The Archdiocese seeks damages from the Moving Insurers in its fifth, sixth, and seventh

causes of action. These claims respectively assert theories of breach of contract, breach of the

implied covenant of good faith and fair dealing based on the Moving Insurers’ alleged bad faith,

and violation of General Business Law (“GBL”) § 349 based on the Moving Insurers’ alleged

deceptive acts and practices. The Moving Insurers now move to dismiss the breach of covenant

and GBL § 349 claims for failure to state a cause of action pursuant to CPLR 3211(a)(7).

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On a motion to dismiss pursuant to CPLR 3211, “the allegations in the complaint are to

be afforded liberal construction, and the facts alleged therein are to be accepted as true,

according a plaintiff the benefit of every possible favorable inference and determining only

whether the facts alleged fit within any cognizable legal theory” (M&E 73-75 LLC v 57 Fusion

LLC, 189 AD3d 1, 5 [1st Dept 2020]; see also Leon v Martinez, 84 NY2d 83, 87-88 [1994]). “A

motion to dismiss under CPLR 3211(a)(7) for failure to state a cause of action must be denied if

the factual allegations contained within the four corners of the pleading manifest any cause of

action cognizable at law” (M&E 73-75 LLC, 189 AD3d at 5).

The Archdiocese’s sixth cause of action alleges that the Moving Insurers breached the

implied covenant of good faith and fair dealing by acting in bad faith to deprive it of the benefit

of the bargain of the subject policies. It claims that the Moving Insurers’ bad faith consisted of

their placing of their own financial interests above that of policyholders by attempting to delay

coverage decisions related to the underlying claims by employing a “wait-and-see” strategy,

which extended to Moving Insurers’ unfair claim settlement practices such as their purported

refusal to participate in mediations and settlement discussions or to provide consent to

settlements (Amended Complaint §§ 666-668).

The covenant of good faith and fair dealing “embraces a pledge that ‘neither party shall

do anything which will have the effect of destroying or injuring the right of the other party to

receive the fruits of the contract’” (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d

144, 153 [2022], quoting Dalton v Educ. Testing Serv., 87 NY2d 384, 389 [1995]). The

covenant encompasses “any promises which a reasonable person in the position of the promisee

would be justified in understanding were included” (id., quoting Rowe v Great Atl. & Pac. Tea

Co., 46 NY2d 62, 69 [1978]), but cannot be used to imply an obligation “which would be

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inconsistent with other terms of the contractual relationship” (id., quoting Murphy v Am. Hom.

Prods. Corp., 58 NY2d 293, 304 [1983]). A cause of action for breach the implied covenant

may be found where an insurer is alleged to have frustrated the purpose of an insurance policy,

such as in Rockefeller Univ. v Aetna Cas. & Sur. Co., where it was found that the plaintiff

policyholder stated a distinct cause of action for breach of the covenant of good faith and fair

dealing in a CVA coverage dispute (231 AD3d 457 [1st Dept 2024]). There, the court found that

the pleading “sufficiently alleged that defendant insurers’ wait and see strategy and claims

handling practices were employed to limit defendants’ financial exposure, in gross disregard of

plaintiff’s interests” (id. at 458).

The Moving Insurers first argue that this claim should be dismissed as duplicative of the

Archdiocese’s fifth cause of action for breach of contract. A cause of action for breach of the

covenant of good faith and fair dealing is duplicative of a breach of contract claim when both

claims are “based on the same allegations and seek the same damages” (Tillage Commodities

Fund, L.P. v SS&C Tech., Inc., 151 AD3d 607, 608 [1st Dept 2017], quoting Ullmann-Schneider

v Lacher & Lovell-Taylor, P.C. [1st Dept 2014]). A breach of covenant claim will not be found

duplicative where there is only “some overlap in the facts alleged” and where “it relies upon

different facts and seeks different damages from the contract claim” (New York Botanical

Garden v Allied World Assur. Co. (U.S.), 206 AD3d 474, 476 [1st Dept 2022]).

The Court finds that the breach of covenant cause of action is not duplicative of the

breach of contract claim. Although there is partial overlap in the facts asserted in support of each

claim, both also rely on distinct factual allegations. The breach of covenant claim is premised on

the Moving Insurers’ alleged bad faith in handling the underlying claims, including employment

of a “wait-and-see” strategy and elevation of their own financial interests above those of the

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insured (Amended Complaint § 666). The bad faith claim alleges unfair claim settlement

practices including, inter alia, “denying coverage based on meritless and untimely defenses,

rejecting the policyholders’ requests to participate in underlying mediations and settlement

discussions . . . [and] refusing to provide consent to any underlying settlements” (id. § 667). The

Amended Complaint further alleges bad faith actions by the Moving Insurers’ attempt to

“intimidate the policyholders into abandoning coverage or accepting reduced coverage by

initiating coverage litigation” while the Archdiocese was defending the underlying claims and by

taking positions in the coverage litigation “antithetical to the duty to defend” that risked

“reducing the . . . defense of the Underlying Claims” (id.). In contrast, the Archdiocese’s breach

of contract cause of action is premised on the Moving Insurers’ alleged breached or anticipatory

repudiation of the subject policies by refusing to indemnify for the Archdiocese for liabilities

incurred in connection with the underlying claims, rather than merely the Moving Insurers’

alleged refusal to participate in or hindrance of settlements (id. § 659).

The fifth and sixth causes of action also allege distinct damages. The breach of covenant

claim seeks recovery of consequential damages that include “pre- and post-judgment interest on

the amount owed under the [Moving Insurers’] Policies,” the costs incurred by the Archdiocese

because of the Moving Insurers’ alleged “delay, obstruction, and unfair claim settlement

practices, including . . . attorneys’ fees and costs responding to the [Moving] Insurers’ coverage

lawsuit” (id. § 671). In contrast, the breach of contract claim seeks damages for “the amount of

any settlements and/or judgments that the Archdiocese and the Associated Policyholders have

incurred or will be forced to incur without the benefit of the coverage owed by the [Moving]

Insurers, including . . . the amounts of . . . settlements that the Archdiocese and Associated

Policyholders were forced to self-fund without the benefit of insurance” (id. § 661).

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In the alternative, the Moving Insurers argue that the Archdiocese’s Amended Complaint

fails to state a cause of action for breach of the implied covenant due to bad faith because it fails

to adequately plead that the Moving Insurers acted with gross disregard towards its interests. To

state a cause of action for breach of the implied covenant in the context of a claim of bad faith in

the insurance context, a plaintiff must allege “that the insurer’s conduct constituted a ‘gross

disregard’ of the insured’s interests – that is, a deliberate or reckless failure to place on equal

footing the interests of its insured with its own interests when considering a settlement offer”

(Pavia v State Farm Mut. Auto Ins. Co., 82 NY2d 445, 453 [1993]).

Here, the Archdiocese alleges that the Moving Insurers “grossly disregarded their

policyholders’ interests and repeatedly sought to elevate their own interests to the serious

detriment of the Archdiocese” (Amended Complaint § 668). Its Amended Complaint states that

the Moving Insurers’ gross disregard was evident in their unfair claim settlement practices that

included, inter alia, rejecting requests to participate in mediation and settlement discussions,

refusing to consent to any underlying settlements, and refusing to honor their obligations to fund

settlements (id. §§ 608-612, 622, 667). It claims that, in acting in this manner, the Moving

Insurers improperly elevated their “own financial interests and industry concerns” over their

obligations to the policyholders (id. §§ 666). The Moving Insurers’ argument that the Appellate

Division, First Department’s decision reinstating certain of their declaratory judgment claims

forecloses the bad faith cause of action is unavailing, as that decision merely found that the

defendants adequately pled the reinstated claims. The Court therefore finds that the Archdiocese

adequately pleads gross disregard in support of its breach of implied covenant claim (cf.

Rockefeller, 231 AD3d at 458). The branch of the motion seeking dismissal of the

Archdiocese’s sixth cause of action is accordingly denied.

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The Archdiocese’s seventh cause of action alleges that the Moving Insurers violated GBL

§ 349, which makes unlawful “[d]eceptive acts or practices in the conduct of any business, trade

or commerce or in the furnishing of any service” (GBL § 349[a]). This claim alleges that the

Moving Insurers engaged in deceptive business practices through their bad-faith handling of the

underlying claims and the claims of similarly-situated policyholders facing CVA lawsuits. A

party states a cause of action under the statute by alleging that “(1) the defendant's conduct was

consumer-oriented; (2) the defendant's act or practice was deceptive or misleading in a material

way; and (3) the plaintiff suffered an injury as a result of the deception” (Himmelstein,

McConnell, Gribben, Donoghue & Joseph, LLP v Matthew Bender & Co., 37 NY3d 169, 176

[2021]).

The Moving Insurers argue that the Archdiocese fails to adequately plead any “consumer-

oriented” conduct, as this case is a private insurance dispute concerning a series of private

contracts. “[A]n act or practice is consumer-oriented when it has ‘a broader impact on

consumers at large’ (id. at 177, quoting Oswego Laborers’ Local 214 Pension Fund v Marine

Midland Bank, 85 NY2d 20, 25-27 [1995]). This element plainly excludes “[p]rivate contract

disputes, unique to the parties,” and is rather focused on “the seller’s deception and its

subsequent impact on consumer decision-making, not on the consumer’s ultimate use of a

product” (id.).

Here, the Archdiocese’s Amended Complaint specifically alleges that the subject policies

are either “standard form general liability insurance policies” or excess liability policies that

“follow form to the underlying primary policies or use substantially similar policy language in all

material respects” (Amended Complaint §§ 565, 568). It further alleges that “the same standard

form policies [the Moving Insurers] sold to the Archdiocese . . . were also sold to other

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policyholders” (id. § 570). The Court therefore finds that the Archdiocese adequately alleges

consumer-oriented behavior as the subject policies are alleged to have been standard form

policies “provided to multiple consumers” (Rockefeller Univ., 231 AD3d at 459, citing Acquista

v New York Life Ins. Co., 285 AD2d 73, 83 [1st Dept 2001]; Himmelstein, 37 NY3d at 177).

The Moving Insurers next argue that the Amended Complaint fails to allege any

deceptive acts or practices, because it does not set forth any actions that would be materially

misleading to a reasonable consumer. Rather, they argue that the Amended Complaint merely

alleges that they took actions “consistent with their legitimate coverage positions” and that,

rather than allege deception, the facts in the pleading show that it took efforts to explain their

coverage positions to the Archdiocese (NYSCEF Doc No. 138, Moving Insurers’ Memorandum

of Law at 20-21).

Deceptive acts and practices are objectively defined as “representations or omissions”

that are “likely to mislead a reasonable consumer acting reasonably under the circumstances”

(Oswego, 85 NY2d at 26; see also Himmelstein, 37 NY3d at 178; Gaidon v Guardian Life Ins.

Co. of Am., 94 NY2d 330, 344 [1999]). “What is objectively reasonable depends on the facts

and context of the alleged misrepresentations and ‘may be determined as a matter of law or fact

(as individual cases require)’” (Himmelstein, 27 NY3d at 178, quoting Oswego, 85 NY2d at 26).

The Court finds that the Amended Complaint sufficiently alleges materially misleading

acts or practices on the part of the Moving Insurers. The Archdiocese’s core allegation as to this

claim is that the Archdiocese purchased the subject policies from the Moving Insurers that it

expected would cover the defense and liabilities of the type faced in the underlying claims and

that, contrary to these expectations, the Moving Insurers engaged in a pattern of bad faith

conduct to delay the resolution of claims and deny coverage. This alleged conduct occurred

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despite the subject policies’ alleged coverage of bodily injury claims arising out of negligent

hiring, supervision, or retention, the Moving Insurers’ historical coverage of sexual abuse claims

asserting such theories against the Archdiocese before the CVA’s 2019 enactment, and “decades

of public statements” from the Moving Insurers to their customers about the scope their coverage

(Amended Complaint §§ 6-18).

The Amended Complaint supports these allegations by setting forth at length specific acts

and practices undertaken by the Moving Insurers in alleged bad faith to avoid their obligations to

the Archdiocese and which would tend to deceive a reasonable consumer. These include, inter

alia: the Moving Insurers’ failure to investigate the underlying claims in a reasonable time,

demanding unnecessary or unavailable documentation from the Archdiocese, delaying their

coverage position, refusing to effectuate settlement of the underlying claims, withholding

consent to settle, and ceasing payment of the defense and settlement of the underlying claims

(Amended Complaint § 678). Taken together, these allegations sufficiently allege conduct that

would be materially misleading to “a reasonable consumer acting reasonably under the

circumstances” (Himmelstein, 37 NY3d at 178). The Court therefore finds that the Archdiocese

adequately pleads the second element of GBL § 349.

The Moving Insurers last argue that the Amended Complaint fails to sufficiently allege

any injury caused by their purportedly deceptive acts, as it does not allege independent damages

or how the Archdiocese relied on any of the Moving Insurers’ acts or practices such that they

could be said to have caused the injury. To sustain a claim under GBL § 349, a plaintiff must

allege that “‘a material [sic] deceptive act or practice caused actual, although not necessarily

pecuniary, harm’” (Small v Lorillard Tobacco Co., 94 NY2d 43, 56 [1999], quoting Oswego, 85

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NY2d at 26). However, “[j]ustifiable reliance by the plaintiff is not an element of the statutory

claim” (Koch v Acker, Merrall & Condit Co., 18 NY3d 940, 941 [2012] [emphasis added]).

The Court finds that the Archdiocese sufficiently alleges independent injury caused by

the Moving Insurers’ alleged deceptive acts and practices. Here, the Archdiocese alleges that it

and other similarly situated policyholders were injured by the Moving Insurers’ deceptive “wait-

and-see” strategy in relation to CVA claims (Amended Complaint §§ 675-680; cf. Rockefeller,

231 AD3d at 458 [“Plaintiff has sufficiently pleaded independent injury, alleging that defendant

insurers violated the statute by engaging in a deceptive wait-and-see strategy that has damaged

plaintiff and potentially other policyholders, sexual abuse survivors, and the insurers’

investors”]). It further alleges that it has sustained actual injuries from the purportedly deceptive

conduct by being forced to pay out-of-pocket for settlements that the Moving Insurers should

have covered pursuant to the subject policies (Amended Complaint §§ 613-626). The branch of

the motion seeking dismissal of the Archdiocese’s seventh cause of action alleging violations of

GBL § 349 is therefore denied.

Accordingly, it is hereby:

ORDERED that the motion is denied in its entirety.

This constitutes the Decision and order of the Court.

5/6/2025 $SIG$ DATE LORI S. SATTLER, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION

□ GRANTED X DENIED GRANTED IN PART OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

□ CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE

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