Exist, Inc. v. Tokio Marine America Insurance Company

Background

Exist, an apparel wholesaler, insured its Florida warehouse and merchandise under a policy issued by Tokio Marine. The policy covered physical loss or damage from external causes, including floods. After a December 19, 2019 flood, Exist reported approximately $2.6 million in damaged merchandise.

Tokio Marine retained an independent surveyor and then Belfor Property Restoration to inspect and inventory the damaged goods. Belfor subcontracted the physical inventory work to Oceanside Labor, whose workers created a handwritten inventory while damaged merchandise was removed and discarded. The inventories contained missing, illegible, inconsistent, and apparently incorrect product numbers. The parties also disputed the number of damaged items: Exist counted 366,411 items, while later inventories counted substantially fewer.

Tokio Marine ultimately paid Exist $1,014,035.40, excluding items it knew were damaged but could not match to Exist’s purchase or sales records. Exist sued for breach of the insurance policy, breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, fraud, civil conspiracy, violation of New York General Business Law § 349, and punitive damages. The parties filed cross-motions for summary judgment, meaning each asked the court to decide claims without a trial because it believed no material facts were genuinely disputed.

Insurance-policy claim

The court applied New York law to the contract claim. Although the policy required suit within one year after the accident, the court held that limitation period unenforceable under the circumstances. Tokio Marine did not finish authenticating and adjusting the claim until more than one year after the flood, so Exist did not yet have a factual basis for challenging the adjustment when the contractual period expired. The court instead applied New York’s six-year limitations period and found the claim timely.

The court granted Exist’s motion for summary judgment on liability for breach of the policy. It found no genuine dispute that Tokio Marine failed to properly authenticate and adjust the loss and failed to pay for all covered damaged goods. The court relied on the flawed inventory process, the unexplained reduction in the item count, the inability to match many damaged goods to Exist’s records, and Tokio Marine’s payment of zero for goods it knew were damaged but could not match because of inventory errors.

The court rejected Exist’s separate argument that Tokio Marine breached the policy by failing to ensure destruction of all damaged goods. The policy placed control of damaged goods with Exist and required destruction in the presence of a Tokio Marine representative only when both parties agreed that disposal or sale was detrimental. The court held that Exist, not Tokio Marine, bore the ultimate duty to ensure destruction.

Other claims and damages

The court dismissed Exist’s claim for breach of the implied covenant of good faith and fair dealing as redundant because it relied on the same conduct underlying the express breach-of-policy claim.

The court granted Tokio Marine summary judgment on unjust enrichment. The evidence did not reasonably show that Tokio Marine or the other relevant entities unlawfully took, sold, or retained the benefit of Exist’s merchandise. The court also granted Tokio Marine summary judgment on conversion, fraud, and civil conspiracy to commit either tort. Applying Florida law to those claims, the court found insufficient evidence that the defendants took the goods without authorization, knowingly made false statements, intended to induce reliance, or agreed to commit either tort.

The court granted Tokio Marine summary judgment on Exist’s claim under New York General Business Law § 349 because the evidence did not reasonably support a finding of materially deceptive or misleading conduct. It also rejected Exist’s request for punitive damages because the court had granted summary judgment on all of Exist’s tort claims, leaving no independent tort that could support such an award.

The court did not award Exist the requested $1,607,917.31 in compensatory damages or $9,733,439.23 in consequential damages. Genuine factual disputes remained about the number and value of covered goods and whether the goods should be valued at purchase cost or selling price after deducting applicable costs, expenses, and discounts. The court therefore denied the parties’ motions in all other respects and ordered the parties to proceed to trial on compensatory and consequential damages owed for Tokio Marine’s breach of the policy.

Disposition

The court granted Exist’s motion for summary judgment on its breach-of-policy claim; dismissed the implied-covenant claim; granted Tokio Marine’s motion for summary judgment on the unjust-enrichment, fraud, conversion, civil-conspiracy, General Business Law § 349, and punitive-damages claims; and denied the parties’ motions in all other respects.