Annal Management Co., Ltd. v. Travelers Excess and Surplus Lines Company

Background

Annal Management owned a multi-story residential apartment building. Travelers issued an insurance policy covering February 25, 2017, through February 25, 2018. The policy set the maximum liability for one occurrence at 110% of the building’s value and provided possible additional coverage of up to $500,000 for “Debris Removal.” That provision covered necessary and reasonable expenses to remove debris from covered property when caused by a covered loss during the policy period.

A fire on December 28, 2017, damaged part, but not all, of the property. Travelers paid the full policy limit for covered physical loss or damage to the building. Annal Management also paid $338,961.17 for debris removal, including costs to cart away and dispose of material removed or dismantled from the building, dumpsters, and supervisory labor. Annal Management claimed another $161,038.83 for tearing off and dismantling debris that remained attached to the fire-damaged building. Travelers admitted that demolition was necessary to remove the debris from the site but refused to pay those costs.

The parties’ motions

The parties filed cross-motions for summary judgment under Rule 56. Neither disputed the relevant facts. The dispute was whether dismantling the damaged building constituted “Debris Removal” under the policy.

Travelers argued that the costs of physically detaching material from the building were demolition costs, not debris-removal expenses. It also argued that Annal Management had to establish that the claimed costs fell within the policy’s coverage. Annal Management argued that debris could not be removed without first tearing it off or dismantling it, so the necessary labor and equipment were covered.

Court’s analysis

Applying New York contract-interpretation law, the court explained that an insurance policy must be interpreted according to the parties’ intent as expressed in its clear language. A disagreement between the parties does not by itself make policy language ambiguous. Although the policy did not define “debris” or “removal,” the court found its terms somewhat vague but not ambiguous.

The court held that a commonsense reading of “Necessary,” “Debris,” and “Removal” included dismantling unusable and damaged material still attached to the building. Travelers’ interpretation would have limited coverage to items already detached from the building, even though the policy contained no such limitation. The court reasoned that debris often cannot be removed without first extracting it from the structure, and that the necessary expenses for that process therefore fell within the debris-removal provision.

The court declined to follow the reasoning of a District of New Jersey decision involving similar facts. It concluded that the other decision did not control and that the policy language here should be given its ordinary meaning. The court also stated that Travelers could have clarified the policy if it intended a narrower definition of debris removal.

Disposition

Judge George B. Daniels denied Travelers’ motion for summary judgment and granted Annal Management’s motion for summary judgment. The Clerk of Court was directed to close the motions.