Arch Specialty Insurance Company v. TDL Restoration, Inc.

Background

Arch issued TDL a commercial general liability insurance policy covering March 28, 2016, through March 28, 2017. The initial premium was based on estimated exposure and the policy allowed an audit based on actual exposure during the coverage period. After an audit, Arch determined that TDL owed $171,339 in additional premium and claimed that TDL also owed $6,476.61 in New York taxes and fees, for a total of $177,815.61.

Arch sued TDL for breach of contract, unjust enrichment, and account stated. Arch moved for summary judgment—a decision without a trial when no genuine dispute of important fact requires a trial—on the breach-of-contract and account-stated claims.

TDL initially relied on records that it believed showed payment. During additional discovery, however, TDL admitted that it could not find proof that it had paid the additional premium or taxes and fees and agreed to withdraw that defense. The records were identified as ledger reports from TDL’s insurance broker, not proof of payment.

Breach of Contract

The court held that the insurance policy existed and that Arch performed its obligations under it. The court also held that there was no genuine dispute that TDL failed to pay the amounts due under the policy, satisfying the breach element of Arch’s contract claim.

The remaining question concerned damages. Arch had to show how its audit established the earned premium. After the court found Arch’s original documentation difficult to understand, Arch submitted a supplemental declaration explaining its calculation. The court was able to verify most of the calculation.

The court identified a problem involving an Executive Supervision category added in the audit. The audit report listed $27,500 in actual exposure for that category, but the audit endorsement combined that amount with New York Carpentry exposure and applied the New York Carpentry rates. The policy did not contain the Executive Supervision category or negotiated rates for it. The court held that Arch could not unilaterally decide how to charge for that additional category without properly modifying the contract and obtaining the required agreement.

Because Arch had not established that there was no genuine dispute about the damages amount, the court partially granted and partially denied summary judgment on the breach-of-contract claim. Summary judgment was granted on all aspects of that claim except these issues:

- whether TDL was liable for the Executive Supervision exposure; - what rate would apply if TDL were liable for that exposure; and - the total damages amount in light of those issues.

The court stated that, if the $27,500 Executive Supervision exposure were omitted, TDL would still owe $158,157 in additional premium and $5,978 in taxes and fees. It said it was prepared to amend the order and enter summary judgment for $164,135 if Arch chose to accept that calculation rather than continue litigating the additional exposure. The opinion does not state that the court entered that amended judgment.

Account-Stated Claim

An account stated is a claim based on a debtor’s alleged agreement that a particular amount is due. The court explained that such a claim cannot be used as another way to collect a disputed debt under the same contract.

The court found that Arch’s account-stated claim arose from the same facts and sought the same damages as its breach-of-contract claim. Because the claims were duplicative, the court concluded that TDL could not be held liable on both claims. The court therefore denied summary judgment on Arch’s account-stated claim.

Disposition

Judge Kenneth M. Karas concluded that Arch’s motion for summary judgment was granted in part and denied in part. The court granted summary judgment on the established portions of the breach-of-contract claim, left the Executive Supervision and related damages issues for further resolution, and denied summary judgment on the account-stated claim. The Clerk was directed to terminate the pending motion.