Court Opinion

ID: 9959917
Source: CourtListenerOpinion
Date Created: 2024-04-12 20:12:16.172613+00
Date Added: 2024-06-11T08:18:59.691411
License: Public Domain

Zurich Am. Ins. Co. v Providence Capital LLC
               2024 NY Slip Op 31202(U)
                      April 6, 2024
           Supreme Court, New York County
        Docket Number: Index No. 656376/2020
                  Judge: Andrea Masley
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
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                       publication.
                                                                                                                        INDEX NO. 656376/2020
  NYSCEF DOC. NO. 249                                                                                             RECEIVED NYSCEF: 04/06/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
            ----------------------------------------------------------------------------------- X

             ZURICH AMERICAN INSURANCE COMPANY,                                                     INDEX NO.         656376/2020

                                                          Plaintiff,
                                                                                                    MOTION DATE
                                                - V -
                                                                                                    MOTION SEQ. NO.        008
             PROVIDENCE CAPITAL LLC, SHERLE WAGNER
             INTERNATIONAL LLC,
                                                                                                     DECISION+ ORDER ON
                                                          Defendants.                                      MOTION
            ----------------------------------------------------------------------------------- X

            HON. ANDREA MASLEY:

            The following e-filed documents, listed by NYSCEF document number (Motion 008) 109, 110, 111, 112,
            113,114,115,132,135,143,144,145,146,156,157
            were read on this motion to/for                                                 DISMISS DEFENSE

            Upon the foregoing documents, it is

                      In motion sequence number 008, defendants Providence Capital LLC

            (Providence) and Sherle Wagner International LLC (Sherle) move, pursuant to CPLR

            3211 (b), to dismiss plaintiff Zurich American Insurance Company's (Zurich) seventh

            affirmative defense to defendants' counterclaims - "Rhode Island General Laws are not

            applicable to this litigation." (NYSCEF 10, Answer to Counterclaims ,i 68.)

            Background

                      Plaintiff Zurich is an insurance company, incorporated in New York with a

            principal place of business in Schaumburg, Illinois. (NYSCEF 220, Amended Complaint

            ,i 4; NYSCEF 222, Answer to Amended Complaint with Counterclaims [Answer] ,i 4

            [admitting allegation upon information and belief].) Defendant Providence is authorized

            to do business in New York and has a principal place of business in Providence, Rhode

            Island. (NYSCEF 220, Amended Complaint ,i 5; NYSCEF 222, Answer ,i 5; NYSCEF
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             Motion No. 008

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            110, Geoffroy 1 aff ,i 2.) Defendant Sherle is authorized to do business in New York and

            has a principal place of business in New York. 2 (NYSCEF 220, Amended Complaint ,i

            6; NYSCEF 222, Answer ,i 6.)

                   Zurich issued a first-party property insurance policy to Providence, effective

            October 1, 2018 to October 1, 2019 (Policy). (NYSCEF 220, Amended Complaint ,i 9;

            NYSCEF 222, Answer ,i 9; NYSCEF 38, Policy3 .) The Policy consists of property

            portfolio protection issued by Zurich and general liability coverage issued by nonparty

            American Guarantee and Liability Insurance Company. (NYSCEF 112, Policy Excerpts

            at 3.) The Policy's Schedule of Locations includes 20 different property locations in six

            different states, 10 in Rhode Island, 6 in Massachusetts, and 1 in each of Florida, New

            York, California, and Texas. (Id. at 5-6.)

                    On February 1, 2019, Sherle notified Zurich of a property damage claim due to a

            burst pipe at 1176 Second Avenue, New York, New York 10021. (NYSCEF 220,

            Amended Complaint ,i,i 11-12; NYSCEF 2, Answer ,i,i 11-12.) On July 26, 2019,

            defendants submitted a sworn statement in proof of loss, claiming damages of

            1 Vincent Geoffroy is the manager of Providence.     (NYSCEF 110, Geoffroy aff ,i 2.)
            According to Geoffroy, "[a]II of the many entities insured under the Policy, including
            [Sherle], are companies for which Providence operationally functions as a parent
            company." (Id. ,i 4.)
            2
              Zurich alleges that Sherle has a principal place of business at 699 Madison Avenue,
            4th Floor, New York, New York 10065. (NYSCEF 220, Amended Complaint ,i 6.) In
            their answer, defendants state that "Sherle Wagner operated its principal place of
            business at 1176 2nd Avenue, New York, New York, consisting of office and retail
            space, prior to the catastrophic losses suffered at that location which give rise to this
            action. Subsequent to those losses, Sherle Wagner has operated a sales office located
            at 699 Madison Avenue, 4th Floor, New York, New York." (NYSCEF 222, Answer ,i 6.)
            3
              Defendants submit only excerpts of the Policy in connection with this motion.
            (NYSCEF 112.) A full copy of the Policy was previously filed by Zurich in connection
            with motion sequence number 003. (NYSCEF 38.)
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             Motion No. 008

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            $8,264,129.85 and extra expenses of $792,729. (NYSCEF 220, Amended Complaint

            ,m 15, 17; NYSCEF 222, Answer,i,i 15, 17.) On June 17, 2020, defendants submitted
            a revised sworn statement in proof of loss claiming damages of $8,655,624 and extra

            expenses of $1,358,052. (NYSCEF 220, Amended Complaint ,i,i 21, 23; NYSCEF 222,

            Answer ,i,i 21, 23.) Zurich conducted its own investigation of the damages and

            determined that $1,192,134 is owed under the Policy, which Zurich has paid out.

            (NYSCEF 220, Amended Complaint ,i,i 41-42; NYSCEF 222, Answer ,i,i 41-42 4 .)

            Zurich seeks "a declaration that (absent breach of contract for Concealment,

            Misrepresentation or Fraud), its liability under the Policy for Defendants' claim is limited

            to $1,192, 134." (NYSCEF 220, Amended Complaint ,i 48.) It also alleges four

            additional claims for breach of contract seeking return of the monies it paid out to

            defendants. (Id. ,i,i 49-75.)

                      On January 14, 2021, defendants filed an answer, asserting counterclaims for

            breach of contract and violation of Rhode Island General Laws§ 9-1-33. (NYSCEF 2,

            Original Answer ,i,i 45-55.) On February 1, 2021, Zurich filed its answer to defendants'

            counterclaims (Counterclaim Answer), asserting a seventh affirmative defense that

            "[t]he Rhode Island General Laws are not applicable to this litigation." (NYSCEF 10,

            Counterclaim Answer ,i 68.) On September 7, 2023, Zurich filed an amended

            complaint. (NYSCEF 220, Amended Complaint.) Defendants filed an answer to the

            amended complaint, asserting the same counterclaims for breach of contract and

            violation of Rhode Island General Laws§ 9-1-33, and adding a counterclaim for breach

            4
             Defendants admit that Zurich has paid out that amount, but states that they are without
            sufficient information to admit or deny the results of Zurich's investigation as to the
            damages. (NYSCEF 222, Answer ,i,i 41-42.)
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                Motion No. 008

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            of the implied covenant of good faith and fair dealing. (NYSCEF 222, Answer.) Prior to

            the agreed upon amendment of the pleadings (see NYSCEF 219, Stipulation),

            defendants made this motion to dismiss Zurich's seventh affirmative defense,

            determining that Rhode Island law applies. Zurich asserts that it is New York law that

            applies.

            Discussion

                    "A party may move for judgment dismissing one or more defenses, on the

            ground that a defense is not stated or has no merit." (CPLR 3211 [b].) "[T]he [movant]

            bears the heavy burden of showing that the defense is without merit as a matter of law."

            (Granite State Ins. Co. v Transatlantic Reinsurance Co., 132 AD3d 479, 481 [1st Dept

            2015] [citation omitted]; see also Shah v Mitra, 171 AD3d 971, 974 [2d Dept 2019]

            ["[Movant] bears the burden of demonstrating that the affirmative defenses are without

            merit as a matter of law because they either do not apply under the factual

            circumstances of [the] case, or fail to state a defense."] [internal quotation marks and

            citation omitted].) "[T]he court should apply the same standard it applies to a motion to

            dismiss pursuant to CPLR 3211 (a) (7), and the factual assertions of the defense will be

            accepted as true." (Id. [internal quotation marks and citation omitted].) "[T]he court

            should not dismiss a defense where there remain questions of fact requiring a trial."

            (Granite State Ins. Co., 132 AD3d at 481 [citation omitted].) However, "[u]nlike

            subdivision (a), which enumerates grounds on which a cause of action may be

            dismissed, there are no listed grounds on which a defense may be attacked." (Siegel,

            NY Practice§ 269 [6th ed.].) "Any defense may be attacked on any ground, and there

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            is no requirement that the court elect to treat the CPLR 3211 (b) motion as one for

            summary judgment under CPLR 3211 (c) before the court can consider affidavits." (Id.)

            A Conflict in the Law

                   "The first step in any case presenting a potential choice of law issue is to

            determine whether there is an actual conflict between the laws of the jurisdictions

            involved." (Matter of Allstate Ins. Co. [Stolarz], 81 NY2d 219,223 [1993].) The parties

            here agree that a conflict exists between New York and Rhode Island law on the issue

            of bad faith settlement practices, namely that this claim does not exist under New York

            law but does exist under Rhode Island law which allows for recovery of attorneys' fees

            and punitive damages.

                   In New York, the Court of Appeals has only gone so far to permit claims for

            covenant of good faith and fair dealing to be plead separately from a breach of contract

            claim for the purpose of seeking recovery of foreseeable consequential damages

            resulting from an insurer's alleged bad faith performance. (Panasia Estates, Inc. v

            Hudson Ins. Co., 10 NY3d 200, 203 [2008], quoting Bi-Economy Mkt., Inc. v Harleysville

            Ins. Co. of NY, 10 NY3d 187, 192 [2008] ["consequential damages resulting from a

            breach of the covenant of good faith and fair dealing may be asserted in an insurance

            contract context, so long as the damages were 'within the contemplation of the parties

            as the probable result of a breach at the time of or prior to contracting"']; also compare

            Acquista v New York Life Ins. Co., 285 AD2d 73, 81-82 [1st Dept 2001] [explaining that

            New York law does not permit a "tort cause of action for bad faith in the context of a

            first-party claim" but does permit recovery of "consequential damages beyond the limits

            of the policy for the claimed breach of contract" in some circumstances] with 9 RI Gen

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            Laws§ 9-1-33 ["(A)n insured under any insurance policy ... may bring an action

            against the insurer issuing the policy when it is alleged the insurer wrongfully and in bad

            faith refused to pay or settle a claim made pursuant to the provisions of the policy, or

            otherwise wrongfully and in bad faith refused to timely perform its obligations under the

            contract of insurance ... an insured may also make claim for compensatory damages,

            punitive damages, and reasonable attorney fees."].) Thus, the court moves to the next

            step, determining which state's law applies.

            Center of Gravity/Grouping of Contacts Test

                   New York courts considering which state's laws apply to a contract employ the

            "'center of gravity' or 'grouping of contacts"' test. (Zurich Ins. Co. v Shearson Lehman

            Hutton, Inc., 84 NY2d 309, 317 [1994], quoting Auten v Auten, 308 NY 155, 160 [1954].)

            "The purpose of grouping contacts is to establish which State has 'the most significant

            relationship to the transaction and the parties."' (Id., quoting Restatement [Second] of

            Conflict of Laws [Restatement]§ 188 [1].) Under this test, courts consider: (1) "the

            traditionally determinative choice of law factor of the place of contracting"; (2) "the

            places of negotiation and performance"; (3) "the location of the subject matter"; and (4)

            "the domicile or place of business of the contracting parties." (Id., citing Restatement§

            188 [2].)

                   Defendants argue that the proper consideration here is the domicile of the

            primary insured, which defendants argue is Providence. In support, defendants cite to

            Certain Underwriters at Lloyd's, London v Foster Wheeler Corp., 36 AD3d 17, 22 [1st

            Dept 2006], affd 9 NY3d 928 [2007]. In Foster Wheeler, the First Department analyzed

            whether New York or New Jersey law applied to coverage of asbestos related-personal

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            injury claims under a number of liability insurance policies. (Id. at 18-19.) Foster

            Wheeler's principal place of business at the time the policies were issued was in New

            Jersey and its operations relating to the asbestos-containing products and customers

            purchasing those products were throughout the United States. (Id. at 19.) The court

            acknowledged the test set forth by the Court of Appels in Zurich, but held that:

                   "[T]he location-of-the-risk rule obviously cannot be applied without
                   modification in the event the insurance policies in question cover risks that
                   are spread though multiple states. Such is the case here, where the risks
                   covered by the unsettled policies are nationwide or global in scope, and,
                   given Foster Wheeler's widely dispersed operations and customers, there
                   is no contention that, at the time the unsettled policies were issued, the
                   parties would have understood any one state to have constituted, in a
                   literal sense, the principal location of the insured risk." (Id. at 22 [internal
                   quotation marks omitted].)

            Thus, the court set forth the principle that "where it is necessary to determine the law

            governing a liability insurance policy covering risks in multiple states, the state of the

            insured's domicile should be regarded as a proxy for the principal location of the insured

            risk" and held that the law of Foster Wheeler's domicile, New Jersey, applied. (Id. at

            24.)

                   In addition to some federal court cases, defendants also rely on Matter of

            Liquidation of Midland Ins. Co., 16 NY3d 536, 544 (2011), quoting Foster Wheeler to

            reiterate that, when applying the "grouping of contacts" approach, "'the state of the

            insured's domicile should be regarded as a proxy for the principal location of the insured

            risk" as this approach "'promotes certainty, predictability and uniformity of result' in that

            '[t]he state of the insured's domicile is a fact known to the parties at the time of

            contracting, and (in the absence of a contractual choice-of-law provision) application of

            the law of that state is most likely to conform to their expectations."' Defendants argue

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            that, pursuant to these cases, the domicile of Providence controls, because Providence

            is the primary insured under the Policy.

                      Zurich does not dispute that Providence is the primary insured. Rather, it argues

            that Foster Wheeler is not applicable here because "it involved a liability insurers' duty

            to defend a single named insured with multiple locations throughout the country against

            hundreds of thousands of asbestos related personal injury claims asserted in

           jurisdictions throughout the United States." 5 (NYSCEF 146, Zurich Opposition at 9.)

            The court agrees. Unlike here, the claims at issue in Foster Wheeler were in many

            states so it was understandable why the First Department deviated from the typical

            "center of gravity" analysis to ensure "certainty, predictability and uniformity." (36 AD3d

            at 23.)

                      Zurich relies on two First Department decisions, issued after Foster Wheeler, that

            analyzed all the Restatement factors in the context of additional insureds added to

            policies to insure risks in specific locations, despite the presence of multistate risks.

            First, in Illinois Nat. Ins. Co. v Zurich Am. Ins. Co., the First Department analyzed

            whether New York law or Maryland law applied to an insurance policy issued to a

            subcontractor that named a contractor as an additional insured, where the domicile of

            the insured subcontractor and its parent was Maryland, but the performance of the

            subcontract and underlying accident were at a construction site in New York. (107

            5
              Notably, the Restatement provision on which Foster Wheeler relies in part applies only
            to "fire, surety or casualty insurance." (Restatement [Second] of Conflict of Laws§ 193
            [1971]; Foster Wheeler Corp., 36 AD3d at 26-27 ["As previously discussed, we regard
            the state of the insured's domicile to be a proxy for the principal location of the insured
            risk, which, under New York law and Restatement§ 193, is the controlling factor in
            determining the law applicable to a liability insurance policy, thereby obviating the need
            to consider all five Restatement factors."].)
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            AD3d 608, 609 [1st Dept 2013].) In determining that New York law applied, the Court

            explained:

                   "Foster Wheeler, however, is not applicable to the facts of this case, as it
                   involved asbestos claims that were spread throughout multiple
                   jurisdictions in the United States ... Here, [the contractor] was added to
                   the Zurich policy as an additional insured to cover a specific risk, the risk
                   arising from [the subcontractor's] performance of its subcontract for work
                   at a New York site. While, in theory, the Zurich policy provides to Keller,
                   [the subcontractor's] parent company, insurance covering risks in multiple
                   states, it is clear that the parties understood, in adding [the contractor] as
                   an additional insured, that the 'principal location of the insured risk' was in
                   New York, where the work took place ... Accordingly, New York law
                   should apply." (Id. [citation omitted].)

            The Court based its determination on the fact that the parties clearly understood, in

            adding the contractor as an additional insured, that the place where the subcontract was

            performed would govern the policy.

                   Here, Sherle is a named insured on the Policy and the Policy lists 1176 Second

            Avenue, New York, New York, where the damage occurred, on its Schedule of

            Locations. (NYSCEF 112, Policy Excerpts at 4-5.) Thus, it cannot be said that the

            parties did not foresee the possibility of the application of New York law to the Policy.

                   Zurich also cites to Davis & Partners, LLC v QBE Ins. Corp., in which the First

            Department applied the "standard 'grouping of contacts' analysis" where the contract

            between the contractor and construction manager was related to a project in Manhattan,

            the contract appeared to be executed in New York and required the insured to name

            New York entities as additional insureds, contained a New York law provision, and the

            occurrence and litigation were in New York. (113 AD3d 544, 545 [1st Dept 2014], citing

            Matter of Midland Ins. Co., 16 NY3d at 543 and Illinois Natl. Ins. Co., 107 AD3d at 608.)

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            The court finds the First Department's application of "the standard grouping of contacts

            analysis" persuasive here. (Id. [internal quotation marks omitted].)

                   On reply, defendants attempt to distinguish Illinois and Davis from this case, on

            the basis that the additional insureds in those cases were not operational subsidiaries.

            The court does not find this distinction persuasive, particularly because defendants do

            not explain why it is important. Defendants also argue that Narragansett Elec. Co. v

            American Home Assur. Co., 921 F Supp 2d 166 (SONY 2013) and BMS Enters. v Gen.

            Star lndem. Co., 2015 US Dist LEXIS 34637 (SONY Mar. 11, 2015, No. 14cv3375),

            demonstrate that Foster Wheeler does not only apply to cases involving more than one

            location of loss. However, unlike the Policy here, the policies in those cases were

            liability policies that covered risks potentially anywhere, not damage to particular

            properties in particular locations. (See BMS Enterprises, Inc., 2015 US Dist LEXIS

            34637, *3 ["Where, as here, the risk insured against it is world-wide, a single state

            cannot be the sole location of the risk."]; Narragansett Elec. Co., 921 F Supp 2d at 170-

            173.) Therefore, an analysis under the center of gravity/grouping of contacts test is

            appropriate here.

            Center of Gravity/Grouping of Contacts Analysis

            Place of Contracting

                   The parties agree that the place of contracting is Rhode Island. Thus, this factor

            weighs in favor of Rhode Island.

            Places of Negotiation and Performance

                   Defendants assert that the Policy was negotiated by Providence's agent, USI

            Insurance Services, LLC, out of its Massachusetts office. (NYSCEF 110, Geoffroy aff ,i

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            7 ["It is my understanding that when USI was negotiating with Zurich, USI was

            physically located in its Massachusetts office. Once various quotes had been obtained,

            they were presented to me by USI in my Providence office."].) In its memorandum in

            opposition, Zurich asserts that negotiations were also held in New York where Zurich's

            office is located. Although Zurich provides no evidence to support its assertion, on reply

            defendants acknowledge that USI representatives were present in their Massachusetts

            office "when discussing potential terms with Zurich (located in New York) [and] all offers

            made by Zurich were presented by USI to Providence in Rhode Island. Thus, the place

            of negotiation involved activity in three states." (NYSCEF 156, memorandum in reply at

            11.) Zurich also argues that USI is a Delaware corporation with a principal place of

            business in New York. (See NYSCEF 144, USI corporate filing page.) However, the

            court does not find USl's place of incorporation or principal place of business relevant

            for this factor. Rather, this factor points to three states - Rhode Island where

            Providence negotiated, New York where Zurich negotiated, and Massachusetts where

            USI negotiated, and thus, this factor is of less importance here. ( See Restatement§

            188 ["This contact is of less importance when there is no one single place of negotiation

            and agreement, as, for example, when the parties do not meet but rather conduct their

            negotiations from separate states by mail or telephone."].)

                      As to place of performance, defendants argue that it is Rhode Island because

            most of the entities and properties covered by the Policy are in Rhode Island .6

            6
              In his affidavit Geoffroy provides a list showing that 18 of the insureds are incorporated
            in Rhode Island (excluding Providence), 4 in New York, 3 in Massachusetts, and 1 in
            California. (NYSCEF 110, Geoffroy aff,i 9; see also NYSCEF 112, Policy Excerpts at
            4.)
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            Defendants also assert that Rhode Island is the place of performance because

            Providence executed the contract in Rhode Island, paid the premium from there, and

            Zurich had to send payments under the Policy to Providence in Rhode Island. In

            contrast, Zurich argues the place of performance is New York, because the loss and

            claim adjustment occurred in New York. As the payments under the Policy were made

            from and to Rhode Island, but the claim at issue was handled in New York, this factor

            points towards both states.

            Location of the Subject Matter

                   Defendants argue that the subject matter of the Policy is Rhode Island because

            most of the entities and properties covered by the Policy are in Rhode Island. Whereas

            Zurich argues that the Policy's subject matter is New York because that is where the

            loss occurred.

                   The court must look to the location of the subject matter of the bad-faith

            counterclaims. (Schwartz v Liberty Mut. Ins. Co., 539 F3d 135, 152 [2d Cir 2008].)

            Here, the bad faith counterclaims arise out of Zurich's alleged (i) refusal "to pay or settle

            the Claim for a covered loss and damages;" (ii) refusal "to timely perform its obligations

            under the Policy;" (iii) failure "to conduct a reasonable investigation of the Claim;" (iv)

            failure "to articulate a reasonable factual or legal basis for refusing to perform its

            obligations under the policy;" (v) "manufacturing factually incorrect reasons to delay and

            ultimately deny coverage, (vi) "requiring the Insureds to expend funds and litigation

            costs to prove coverage;" (vii) "unreasonably seeking to claw back money it has paid

            the Insureds;" (viii) failure "to provide a reasonable offer to settle the Claim at times

            when its liability was reasonably clear, including but not limited to a refusal to make a

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            reasonable offer of settlement;" (ix) deviation "from its own practices or from industry

            practices;" and (x) "acting with gross disregard of the Insureds' interests." (NYSCEF

            222, Amended Answer with Counterclaims          ,m 72, 76.) Thus, the court looks to where
            Zurich engaged in this alleged conduct. However, it is unclear from the record where

            Zurich's conduct occurred. For example, while there is an allegation that Zurich

            retained experts to inspect the New York property where the damage occurred, it is

            unclear where Zurich made decisions regarding the claim. Zurich alleges that its

            principal place of business is in Illinois. (NYSCEF 220, Amended Complaint ,i 4.)

            Further, while defendants admit Zurich negotiated the Policy in New York, neither side

            addresses where Zurich was issuing when its claim decisions from. The court cannot

            determine what state is favored under this factor.

            Domicile or Place of Business of the Contracting Parties

                   While defendants argue the relevant domiciles are Illinois for Zurich and Rhode

            Island for Providence, Zurich argues that the relevant domiciles are New York for itself,

            New York for Sherle, and Rhode Island for Providence.

                   "Treating the state of the principal place of business as the corporate
                   domicile for these purposes, rather than the state of incorporation, is
                   consistent with the view expressed in the Restatement that, '[a]t least with
                   respect to most issues, a corporation's principal place of business is a
                   more important contact than the place of incorporation.' We look to the
                   state of incorporation for the law governing the corporation's internal
                   corporate governance and its relations with shareholders, not for the law
                   governing the corporation's contractual relationships in general." (Foster
                   Wheeler Corp., 36 AD3d at 25, quoting Restatement§ 188, Comment e,
                   at 581.)

                   Therefore, the court rejects Zurich's assertion that its domicile is New York as its

            principal place of business is in Illinois. (NYSCEF 220, Amended Complaint ,i 4.) Thus,

            this factor points in favor of Rhode Island and Illinois. Even if the court considered
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            Sherie's principal place of business, it would not change the fact that this factor also

            points in favor of Rhode Island.

                    "[T]he Restatement factors 'are to be evaluated according to their relative

            importance with respect to the particular issue."' (Foster Wheeler Corp., 36 AD3d at 27,

            quoting Restatement§ 188[2].) "Stated otherwise, the choice-of-law analysis is not a

            mindless scavenger hunt to see which state can be found to have more contacts, but

            rather ... an effort to detect and analyze what interest the competing states have in

            enforcing their respective rules." (Id. [internal quotation marks and citation omitted].)

            Here, the factors do not clearly favor any one state but do lean in favor of Rhode Island

            as that state has the most significant contacts with the Policy.

            Governmental Interests

                   "There are of course instances where the policies underlying conflicting laws in a

            contract dispute are readily identifiable and reflect strong governmental interests, and

            therefore should be considered." (Allstate Ins. Co. v Stolarz, 81 NY2d 219, 226 [1993].)

            Thus, courts "may properly consider State interests to determine whether to apply New

            York law." (Id. at 227.)

                   Here, New York's governmental interests, when balanced against Rhode Island's

            contacts with the Policy and legitimate governmental interest in protecting Rhode Island

            policyholders from an insurer's bad faith conduct are "not sufficiently compelling to

            warrant the application of New York law." (Eagle Ins. Co. v Singletary, 279 AD2d 56, 60

            [2d Dept 2000] [citation omitted].) In support of its argument, Zurich relies on Schwartz,

            539 F3d at 152 (citations omitted), which found that

                   "New York policy considerations also militate in favor of applying New
                   York law. That state's 'gross disregard' standard reflects a policy of
             656376/2020 ZURICH AMERICAN INSURANCE vs. PROVIDENCE CAPITAL LLC               Page14of15
             Motion No. 008

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  NYSCEF DOC. NO. 249                                                                       RECEIVED NYSCEF: 04/06/2024

                    affording insurers latitude 'in investigating and resisting unfounded claims.'
                    As a consequence, 'there remains a strong presumption in New York
                    against a finding of bad faith liability by an insurer.' To apply California
                    law to the Excess Insurers' cross-claims, based on an insurer's conduct
                    that took place chiefly in New York, would offend New York's policy
                    choice."

            Here, as previously stated, the court cannot determine on this record whether Zurich's

            conduct occurred in New York. Thus, Schwartz is distinguishable.

                    Accordingly, it is

                    ORDERED that defendants' motion to dismiss plaintiff's seventh affirmative

            defense is granted, and that affirmative defense is dismissed.

                     4/6/2024
                      DATE                                                      ANDREA MASLEY, J.S.C.
             CHECK ONE:                  CASE DISPOSED                  NON-FINAL DISPOSITION

                                         GRANTED         □ DENIED       GRANTED IN PART          □ OTHER
             APPLICATION:                SETTLE ORDER                   SUBMIT ORDER

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

             656376/2020 ZURICH AMERICAN INSURANCE vs. PROVIDENCE CAPITAL LLC                    Page 15 of 15
             Motion No. 008

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