Case 1:09-cv-03535-LAP Document 1 Filed 04/07/09 Page 1of 9

Wrobel & Schatz LLP

Attorneys for Plaintiffs
1040 Avenue of the Americas, 11th Floor
New York, New York 10018
UNITED STATES DISTRJCT COURT
SOUTHERN DISTRICT OF NEW YORK

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SAVOY SENIOR HOUSING CORPORATION,
SAVOY LIBERTY VILLAGE, LLC,
Plaintiffs,

Jury Trial Demanded

9- Civ-3535 (LAP) ECF CASE
COMPLAINT

-againstMT. HAWLEY INSURANCE COMPANY,

Defendant.

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Plaintiffs Savoy Senior Housing Corporation and Savoy Liberty Village, LLC
(collectively "Savoy" or "Plaintiffs"), by and through their attorneys, Wrobel &
Schatz
LLP, as and for their Complaint against defendant Mt. Hawley Insurance Company ("Mt.
Hawley" or "Defendant"), allege as follows:
Preliminary Statement
This is an action to require Defendant insurance company to honor its contractual
obligation, contained in multiple commercial general liability policies it issued to
Plaintiffs' partnership, to indemnify Plaintiffs' costs of defense and cost of settlement of
a legal action arising under the Clean Water Act ("CWA"). Defendant's January 31, 2008
denial of coverage claimed four separate reasons for the denial -every single one of
which is demonstrably unsustainable under the general liability policies that Defendant
drafted. Because Plaintiffs' costs of defense and cost of settlement are covered by

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Defendant's policies, Plaintiffs are entitled to a judgment of over $1.5 million, together
with interest and the costs of this action.
Jurisdiction and Parties
1.

Plaintiff Savoy Senior Housing Corporation is a New York Corporation with its principal
place of business located at 111 Fulton Street, New York, New York 10019.

2.

Plaintiff Savoy Liberty Village LLC is a Delaware Corporation with its principal place of
business located at 111 Fulton Street, New York, New York 10019.

3.

At all pertinent times, Plaintiffs were partners in Liberty Village Associates ("Plaintiffs'
Partnership"), a Delaware limited partnership, the named insured in Defendant's
insurance policies.

4.

Defendant Mt. Hawley Insurance Company is an Illinois Corporation engaged in the

insurance business with its principal place of business located at 9025 N. Lindbergh
Drive, Peoria, Illinois 61615. Upon information and belief, Mt. Hawley is authorized to
transact business in this district and regularly transacts business in this district. In
addition, upon information and belief, Mt. Hawley regularly brings and defends court
cases in the federal and state courts of the State of New York.

5.

The amount in controversy, without interests and costs, exceeds the sum or value
specified by 28 U.S.C. 1332.
6.

Venue is proper in this district pursuant to 28 U.S.C. 1391 (a) and (c).

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Document 1 Filed 04/07/09 Page 3 of 9

Facts
A.
7.

Defendant Issues Policies to Plaintiffs that Do Not Exclude CWA Claims

Mt. Hawley issued the following commercial general liability insurance policies (the
"Policies") to Plaintiffs' Partnership:
a. Policy Number MGL0134620, effective from March 6, 2003 to March 6,
2004 (Exhibit A);
b. Policy Number MGL0139030, effective from March 6, 2004 to
March 6, 2005 (Exhibit B); and
c. Policy Number MGL0139873, effective from March 6, 2006 to
September 6, 2005 (Exhibit C);
8.

9.

The pertinent terms of the Policies are essentially identical.

By the Policies, Defendant promised to defend and indemnify Plaintiffs' Partnership

against property damage, defined as "physical injury to tangible property,"
occurring during the policy period. E.g., Exh. A (Policy MGLO 134620) at 1(1).
Defendant promised that its obligation extended to Plaintiffs' Partnership and also
its "members, ... partners, and their spouses...".E.g., Exh. A (Policy MGL0134620)
at II( 1)(b).
10.

11.

The Policies contain a detailed list of exclusions from coverage.

The Policies contained no express exclusion from coverage of any claims under the Clean
Water Act.

12.

The Policies contain a general exclusion of coverage of "property damage" arising out
of the release of "pollutants. " E.g., Exh. A (Policy MGL0134620) at
II(f). "Pollutants" are defined as "any solid, liquid, gaseous or thermal irritant or

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Document 1 Filed 04/07/09 Page 4 of 9

contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

Id. at V(l5) (emphasis added).

13.

The Clean Water Act, by contrast, prohibits a far broader category of discharges without
permits, including dredged soil, rock, sand, and dirt (CWA 502(6), 33 U.S.C.
1362(6)), and also prohibits non-polluting discharges into wetlands, constructions of
dams, dikes or bridges, streambank stabilization or maintenance, stream channelization,
and stream diversion without water quality certifications and proper permitting.

B.

Plaintiffs Are Sued For CWA Violations that Do Not Involve "Irritants
or Contaminants"
14.

On July 26, 2006, the United States of America brought a federal lawsuit

under CWA 30l (a), 33 U.S.C. 131l (a) (the "Action") against Savoy, Jacob Frydman,
SDB Construction Inc., Best GC, Inc., and Acres of Virginia, Inc.
15.

The complaint in that Action alleged that, from July 2001 until the filing

of the Complaint, the defendants allowed dredged or fill material, namely, dirt, soil, rock,
sand, and sediment, to be discharged and remain in waterways and wetlands along the
area of 140 acres of property known as the Liberty Village Site.
16.

The complaint in that Action did not allege, nor could it have alleged, that Plaintiffs'
discharged irritants or contaminants or artificial chemicals of any kind into waterways.
In other words, the CWA complaint did not concern the discharge of "pollutants" as that
term is commonly understood and defined in Defendant's Policies.

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C.
17.

Defendant Refuses to Defend and Indemnify Plaintiffs for Reasons that

are Unsupported by the Policies

On or about January 28, 2008, Plaintiffs formally demanded that Defendant

defend and indemnify against the Action.

18.

By letter dated January 31, 2008 ("Defendant's First Denial Letter," attached as Exhibit
1

D), Defendant declined to defend and indemnify Plaintiffs for three

reasons, each of is insupportable under the plain language of the Policies.
19.

First, Defendant's denied coverage on the asserted ground that Plaintiffs were not
"named insureds" (Exhibit D at p. 2).

20.

Defendant's policy language, however, extends coverage to the named insured, a

partnership, and the partnership's members, which include Plaintiffs.
21.

Thus, Plaintiffs are specifically covered by Defendants' own language,

and Defendant's first asserted ground to deny coverage is baseless.

22. Second, Defendant's denied coverage on the asserted ground that the Action did not
involve "property damage" or an "occurrence" under the Policies (Exhibit D at 4).
23. Defendant's policy language, however, defines both "property damage" and "occurrence"
broadly to include any alleged "[p]hysical injury to tangible property" caused by "an
accident, including continuous or repeated exposure to substantially the same general
harmful conditions." E.g., Exh. A (Policy MGLO 134620) at V(l 3) ("occurrence") and
V( l 7) ("property damage"). The government's allegations in the

As indicated by the cover letter attached to Exhibit D, Defendants' First Denial Letter
was sent to an incorrect address and was not received by Plaintiffs until March.
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Action were that the insured had allowed dredged and fill materials to be discharged into
and remain in waterways and wetlands. These allegations surely alleged "property
damage" caused by "occurrences" as those terms are broadly defined in the Policies.
24.

Thus, Defendant's second asserted ground to deny coverage is baseless.

25. Third, Defendant denied coverage because the Action alleged that the insureds "were
responsible for the unauthorized discharge of pollutants into the waters of the United
States in Campbell County, Virginia," and the Policies expressly exclude claims
concerning "pollution" (Exhibit D at 7-8).
26. Defendant's pollution exclusion, however, is limited to the discharge of actual "pollutants"
as the term is commonly understood -that is, potentially toxic artificial "irritants or
contaminants," e.g., Exh. A (Policy MGL0134620) at V(15) -and cannot be stretched
to include the movement or discharge of natural materials alleged in the Action as
violating the CWA.
27.

Thus, Defendant's third asserted ground to deny coverage is baseless.

28. Because Defendant's reasons for denying coverage lacked any merit, Plaintiffs demanded,
by letter dated April 22, 2008, that Defendant reconsider the denial, and cited substantial
case law from state and federal courts in Virginia, the location of the occurrence and the
likely choice of law for interpretation of the Policies, that a generic pollution exclusion
did apply to the movement of natural elements in alleged violation of the Clean Water
Act. A true and correct copy of the April 22, 2008 letter is attached as Exhibit E.
29. By letter dated May 12, 2008, Defendant refused to reconsider its denial. Apparently
concerned that it had not yet hit upon any good reason for the denial,

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however, Defendant claimed yet another reason: Plaintiffs' asserted failure to provide
notice of a potential claim "as soon as practicable." A true and correct copy of the May
12, 2008 letter is attached as Exhibit F.
30. This belated ground for denial is also without merit, however, because Defendant was
notified of potential claim before any substantial proceedings in the Action.
D.

Plaintiffs Defended and Resolved Action Without Defendant's Involvement

31. As a result of Defendant's wrongful denial of defense and coverage, Plaintiffs were
forced to defend that Action without assistance.
32. By a confidential settlement agreement dated November 6, 2008, Plaintiffs settled the
Action without any admission of liability.
33. In conducting the defense of the Action and settling the Action, Plaintiffs expended over
$1.5 million, which should have been paid by Defendant under the Policies.

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AS AND FOR A FIRST CAUSE OF ACTION

[Breach of Contract I
17.

The Policies are binding agreements between Plaintiffs Partnership and Defendant.

18.

The Policies require Defendant to defend and indemnify Plaintiffs in the Action and
the damages sought and paid in the Action.

19.

Plaintiffs have performed all acts and met all obligations required of it under the
Policies.

20.

Defendant has breached the Policies in failing to defend the action and cover the
claims in the Action, and failing promptly to reimburse Plaintiffs' costs to defend
and resolve the Action.
21.

Plaintiffs have suffered damages in the amount to be determined but not

less than $1.5 million, exclusive of interests and costs, as a proximate result of
Defendant's breach of its contractual obligations under the Policies.

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WHEREFORE, Plaintiffs demand a money judgment against Defendant:

a) Awarding money damages in an amount to be determined but no less
than $1.5 million;
b) Prejudgment interest, costs, and attorney's fees; and
c) Such other and further relief as the Court may deem just and proper.
Dated: New York, New York April 6, 2009

WROBEL & SCHATZ LLP

By:
/s
Philip R. Schatz (PS 6158)
1040 Avenue of the Americas
11th Floor
New York, NY 10018
(212) 421-8100
Attorneys for Plaintiffs

Case 1:09-cv-03535-LAP

Document 10 Filed 12/28/09 Page 1of 1

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SAVOY SENIOR HOUSING CORPORATION, SAVOY
LIBERTY VILLAGE, LLC)
Plaintiffs,

09-cv-3535 (LAP)
STIPULATION OF
DISMISSAL WITH

PREJUDICE

-against-

MT.HAWLEY INSURANCE COMPANY,

Defendant.

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It is hereby stipulated and agreed, by and between the parties to the above captioned
action, by the1r undersigned counsel, that pursuant to Rule 41(a)(l)(A)(ii) of

the Federal Rules of Civil Procedure, this action is hereby dismissed wi.th prejudice and
without costs to either party.
Dated: New York, New York December
11, 2009

WROBF..L-&1

By:i.

:-:"'__

.,. Philip . Scha (PS 6158)

1040 Avenue of the America .
Suite 1101
New York, NY 1001-8-3703 Te!.:(212) 42)-8100

Attorneys.for Plaintiffi

. RIV KIN RADLER LLP