| Rose Inn of Ithaca, Inc. v Great Am. Ins. Co. |
| 2010 NY Slip Op 05852 [75 AD3d 737] |
| July 1, 2010 |
| Appellate Division, Third Department |
| Rose Inn of Ithaca, Inc., et al., Appellants-Respondents, v GreatAmerican Insurance Company, Respondent-Appellant. |
—[*1] Hiscock & Barclay, L.L.P., Albany (Mark T. Whitford Jr. of counsel), forrespondent-appellant.
Mercure, J. Cross appeals from an order of the Supreme Court (Garry, J.), entered March 11,2009 in Tompkins County, which, among other things, partially granted defendant's cross motionfor summary judgment dismissing the complaint.
Plaintiffs Charles Rosemann and Sheryl Rosemann are the sole shareholders and owners ofplaintiff Rose Inn of Ithaca, Inc., which operated a country inn. After a substantial portion of theinn was destroyed in a 2004 fire, plaintiffs made a claim under their insurance policy, which wasissued by defendant. Because plaintiffs decided not to rebuild the inn, the policy entitled them tothe actual cash value of the loss.
The claim negotiations were conducted on plaintiffs' behalf by Charles Rosemann(hereinafter [*2]Rosemann), who had decades of experience inthe hospitality industry and had negotiated a prior insurance claim involving a fire at the inn. Inthat role, Rosemann dealt regularly with the independent adjuster to assess the degree of damageto the inn and, after receiving the preliminary estimate of the damage, contended that over 200items in it required revision. Rosemann raised a number of issues with regard to the revisedestimate as well, and his efforts resulted in a final estimate of property damage that was almost$250,000 higher than the preliminary one. He also negotiated with defendant, rejecting multiplesettlement offers and arguing that the extant portion of the inn was a total loss.[FN1]After several months of these extensive discussions, the claim was settled for the actual cashvalue of those parts of the inn that had been destroyed, leaving unresolved only the issue ofwhether plaintiffs were entitled to replacement costs for the surviving portion of the inn.
Plaintiffs thereafter commenced this action asserting two breach of contract claims, the firstalleging that defendant omitted items from its calculation of actual cash value, and the secondcontending that defendant should have determined that the surviving portion of the inn was atotal loss and awarded plaintiffs its actual cash value as well. Defendant answered and raised theaffirmative defense of accord and satisfaction. Plaintiffs subsequently moved for partialsummary judgment on the first claim insofar as it related to architectural and engineering feesomitted from the calculation of actual cash value, and defendant cross-moved for summaryjudgment dismissing the complaint. Supreme Court granted plaintiffs' motion as to the issue ofliability on the first claim, and granted defendant's cross motion to the extent of dismissing thesecond claim. Defendant appeals.[FN2]
We agree with defendant that the first claim should have been dismissed in its entirety, andmodify Supreme Court's order accordingly. As defendant asserts, an accord and satisfaction iseffected when "the parties . . . enter into a new contract wherein they agree that astipulated performance will be accepted in the future, in lieu of an existing claim" (Altamurov Capoccetta, 212 AD2d 904, 904 [1995], lv denied 85 NY2d 808 [1995]; seeEnvironmental Prods. & Servs. v Consolidated Rail Corp., 285 AD2d 700, 702 [2001]). Thatis, an accord and satisfaction requires a "dispute as to the amount due and knowing acceptanceby the creditor of a lesser amount" (Consolidated Edison Co. of N.Y. v Jet AsphaltCorp., 132 AD2d 296, 303 [1987]; see Marine Midland Bank v Scallen, 161 AD2d103, 105 [1990]). Inasmuch as an accord and satisfaction constitutes a contract, it must be shownthat the parties set forth the essential elements thereof and had a meeting of the minds to resolvethe disputed claim (see Sorrye v Kennedy, 267 AD2d 587, 589 [1999]; Altamuro vCapoccetta, 212 AD2d at 905).[*3]
Here, the relevant facts are not in dispute. The adjusterwho handled plaintiffs' claim for defendant stated in deposition testimony that the architecturaland engineering fees incurred in the rebuilding of a structure are a component of replacementcost. She also acknowledged that replacement cost is reduced by depreciation to arrive at theactual cash value of a stucture. Nevertheless, the adjuster omitted the architectural andengineering fees from the final settlement amount because plaintiffs decided not to rebuild theinn. Rosemann asserted that he was unaware that defendant did not intend to pay the fees. Longbefore accepting the settlement amount, however, Rosemann had questioned whether the feesshould be included in the estimate that became the basis for the final calculation of replacementcost. Although the dispute over the fees evidently was not expressly resolved, plaintiffsnonetheless accepted the settlement. As such, there was no "mistake as to matters that were notwithin the contemplation of the parties" that would permit plaintiffs to avoid the creation of anaccord and satisfaction (13-70 Corbin on Contracts § 70.14 [2010]). Inasmuch as plaintiffselected to accept the settlement without asserting their current claim that they were entitled to anadditional amount representing the architectural and engineering fees, the settlement gave rise toan accord and satisfaction (see Gimper, Inc. v Giacchetta, 221 AD2d 682, 684 [1995];Hemingway v State Farm Fire & Cas. Co., 187 AD2d 814, 815-816 [1992]; Restatement[Second] of Contracts § 154; cf. Sabbagh v Pantano, 170 AD2d 411, 412 [1991];Ginsburg v Equitable Life Assur. Socy. of U.S., 254 App Div 445, 447 [1938], lvdenied 279 NY 810 [1939]).
Plaintiffs' remaining claims for damages, arising from items allegedly omitted orundervalued in the final calculation of actual cash value, are similarly barred by accord andsatisfaction. As with the above fees, while Rosemann stated that he did not know that sales taxwas omitted from the calculation of replacement cost, the record reveals that he inquired aboutthe inclusion of the tax prior to settling the claim. Plaintiffs further complain that the valuation ofunit costs in the settlement was too low, but Rosemann had affirmatively challenged those costsprior to settling the claim. Finally, plaintiffs concede that damages for additional tear-out andremoval costs are unavailable given the dismissal of the second claim.
Cardona, P.J., Malone Jr., Kavanagh and Egan Jr., JJ., concur. Ordered that the order ismodified, on the law, without costs, by reversing so much thereof as partially denied defendant'scross motion for summary judgment; cross motion granted in its entirety, summary judgmentawarded to defendant and complaint dismissed; and, as so modified, affirmed.
Footnote 1: Defendant's claims adjusterstated that Rosemann rejected the first settlement offer of $3,964,035 and demanded $4,150,720.Defendant agreed to pay that amount two weeks later, but Rosemann again declined to settle,citing ongoing concerns with the damage estimate. After those issues were resolved, the finalsettlement value was over $4.3 million.
Footnote 2: Plaintiffs appealed fromSupreme Court's order as well, but seek only its affirmance in their brief. Accordingly, we deemtheir appeal to have been abandoned (see Matter of Northern Metro. Residential Healthcare Facility, Inc. vNovello, 24 AD3d 1069, 1071 n 1 [2005]).