FILED: NEW YORK COUNTY CLERK 02/21/ :16 AM INDEX NO /2017 NYSCEF DOC. NO. 54 RECEIVED NYSCEF: 02/21/2018

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1 STATE OF NEW YORK SUPREME COURT COUNTY OF NEW YORK 17' 221 W. 17 STREET, LLC, vs. Plaintiff, AFFIRMATION IN SUPPORT ALLIED WORLD SURPLUS LINES INSURANCE Index No.: /17 COMPANY, Defendant. David B. Karel, being an attorney duly authorized to practice law in the State of New York, hereby affirms the truth of the following, under penalties of perjury and pursuant to CPLR 2106: 1. I am a partner in WILKOFSKY, FRIEDMAN, KAREL CUMMINS, attorneys for the Plaintiff herein, and as such, am fully familiar with all of the facts and circumstances of this matter. 2. This Affirmation is being submitted in support of Plaintiff's motion for partial summary judgment on its Third Cause of Action, seeking a declaration that Allied World Surplus (" Allied" Insurance Company's ("Allied") rescission of the insurance policy not be given effect. PROCEDURAL HISTORY 3. Plaintiff commenced the instant action by filing a Summons and Complaint and later a Supplemental Summons and Amended Complaint on or about August 2, 2017, a Second Amended Complaint on or about August 16, 2017, and a Third Amended Complaint on or about August 24, A copy of Plaintiff's Third Amended Complaint is annexed hereto as Exhibit "A." 1 of 9

2 4. Along with the Third Amended Complaint, Plaintiff also served discovery demands on Allied. 5. On or about August 25, 2017, Plaintiff filed a CPLR 7601 Petition seeking, inter alia, a declaration that Allied's appointed appraiser was not impartial and seeking an order that Allied designate a competent and disinterested appraiser. (NYSCEF Doc. No. 7). 6. Thereafter, the parties stipulated and agreed to extend Allied's time to respond to the CPLR 7601 Petition until October 5, 2017, and to extend the return date for the petition until October 20, (NYSCEF Doc. No. 20). 7. This matter was then transferred to the Commercial Division, at the request of Allied, by an Administrative Order filed on September 20, (NYSCEF Doc. No. 22). 8. On or about October 5, 2017, Allied filed a cross-motion for an order dismissing the CPLR 7601 Petition, and also filed a separate cross-motion seeking dismissal of Plaintiff's First Cause of Action in the Third Amended Complaint which sought recovery of consequential damages. (NYSCEF Doc. Nos. 23, 28). 9. However, Allied's cross-motion did not seek dismissal of Plaintiff's Second Cause of Action, seeking a declaration that Allied be compelled to proceed with appraisal and pay the amounts awarded in the appraisal, and did not seek dismissal of Plaintiff's Third Cause of Action, seeking a declaration that Allied's rescission of the insurance policy not be given effect. 10. Plaintiff opposed Allied's cross-motions. (NYSCEF Doc. Nos ). 11. Parties for Plaintiff and for Allied appeared before this Court on January 4, Thereafter, this Court issued an Order that the rescission issue be tried first, setting deadlines for completion of written discovery, requiring that all depositions be completed 2 of 9

3 by February 16, 2018, and directing that all dispositive motions be made by Order to Show Cause by February 16, (NYSCEF Doc. No. 42). 13. The Order also scheduled a trial on the issue of rescission for March 1, On or about January 8, 2018, this Court issued an Order reserving decision on Allied's cross-motion seeking dismissal of Plaintiff's First Cause of Action pending disposition of the March 1, 2018 trial. (NYSCEF Doc. No. 43). 15. On or about January 8, 2018, this Court also issued an Order denying, without prejudice, Plaintiff's petition for appraisal and Allied's cross-motion seeking dismissal of the petition. (NYSCEF Doc. No. 44). 16. Thereafter, the parties completed a number of depositions. 17. Angelo Cosentini, Plaintiff's construction manager, was deposed on February 12, Due to the voluminous nature of the deposition testimony, only the pertinent excerpts from Angelo Cosentini's deposition transcript referenced in Plaintiff's motion papers are attached hereto as Exhibit "B." However, Plaintiff can provide the Court with a complete copy of Mr. Cosentini's transcript, or any other deposition transcript cited herein, if necessary. 18. Michael Shah was deposed as a representative of Plaintiff on February 12, Christopher Zitzmann, Allied's underwriter for the insurance policy at issue, was deposed on February 13, Pertinent excerpts from Christopher Zitzmann's deposition transcript referenced in Plaintiff's motion papers are attached hereto as Exhibit "C." However, given the shortened time frame between the completion of Mr. Zitzmann's deposition and the deadlines for the instant motion, only a rough draft of Mr. Zitzmann's deposition transcript is currently available. 20. Douglas McCabe, an employee of JS Held, was deposed on February 14, of 9

4 21. Mary Gardner, Plaintiff's insurance broker at The Signature B&B Companies, was deposed on February 15, Pertinent excerpts from Mary Gardner's deposition transcript referenced in Plaintiff's motion papers are attached hereto as Exhibit "D." 22. Paul Aviles, Allied's Vice President, was deposed on February 16, On February 16, 2018, after hearing of Allied's failure to comply with this Court's prior Orders, this Court Ordered Allied to provide allegedly privileged documents to the Court for review, Ordered Allied to respond to interrogatories propounded by Plaintiff, and Ordered that the parties had until February 21, 2018 to file Motions for Summary Judgment. (Dkt. No. 50). UNDISPUTED FACTS 24. The following facts are undisputed. 25. Plaintiff used The Signature Group, now called The Signature B&B Companies, (" Signature" ("Signature") as its insurance broker to procure the Builder's Risk Insurance Policy at issue. 26. During the course of the application process, Signature asked Plaintiff to provide certain information. 27. Plaintiff provided all of the information requested by Signature, including copies of the Engineer's Report for the proposed renovation, its construction manager, OTL Enterprises, LLC's ("OTL") construction cost report, plans, drawings, and structural diagrams for the proposed renovations to the Building, photographs of the building, and a detailed description of the work intended to be performed. 28. Plaintiff also provided Signature with estimates on the costs relating to the construction project, including the hard costs and soft costs of construction. 4 of 9

5 29. Plaintiff also provided Signature with an opinion as to the value of the existing shell of the Building as of the time of the application, as determined by its construction manager, OTL. 30. Plaintiff was never asked to provide the Actual Cash Value, or any other particular valuation, for the existing shell of the Building. Rather, Plaintiff was simply asked its opinion as to the "value." 31. On or about April 6, 2015, Allied issued a Builder's Risk Insurance Policy, bearing Policy Number (Dkt. No. 10). 32. Allied had an inspection performed of the premises prior to the fire, and received a report detailing the condition of the premises and the work being performed. See Exhibit at 39:11-41: On October 20, 2015, there was a fire at the Building, resulting in a substantial loss. THERE WAS NO MISREPRESENTATION OF A FACT 34. First, as set forth in the accompanying Memorandum of Law, the estimated value of the shell of the Building that Plaintiff provided as part of its application for insurance was an opinion, not a fact, and as such, cannot form the basis of a material misrepresentation. 35. As set forth in the Affidavit of Angelo Cosentini sworn to on February 15, 2018, he was asked to provide his opinion as to the value of the shell of the Building, and he offered his best opinion. 36. As Mary Gardner testified at her deposition on February 15, 2018, Plaintiff provided her with estimates on the costs relating to the construction project, and Plaintiff's 5 of 9

6 opinion as to the estimated value of the shell as part of Plaintiff's application for insurance. See Exhibit "D" at 50:4-54: In addition, Allied was provided with all of the information requested as part of the insurance application, and never asked for any additional information or proof as to Plaintiff's opinion of the estimated value of the shell of the Building. 38. As set forth in the Affidavit of Angelo Cosentini, he provided copies of the Engineer's Report for the proposed renovations, photographs of the building, the construction cost report, and the plans, drawings, and structural diagrams for the proposed renovations to Mary Gardner at Signature. 39. As Mary Gardner testified at her deposition on February 15, 2018, she received the above-referenced materials from Cosentini, and transmitted them to the broker, Lighthouse Specialty Brokers, to be forwarded to Allied. See Exhibit "D" at 38:16-40: These materials were then transmitted to, and received by, Allied. 41. Thereafter, Allied issued a Binder dated October 12, 2014, a copy of which is attached hereto as Exhibit "E". 42. As Christopher Zitzmann testified at his deposition, he received the Engineer's Report, photographs of the premises, the construction cost report, all of the building plans for the proposed renovations, and was aware of the scope of the planned renovations for the building. See Exhibit at 29:8-30:11, 133:20-134: Second, in addition to the fact that the estimated value figure submitted by Plaintiff as part of its initial submission was simply an opinion, there is absolutely no evidence that this opinion by Plaintiff was either false or made in bad faith. 6 of 9

7 44. In fact, Allied's underwriter, Christopher Zitzmann, admitted at his deposition that he did not think that Plaintiff made any misrepresentation when it submitted its opinion that the shell of the Building was worth approximately $3,300,000. See Exhibit at 125:7-126: Third, there is no evidence that Plaintiff's opinion as to the general value of the shell of the Building was material to Allied's decision to issue the insurance policy. 46. In fact, during his deposition, Allied's underwriter Christopher Zitzmann admitted that the rates for policies such as this one were experience-based ratings, based upon his experience, and that there were no documents anywhere where one could look to determine which rates to use to establish premiums to be charged for the policy for which he established a premium herein. He clearly stated that there were no set or required rates. See Exhibit at 76:22-89: Therefore, and as set forth in the Memorandum of Law, Plaintiff's opinion as to the value of the shell of the Building at the time of the insurance policy application was neither a misrepresentation nor material to Allied's decision to issue the insurance policy, and as such, Allied cannot rely on Plaintiff's opinion as to the value of the shell of the Building at the time of the insurance policy application as a basis to rescind the policy. ALLIED RATIFIED ANY PURPORTED MISREPRESENTATION 48. As set forth in the Affidavit of Randolph Goodman, sworn to on February 15, 2018, Allied was advised as early as May 24, 2016 as to Plaintiff's position that the Actual Cash Value of the Building was well in excess of the estimated value of the shell provided as part of the insurance application. 7 of 9

8 49. Allied as well had an inspection performed of the premises prior to the fire. Such inspection detailed the condition of the premises, the work being performed, included numerous photographs all providing Allied with additional information to permit it to establish appropriate values and risk criteria. See Exhibit at 39:11-41: Despite this knowledge, Allied continued to make partial payments on Plaintiff's fire loss claim through May of See Affidavit of Randolph Goodman. 51. In fact, it was not until August 9, 2017, over fourteen (14) months after first learning of Plaintiffs position as to Actual Cash Value, that Allied finally decided to issue a letter rescinding the policy in question. (Dkt. No. 26). 52. Given this, and as set forth in the accompanying Memorandum of Law, Allied's failure to take prompt action after first learning of Plaintiff's position as to the Actual Cash Value of the Building constitutes a ratification of the policy, and Allied may not now rely on the alleged discrepancy between the estimated value of the shell provided as part of the insurance application and Plaintiff's claimed Actual Cash Value of the Building after the fire loss to rescind the insurance policy. CONCLUSION 53. Based upon the foregoing, Plaintiff respectfully requests that its motion for partial summary judgment on its Third Cause of Action be granted and that this Court issue a declaration that Allied's rescission of the insurance policy not be given effect, along with such other and further relief this Court deems just and proper. 8 of 9

9 Dated: New York, New York February 20, 2018 Yours, etc., WILKOFSKY, FRIEDMAN, KAREL & CUMMINS By: s/ David B. Karel DAVID B. KAREL Attorneys for Plaintiff 299 Broadway, Suite 1700 New York, New York (212) of 9