The following e-filed documents, listed by NYSCEF document number (Motion 036) 677, 678, 679, 680, 681, 682, 683, 684, 685, 686, 687, 688, 689, 690, 691, 692, 693, 694, 695, 696 were read on this motion to EXCLUDE EXPERT TESTIMONY.

This motion is another of the many pretrial motions in limine filed by the parties in insurance-coverage litigation between Brooklyn Union Gas Company and Century Indemnity Company arising from cleanup of the Gowanus Canal and other sites contaminated by manufactured-gas plants operated by Brooklyn Union.

This motion arises from a dispute over one particular provision in several multi-year excess policies that Century's corporate predecessor issued decades ago to Brooklyn Union. Each policy covered "occurrences" (as defined in the policy), and imposed a per-occurrence limit on coverage. The parties argue over whether those limits apply for the full period of the policy (as Century contends); or whether they apply only annually, resetting each year of the multi-year [*2]policy period (as Brooklyn Union maintains). The First Department held in this action in 2019 that the multi-year Century policies are ambiguous on this point. (See Century Indem. Co. v Brooklyn Union Gas Co. 170 AD3d 632, 633 [1st Dept 2019].)

Century has served an expert report opining that under the insurance industry's well-settled custom and practice for multi-year policies, per-occurrence limits apply for the full policy period unless annual limits are expressly specified. Brooklyn Union moves to preclude this expert from testifying at trial. According to Brooklyn Union, his opinion is irrelevant because extrinsic evidence of industry custom and practice cannot be used to resolve an ambiguity in an insurance policy.

The motion is denied.

Brooklyn Union argues that the expert testimony at issue is irrelevant and inadmissible on the ground that ambiguities in an insurance policy assertedly must be construed against the drafter without reference to extrinsic evidence such as industry custom and practice. (See NYSCEF No. 679 at 5-8.) Brooklyn Union is incorrect.^[FN1] (See Southwest Mar. & Gen. Ins. Co. v Preferred Contrs. Ins. Co., 143 AD3d 577, 577 [1st Dept 2016] [rejecting argument that an ambiguous policy must necessarily be construed against that policy's drafter, because "the parties may submit extrinsic evidence as an aid in construction" of the policy] [internal quotation marks omitted].)

When an insurance policy provision is ambiguous, the court considers first whether the parties have submitted extrinsic evidence that might resolve the ambiguity. If the parties have not submitted extrinsic evidence, the extrinsic evidence submitted is conclusory or otherwise sheds little light on the ambiguity, or the extrinsic evidence points decisively in one direction, the court may resolve the ambiguity as a matter of law, construing the policy against the drafter.^[FN2] (See e.g. State of New York v Home Indem. Co., 66 NY2d 669, 671 [1985], citing Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 172 [1973] [conclusory extrinsic evidence]; New York State Ins. Fund v Everest Natl. Ins. Co., 125 AD3d 536, 537 [1st Dept 2015] [no extrinsic evidence]; Fairchild v Genesee Patrons Coop. Ins. Co., 238 AD2d 841, 842 [3d Dept 1997] [decisive extrinsic evidence].) If, on the other hand, admissible extrinsic evidence addresses—but does not resolve—the ambiguity, interpreting the provision at issue is for the [*3]factfinder. (See e.g. Heartland Brewery, Inc. v Nova Cas. Co., 149 AD3d 522, 523 [1st Dept 2017], citing American Surety Co. of NY v National Fire Ins. Co. of Hartford, 25 AD2d 734, 734 [1st Dept 1966]); Demetrio v Stewart Tit. Ins. Co., 124 AD3d 824, 826 [2d Dept 2015].)

Here, Century has proffered detailed extrinsic evidence (in the form of an expert's report and, presumably, future trial testimony) to resolve the ambiguity in the multi-year Century policies about whether their per-occurrence limits apply on an annual or term basis. Brooklyn Union argues in the alternative that this extrinsic evidence is categorically inadmissible. It contends that only course-of-dealing extrinsic evidence—not evidence about the insurance industry's typical customs and practices—may be put before the factfinder to resolve a policy ambiguity. (See NYSCEF No. 679 at 11-12; NYSCEF No. 696 at 6-7.) This court disagrees.

In Underwood v Greenwich Insurance Co., the Court of Appeals held that custom-and-practice evidence is admissible to explain the intentions of the parties with respect to an insurance contract that is not clear and unambiguous on its face, reversing a directed verdict for erroneously excluding such evidence. (See 161 NY 413, 423-424 [1900]; Nelson v Sun Mut. Ins. Co., 71 NY 453, 458-459 [1877] [approving trial court's admission of custom-and-practice evidence to explain marine-insurance term of art]; see also SR Intl. Business Ins. Co. v World Trade Ctr. Props., LLC, 467 F3d 107, 134-136 [2d Cir 2006] [holding that court properly admitted at trial custom-and-practice evidence on the meaning of "occurrence" in the insurance policies at issue].) Brooklyn Union seeks to distinguish Underwood on the ground that it dealt with an interim insurance "binding slip," not a full-fledged insurance policy. (See NYSCEF no. 696 at 9.) Brooklyn Union does not, however, explain why that distinction should make a difference. Nor is Underwood's analysis of the admissibility of custom-and-practice evidence based on circumstances peculiar to binding slips.

Brooklyn Union has not identified precedent disapproving of the use of custom-and-practice extrinsic evidence in the insurance context (or suggest that only course-of-dealing evidence may be considered). Brooklyn Union relies on Mostow v State Farm Insurance Co. (88 NY2d 321 [1996]). (See NYSCEF No. 679 at 9-10; NYSCEF No. 696 at 6-7.) But Mostow does not address what evidence may be used to resolve an ambiguous insurance policy. Mostow holds only that the "test to determine whether an insurance contract is ambiguous focuses on the reasonable expectations of the average insured upon reading the policy."^[FN3] (88 NY2d at 326-327 [emphasis added]; see also Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 25 NY3d 675, 680 [2015] [discussing Mostow rule in context of explaining how to determine whether an insurance-policy provision is ambiguous]; Gaidon v Guardian Life Ins. Co. of Am., 255 AD2d 101, 101 [1st Dept 1998] [holding, under Mostow's "reasonable expectations of the average insured" standard, that the insurance policies at issue were unambiguous].)

Brooklyn Union's focus on the admissibility of custom-and-practice evidence in the [*4]particular context of the insurance industry is also misplaced, in any event. An insurance policy is a contract. It is "subject to principles of contract interpretation" that govern the "construction of contracts generally." (Universal American, 25 NY3d at 680 [internal quotation marks omitted].) Custom-and-practice extrinsic evidence may properly be considered in New York to shed light on the meaning of an ambiguous contractual provision. (See e.g. B.M. Heede, Inc. v Roberts, 303 NY 385, 390 [1952]; accord J.P. Morgan Inv. Mgt. Inc. v AmCash Group, LLC, 106 AD3d 559, 559-560 [1st Dept 2013].)

To be sure, evidence of an industry custom, practice, or usage will suffice to resolve an ambiguity only upon a showing either "that the parties are actually aware of the established usage of the term, or that 'the usage in the business to which the transaction relates is so notorious that a person of ordinary prudence in the exercise of reasonable care would be aware of it.'"^[FN4] (AmCash Group, 106 AD3d at 559, quoting Matter of Reuters Ltd. v Dow Jones Telerate, 231 AD2d 337, 343 [1st Dept 1997].^[FN5] ) This can be a high bar. But holding in a given case that a party has failed to establish the requisite uniform and well-settled custom is different from holding that evidence of custom is categorically inadmissible.

The question for this court, given its conclusion that custom-and-practice evidence may be admissible in general, is whether the particular expert report proffered by Century is admissible at trial in this action.

The existence of an industry custom, practice, or usage, and whether the parties had actual or constructive knowledge of it, "is a question of fact for the jury." (Walls, 49 NY at 469.) It must be proven, or not, like other questions of fact. (See Matter of Estate of Atkinson, 103 AD2d 960, 960 [3d Dept 1984], citing Frye v State, 192 Misc 260, 265 [Ct Cl 1948].) Thus, the expert report at issue here must provide a basis from which a reasonable juror could conclude [*5]that when Brooklyn Union purchased the underlying Century policies, a uniform, well-settled custom existed in the insurance industry that per-occurrence limits in a multiyear policy would apply to the policy's full term unless the limits specified that they applied only annually.^[FN6] (Compare Deveso v Chandler, 210 AD 684, 690 [4th Dept 1924] [holding that whether the usage at issue was sufficiently uniform, well-settled, and generally known "as to raise a presumption that [the parties] had it in mind . . . was under the evidence a question from the jury], affd 241 NY 559 [1925], with Home Indemnity, 66 NY2d at 672 [holding that the term-of-art affidavit in that case "did not supply the evidentiary facts needed to present an issue for the jury"].^[FN7] )

This evidentiary burden is not demanding. (See e.g. Scott v Brown, 29 Misc 320, 321 [App Term 1899] [holding that "the evidence upon [the] question" of custom in that case "was slight," but nonetheless "enough to present the question of fact to a jury"].) This court concludes that Century has satisfied its burden here. The expert report at issue describes the expert's basis for knowledge and expertise on this issue; it describes and explains the particular industry practice at issue (and the reasons for that practice) in detail; it opines that the practice in question has been uniform and well-settled in the industry for decades, extending back into a period in which some of the underlying Century policies were written; and it explains why it would be fair in these circumstances to infer that both Brooklyn Union and Century's predecessor were aware of and acted consistently with the industry practice with respect to the policy terms at issue on this motion. (See generally NYSCEF No. 681 at 2-14.) This showing is sufficient to put before the jury testimony about the industry practice attested to in the report that Brooklyn Union is moving to exclude.

To be sure, the report is not unassailable. One might question, for example, the report's lack of discussion of industry practice in the decades preceding the period the report covers, given that those decades encompassed the majority of the underlying policies in this case. Nor does the report articulate the expert's basis for knowledge of industry practice in those preceding decades. These questions would be legitimate subjects for cross-examination at trial should the [*6]expert testify. But they are not a basis to exclude the expert's testimony altogether at this threshold stage.

Accordingly, for the foregoing reasons, it is hereby

ORDERED that Brooklyn Union's motion in limine is denied.