Opinion
Index No. 108041/10 Motion Sequence No. 002 Motion Sequence No. 003
01-22-2013
DAVIS & PARTNERS, LLC, RFD 425 FIFTH AVENUE L.P. and STATE NATIONAL INSURANCE COMPANY, Plaintiffs, v. QBE INSURANCE CORPORATION, Defendant.
, J.:
Motion sequence numbers 002 and 003 are consolidated for disposition.
In this declaratory judgment action, plaintiffs Davis & Partners, LLC (Davis), RFD 425 Fifth Avenue L.P. (RFD) and State National Insurance Company (State National) move for partial summary judgment, pursuant to CPLR 3212, declaring that plaintiffs Davis and RFD are entitled to defense from defendant QBE Insurance Corporation (QBE) in an underlying personal injury action entitled Callegari v Davis & Partners (Supreme Court, New York County, Index No. 102354/05) (the underlying action); that the comprehensive general liability (CGL) coverage provided to Davis and RFD under the QBE insurance policy is primary to their coverage under their policy with State National with respect to the underlying action; and that QBE is required to reimburse plaintiffs for all amounts paid by plaintiffs in the defense of the underlying action. Defendant QBE moves for summary judgment dismissing the summons and complaint. QBE's motion also seeks judgment declaring that QBE is not obligated to defend or indemnify either Davis or RFD in the underlying action, and that QBE is not obligated to reimburse any of the plaintiffs for their expenses in defending the underlying action.
The relevant facts arc undisputed. On February 17, 2004, Edward Callegari (Callegari), an employee of non-party Jansons Associates, Inc. (Jansons), was stabbed by Drew Rose (Rose), an employee of Davis, while performing construction work at 425 Fifth Avenue, New York, New York (the project). RFD was the owner of the construction site and Davis was the general contractor. Jansons was a subcontractor of non-party Tishman Construction Corporation of New York.
After a trial by jury in the underlying action before Justice Lucy Billings of this Court, the jury rendered a verdict finding that Davis did not direct or authorize Rose's assault on Callegari, but that Davis knew or should have known that Rose was using a dangerous knife on their jobsite prior to the date of the assault, and that Davis was negligent in allowing such use. The jury answered in the negative to an interrogatory as to whether Jansons was negligent in failing to take precautions to prevent injury to Callegari. It found that Callegari and Rose were negligent, and apportioned fault 60% to Rose, 9.17% to Davis, and 30.83% to Callegari. By post-verdict decision on the record on March 16, 2012 and order dated April 19, 2012, Justice Billings denied Davis' and RFD's motion for partial contractual indemnification against Jansons. The Court reasoned that because the jury found that Davis was actively negligent in the altercation between Callegari and Rose, Davis was not entitled to contractual indemnification from Jansons. (See Mar. 16, 2012 Transcript at 10-11.)
QBE issued CGL policy #HGB00503-1 to Jansons for the term April 20, 2003 through April 20, 2004. (Affirmation of Max W. Gershweir [Ps.' Atty], Exh. A.) State National issued policy # SNL 2300227-03, a Commercial Lines Policy, to "Davis & Partners et al.," for the policy period from December 20, 2003 to December 20, 2004.
RFD and Davis claim coverage as additional insureds under the QBE policy. As a threshold matter, QBE contends that the entities that are plaintiffs in this action - RFD 425 Fifth Avenue L.P. and Davis & Partners, LLC, were not named as additional insureds.
The Additional Insured Endorsement provides in pertinent part: "WHO IS AN INSURED (Section II) is amended to include as an Insured the person or organization shown in the Schedule, but only with respect to liability arising out of 'your work' for that Insured by or for you." The Schedule, in turn, provides: "Name of Person or Organization": As required by written contract and or [sic] as evidenced by Certificate of Insurance on file with company."
Under the contract between Jansons and Tishman, Jansons was required to indemnify the Additional Insureds for all claims and liabilities "arising out of any act, error or omission of or breach by [Jansons] . . . in connection with the performance of the Work or otherwise arising out of, in connection with or as a consequence of the performance of the Work. . . ." (Contract, § 12.3 [Ps.' Motion, Exh. H; Aff. of Trevor Davis, Exh. 3].) Section 12.2 (a) of the contract required Jansons to carry primary insurance for itself and all Additional Insureds identified in an annexed Exhibit S, to cover losses arising out of injuries caused by or in connection with the operations of Jansons or its subcontractors. Although no "Exhibit S" was annexed to the copies of the contract provided on the instant motions, there is an "Exhibit Q" which names as Additional Insureds RFD 425 Fifth Avenue LLC, not L.P., and Davis & Partners, LP., not LLC. It does, however, state that the named RFD entity is "c/o Davis & Partners, LLC." It also provides that "all related companies" of the named companies are additional insureds. (Aff. of Trevor Davis, Exh. 3.)
Exhibit Q states in full:
"It is hereby understood and agreed that the following additional insured, has been added to the Policy for Project: 425 FIFTH AVENUE:
RFD 425 FIFTH AVENUE LLC C/O DAVIS & PARTNERS, LLCTheir officers, agents, directors, employees, partners and any and all related companies.
TREVOR DAVIS C/O DAVIS & PARTNERS, LLC
ABY J. ROSEN C/O RFR HOLDINGS CORPORATION
MICHAEL FUCMS C/O RFR HOLDING, LLC
RFR HOLDING, LLC
HGA NEW YORK GMBH & CO. KG
DAVIS & PARTNERS, LP
DAVIS CONSTRUCTION COMPANY, INC.
HAMBURGISCHE LANDESBANK GIROZENTRALE
WOLF MANAGEMENT & LEASING, LLC
T1SHMAN CONSTRUCTION CORPORATION OF NEW YORK
All other Terms & Conditions remain unchanged."
The issue before the court is therefore whether plaintiff entities, which concededly are not specifically named as Additional Insureds, are companies "related" to the entities that were named. Plaintiffs submit a copy of a "Certificate of Conversion," issued by the State of Delaware for Davis & Partners, L.P., showing that it was converted to Davis & Partners, LLC on September 10, 1998. (Davis Aff., Exh. 1.) They also submit a document entitled "City Register Recording and Endorsement Page," dated January 2, 2001, showing transfer of the property from RFD 425 Fifth Avenue LLC to RFD 425 Fifth Avenue L.P. (Davis Aff., Exh. 2.)
QBE objects to this court's consideration of these documents based on plaintiffs' "laches" in responding to its request for evidence of their relationship to the specifically named Additional Insureds. (See Aff. of Howard Altaian [D.'s Atty] in Reply on D. Motion], ¶11.) However, QBE fails to cite applicable legal authority in support of its objection. Moreover, QBE fails to demonstrate any prejudice as a result of plaintiffs' delay in providing these documents which are public records. The court will accordingly consider these documents.
The documents demonstrate that plaintiff entities are successors to the specifically named Additional Insureds, are related within the meaning of the contract between Tishman and Jansons, and are therefore entities for which Jansons was required to provide Additional Insured coverage. As the QBE policy by its terms provides for coverage of any Additional Insured for whom its insured, Jansons, is "required by written contract" to provide coverage, plaintiffs arc Additional Insureds under the policy.
QBE further argues that RFD and Davis are not entitled to coverage because they failed to notify QBE of the claim in a timely fashion. The QBE policy contained a provision requiring the insureds to notify it "as soon as practicable of an 'occurrence' or an offense which may result in a claim." (Commercial General Liability Coverage Form, § IV[2][a].) It also required the insureds to notify QBE "as soon a[s] practicable" if a suit is brought against any insured (id., § IV[2][b][2]), and to "[i]mmediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or 'suit'." (Id., § IV[2][c][1].)
It is uncontested that by letter dated May 26, 2005, RFD and Davis first tendered their defense and indemnification to QBE for the Callegari claim. This tender was 16 months after the February 17, 2004 stabbing and three months after Callegari commenced the underlying action against them. (Aff. of Robert Riccobono [Vice President for QBE's third-party administrator], ¶ 19, Exh. B.) QBE disclaimed coverage by letter dated July 27, 2005, on the ground, among others, of plaintiffs' late notice of the occurrence. (Id., Exh. C.)
The parties agree that under New York law in effect at the time of the QBE policy, an insurer was not required to show prejudice in order to disclaim based on late notice (Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 337-338, 340 [2005]), while under New Jersey law, a showing of prejudice was required. However, they sharply dispute whether New York or New Jersey law applies.
As stated in the QBE policy, the mailing address for Jansons, the insured, was 130 Mozart Street, East Rutherford, New Jersey 07073. The policy contained both New York- and New Jersey-specific endorsements. The New York endorsements covered "calculation of premium," "premium audit," "commercial general liability coverage form," "legal action against us," and "transfer of duties when a limit of insurance is used up." The New Jersey endorsement covered "loss information." In addition, the policy included endorsements that covered "cancellation and nonrenewal" for both New York and New Jersey.
As the QBE policy did not contain a choice-of-law provision, the court must look to New York's established choice-of-law principles in order to make a determination as to whether New York or New Jersey law applies with respect to the late notice issue. (See Certain Underwriters at Lloyd's. London v Foster Wheeler Corp. [Foster Wheeler]. 36 AD3d 17, 20 [1st Dept 2006], affd for reasons stated below 9 NY3d 928 [2007].)
Under New York's center of gravity or grouping of contacts approach to choice of law questions in contract cases, the court is required "to apply the law of the state with the most significant relationship to the transaction and parties." (Id. at 21 [internal quotation marks and citations omitted].) "This approach generally dictates that a contract of liability insurance be governed by the law of the state which the parties understood was to be the principal location of the insured risk . . . ." (Id. at 22 [internal quotation marks and citation omitted].) However, where the policy insures risks in multiple locations, the location of the risk rule cannot be applied without modification. (Id.) In this instance, "the state of the insured's domicile should ordinarily be regarded as a 'proxy' for the principal location of the insured risk." (Id. at 24.) As the Appellate Division has reiterated, "[w]here the covered risks are spread over multiple states, courts will generally locate the risk in one state, namely, the state of the insured's domicile at the lime the policy was issued. . . ." (Liberty Surplus Ins. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 67 AD3d 420, 421 [1st Dept 2009] [internal quotation marks and citation omitted].)
However, contrary to Davis' contention, there is no per se rule that where the policy insures risks in more than one state, the place of the insured's domicile must be applied. Rather, the courts continue to apply the center of gravity test. (See generally Foster Wheeler, 36 AD3d at 22.) Nor, contrary to Davis' contention, are the courts limited, in applying the center of gravity test to consideration of the five factors enumerated in the Restatement of Law - the place of contracting, the place of negotiation, the place of performance, the location of the subject matter, and the contracting parties' domiciles. (See Davis Reply at 15.) Rather, the courts will also apply an interest analysis under which the respective governmental interests of the competing jurisdictions are considered. (See Foster Wheeler, 36 AD3d at 22-23.) Under the center of gravity approach, while the Restatement factors are given "heavy weight" (Matter of Allstate Ins. Co. [Stolarz] 81 NY2d 219, 226 [1993] [internal quotation marks and citations omitted]), "the spectrum of significant contacts - rather than a single possibly fortuitous event - may be considered. Critical to a sound analysis, however, is selecting the contacts that obtain significance in the particular contract dispute." (Id. [internal citation omitted].)
The center of gravity approach thus seeks to identify the law of the state with the most significant relationship to the transaction and parties and to avoid inconsistent results where claims are brought under the insurance policy in different states. (Foster Wheeler, 36 AD3d at 21, 23-24 .) "[U]nderlying the rule that . . . the location of the insured risk carries little weight in a choice-of-law analysis where the risk is scattered throughout two or more states - is an understanding that, barring extraordinary circumstances, only one state's law should govern an insurance agreement." (Travelers Cas. & Sur. Co. v Dormitory Auth. 2008 US Dist LEXIS 104315, *10 [SD NY 2008] [applying New York law] [internal quotation marks and citation omitted].)
Applying these standards, the court holds that New Jersey, the state of insured Jansons' domicile at the time the policy was entered into, is the principal location of the risk. Worth Constr. Co. Inc. v Admiral Ins. Co. (40 AD3d 423 [1st Dept 2007], revd on other grounds 10 NY3d 411 [2008]), on which QBE principally relies, is not to the contrary. In Worth, the court applied New Jersey law to a late notice issue where the subject construction site was located in New York and the underlying personal injury action was being litigated in New York, but the policy was issued in New Jersey to a New Jersey corporation. There, however, the policy contained an additional insured endorsement which covered liability arising out of the insured's operations at a New York project that was specifically identified in the endorsement, and which required notice of the claim as soon as practicable. (Worth, 40 AD3d at 424.) Here, in contrast, neither the additional insured endorsement nor any other provision in the policy identifies a New York work site as the location of the risk. (See Certain Underwriters at Lloyds of London v Illinois Nat. Ins. Co., 2011 US Dist LEXIS 20985 *10 [SD NY 2011] [distinguishing Worth on this basis); Travelers Cas. & Sur. Co. v Dormitory Auth. 2008 US Disl LEXIS 92983, *14 [SD NY 2008][same].)
In so holding, the court rejects QBE's contention that the additional insured endorsement is specific to New York because it provides coverage to plaintiffs only for "liability arising out of Jansons' work for Davis - work that was contracted for and performed solely in New York." (QBE Reply Memo, on QBE Motion at 4.) Additional insured endorsements routinely provide coverage for liability arising out of the insured's work. If QBE's contention were credited, any such additional insured endorsement would be sufficient to locate the risk in the state where the work was actually performed, notwithstanding the failure to identify the state in the endorsement. This result would be plainly inconsistent with the authority discussed above.
The policy includes a New York endorsement entitled "Legal Action Against Us" which provides in pertinent part: "No person or organization has a tight under this Coverage Part: a. To join us as a party or otherwise bring us into a 'suit' asking for damages from an insured, b. To sue us on this Coverage Part unless all of its terms have been fully complied with."
It is noted that Davis and RFD do not argue that this endorsement requires strict compliance with notice requirements under New York law. Nor could they persuasively do so. This endorsement contains language identical to the Commercial General Liability Coverage Form of the policy which was applicable to accidents in both New York and New Jersey, and which also required the insured to give notice "as soon as practicable" of the occurrence or suit. (§ IV[2][a], 2[b][2].) The difference between this Form and the endorsement is that the Form provides that "[a] person or organization may sue us to recover on an agreed settlement or on a final judgement against an insured obtained after an actual trial" (§ IV[3][b]), whereas the New York endorsement provides that "[a] person or organization may sue us to recover on an agreed settlement or on a final judgment against an insured." In other words, the endorsement does not limit suits against the insurer to judgments obtained after trial.
The court accordingly holds, under its choice of law analysis, that New Jersey law applies to the notice issue. As QBE does not make any showing of prejudice as a result of plaintiffs' delay in giving notice of the occurrence and underlying personal injury action, the delay is not a bar to maintenance of the action.
Turning to the merits of Davis' and RFD's claim of entitlement to coverage from QBE, QBE contends that plaintiffs are not entitled to coverage because the jury determined in the underlying action that the occurrence did not arise out of Jansons' work, and because the occurrence was not an accident within the meaning of the policy.
The Additional Insured Endorsement to the QBE policy provides for coverage of an insured "only with respect to liability arising out of 'your work' [i.e. Jansons' work] for that Insured by or for you." The policy applies to "bodily injury" and "property damage" "caused by an 'occurrence' that takes place in the 'coverage territory.'" (Commercial General Liability Coverage Form, § I[1][b][1].) "'Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id., § V[13].) The policy also contains an exclusion for intentional conduct which provides: "This insurance does not apply to: a. Expected or Intended Injury [defined as] 'Bodily injury' or 'property damage' expected or intended from the standpoint of the insured."
It is well settled that "the phrase 'arising out of in an additional insured clause [] mean[s] originating from, incident to, or having connection with." It requires "only that there be some causal relationship between the injury and the risk for which coverage is provided." (Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburg. PA, 15 NY3d 34, 38 [2010] [internal citations omitted].) "[T]hc focus of the inquiry is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained." (Id. [internal quotation marks and citation omitted].) The negligence, or lack of negligence, of the insured subcontractor is immaterial to the determination of whether the injury of the plaintiff in the underlying action arose out of the subcontractor's work. (Id. at 39; Hunter Roberts Constr. Group. LLC v Arch Ins. Co., 75 AD3d 404, 407-408 [1st Dept 2010J.) Thus, contrary to QBE's contention (QBE Memo. In Support of QBE Motion at 5), the jury's finding in the underlying action that Jansons was not liable for negligent failure to protect its employee is not probative of whether the loss arose out of Jansons' work.
Moreover, where an employee of the insured subcontractor is injured while performing the subcontractor's work, there is a sufficient connection to trigger coverage for the additional insured under the "arising out of additional insured endorsement of the subcontractor's policy. (Id. at 408; Admiral Ins. Co. v American Empire Surplus Lines Ins. Co., 96 AD3d 585, 588-589 [1st Dept 2012].) Here, QBE makes no showing that Jansons' employee, Callegari, was not injured while working for Jansons. The court accordingly holds that QBE's coverage obligation is triggered to Davis and RFD as additional insureds.
The court is also unpersuaded by QBE's contention that the assault by Rose against Callegari is not an "accident" and therefore not a covered "occurrence" within the meaning of the QBE policy. "[I]n deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual and unforeseen." (RJC Realty Holding Corp. v Republic Franklin Ins. Co., 2 NY3d 158, 163 [2004][internal quotation marks and citation omitted; emphasis in original].) In the instant case, while the assault was intentional on Rose's part, it was unexpected, rather than intentional, from Jansons' point of view. (See id.)
To the extent that the issue is whether the loss was unexpected from the point of view of the additional insureds, Davis and RFD, the court reaches the same conclusion. The jury made no findings as to RFD's liability. It found that Davis was actively negligent in allowing its employee, Rose, to use a dangerous knife on the jobsite, but that Davis did not direct or authorize Rose's assault on Callegari - i.e., that the assault was not intentional on Davis' part.
The verdict sheet in the underlying action poses no question as to RFD's liability. In fact, it appears that RFD was dismissed from that action. (Sec March 16, 2012 Transcript at 28.)
Moreover, Davis may not be found liable for Rose's intentional act under the doctrine of respondeat superior. This doctrine holds an employer liable for an employee's acts only if "the tortious conduct is generally foreseeable and a natural incident of the employment." (RJC Realty Holding Corp., 2 NY3d at 164, citing Riviello v Waldron, 47 NY2d 297, 304 [1979].) Here, there is no basis on which it could be found that an assault by Rose, a construction worker, on Callegari, another construction worker, was in furtherance of Davis' business and therefore a natural or expected incident of his employment. (See RJC Realty Holding Corp., 2 NY3d at 164.) As Rose's act may not be attributed to Davis, it constitutes an accident within the meaning of the QBE policy. (Id. at 164-165.) Put another way, as Davis' liability was based upon negligent supervision of Rose, and not upon respondeat superior, the assault was an accident within the meaning of the QBE policy and was not within the exclusion for expected injuries. (See NYAT Operating Corp. v GAN Natl. Ins. Co., 46 AD 3d 287 [1st Dept 2007], lv denied 10 NY3d 715 [2008]; see also White v Hampton Mat. Co. L.L.C., 35 AD3d 243 [1st Dept 2006][distinguishing between negligent supervision and respondeat superior claims].)
The cases cited by QBE are not to the contrary. With one exception, the cases involve denial of coverage for an insured's, as opposed to its employee's, intentional conduct (see e.g. Allstate Ins. Co. v Mugavero, 79 NY2d 153 [1992]; Allstate Ins. Co. v Schimmel, 22 AD3d 616 [2nd Dept 2005]), or denial of coverage to an insured based on a policy provision that expressly excludes coverage for claims based on assault and battery. (Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347 [1996].) QBE also relies on a 1996 case (Public Serv. Mut. Ins. v Camp Raleigh, 233 AD2d 273 [1st Dept 1996], lv denied 90 NY2d 801 [1997]) for the proposition that an insurer has no duty to defend and indemnify an insured for an intentional assault (sexual molestation) by its employee because such act is not an "accident" as defined by the policy. As Davis and RFD correctly point out, that case is not good law in light of the more recent decision of the Court of Appeals discussed above.
The court has considered QBE's remaining objections to coverage and finds them to be without merit. In this regard, it is noted that although Justice Billings held that Davis is not entitled to contractual indemnification from Jansons because Davis was found actively negligent by the jury (see supra at 2), Davis' entitlement to contractual indemnification is governed by standards that are not applicable to this determination as to its entitlement to indemnification under the insurance policy. (See generally Kinney v Lisk Co., 76 NY2d 215 [1990].)
Finally, Davis and RFD seek a declaration that their coverage from QBE is primary to their coverage from State National. In order to determine the priority of coverage among different policies, the court must have all of the policies before it. (BP A.C. Corp. v One Beacon Ins. Group., 8 NY3d 708, 716 [2007].) Davis and RFD do not deny that Tishman may have issued coverage to them, and they have not produced the policy. The court is therefore unable to determine the priority of coverage on this record.
It is accordingly hereby ORDERED and ADJUDGED that plaintiff's motion (Motion Seq. No. 002) is granted to the extent of declaring that (1) Davis & Partners, LLC, and RFD 425 Filth Avenue. L.P. are entitled to defense and indemnification from QBE Insurance Corporation in the action entitled Callegari v Davis Partners (Index No. 102354/05) (Callegari action) and (2) QBE Insurance Corporation is required to reimburse plaintiffs for all reasonable amounts paid by plaintiffs in the defense of the Callegari action; and it is further
ORDERED that defendant's motion (Motion Seq. No. 003) is denied; and it is further
ORDERED that the parties shall appear for a pre-trial conference in Part 60 on February 26, 2013 at 2:30 p.m., with respect to the remaining issue in this action - namely the priority of QBE's coverage. Dated: New York, New York
January 17, 2013
ENTER:
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MARCY FRIEDMAN, J.S.C.