Opinion
Index No. 652621/2017
03-13-2023
Harleysville Insurance Company, 114 FIFTH AVENUE ASSOCIATES, LLC, COMMERCIAL CONSTRUCTION MANAGEMENT, INC., and LULULEMON USA INC., Plaintiffs, v. United Fire Protection, Inc., and EVEREST INDEMNITY INSURANCE COMPANY, Defendants.
Vigorito, Barker, Patterson, Nichols & Porter, LLP, Garden City, NY (Thomas P. Jaffa of counsel), for plaintiffs. Kennedys CMK LLP, New York, NY (Thomas C. Kaufman of counsel), for defendant Everest Indemnity Insurance Company.
Unpublished Opinion
Vigorito, Barker, Patterson, Nichols & Porter, LLP, Garden City, NY (Thomas P. Jaffa of counsel), for plaintiffs.
Kennedys CMK LLP, New York, NY (Thomas C. Kaufman of counsel), for defendant Everest Indemnity Insurance Company.
GERALD LEBOVITS, J.
Plaintiffs, Harleysville Insurance Company (Harleysville), 114 Fifth Avenue Associates, LLC (114 Fifth Avenue), Commercial Construction Management, Inc. (Commercial), and Lululemon USA Inc. (Lululemon), move for an order (1) granting them partial summary judgment under CPLR 3212 against defendant Everest Indemnity Insurance Company (Everest); (2) under Insurance Law § 3001, declaring that Everest is statutorily estopped under Insurance Law § 3420 (d) (2) from disclaiming coverage, and that Everest alone must defend Commercial as an additional insured in connection with an underlying action and third-party action; (3) declaring that the commercial-general-liability policy that Harleysville issued to Commercial is excess over the policy that Everest issued to defendant, United Fire Protection, Inc.; and (4) declaring that Everest must reimburse Harleysville for all post-tender attorney fees and costs incurred in the underlying action and related third-party action.
Everest cross-moves for an order (1) granting summary judgment to Everest; (2) dismissing plaintiffs' complaint; and (3) declaring that Everest owes no duty to defend or indemnify plaintiffs.
BACKGROUND
In 2015, Commercial and United Fire entered into a written agreement concerning a construction project at a Lululemon located at 114 5th Avenue, New York, New York. Under the contract, United Fire would supply labor and material to complete sprinkler work. As part of their work for the project, both corporations procured insurance policies: Commercial procured a commercial-general-liability policy from Harleysville, and United Fire procured commercial-general-liability and commercial-catastrophe policies from Everest. Both of United Fire's policies expressly exclude coverage for employer's liability. Commercial's policy with Harleysville contains an excess "other insurance" clause that provides that "[t]his insurance is excess over:... [a]ny other primary insurance available to [Commercial] covering liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured by attachment of an endorsement." (NYSCEF No. 40 at § IV [4] [b].)
On September 17, 2015, non-party Jose Molina, an employee of United Fire, was seriously injured when he was allegedly struck by a falling sprinkler pipe. In an underlying action, he later sued 114 Fifth Avenue, Commercial, and Lululemon for negligence and Labor Law violations. Commercial then filed a third-party action against United Fire, seeking common-law indemnification, contribution and contractual indemnification.
On November 15, 2016, United Fire's broker forwarded Commercial's tender demand for defense and indemnification of Commercial, Lululemon, and 114 Fifth Avenue, to Everest. Everest alleges that, in response, it "conducted a reasonable investigation of the claim" to determine whether Lululemon, 114 Fifth Avenue, and Commercial ("purported insureds") were entitled to coverage. (NYSCEF No. 44 at 5.) Everest alleges that it was not able to contact the purported insureds until December 12, 2016. On January 23, 2017, Everest disclaimed coverage under both policies based on their exclusions for employer's liability. As a result, Harleysville has provided the sole defense for Commercial, 114 Fifth Avenue, and Lululemon in the underlying action.
Plaintiffs commenced the present action seeking a judgment directing Everest to defend and indemnify 114 Fifth Avenue, Commercial, and Lululemon in the underlying action, and to compensate Harleysville for its prior legal defense costs.
DISCUSSION
I. Whether Lululemon and 114 Fifth Avenue are Additional Insureds on the Everest Primary Policy
Everest moves for summary judgment dismissing Lululemon and 114 Fifth Avenue's coverage claims on the ground that they are not additional insureds under the Everest general-liability policy. This court agrees that those claims must be dismissed. The Everest policy includes as additional insureds only those organizations for whom United Fire has "agreed in writing in a contract or agreement" to include as an additional insured. (NYSCEF No. 34 at 39 § II.) The parties do not dispute that such an agreement was only executed between United Fire and Commercial. Lululemon and 114 Fifth Avenue are not additional insureds of Everest.
II. Whether the Claims in the Underlying Action Come Within the Scope of the Everest Policies
An insurer's duty to defend is "exceedingly broad" and will arise "[i]f [a] complaint contains any facts or allegations which bring the claim even potentially within the protection purchased." (Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34, 37 [2010] [internal citations and quotation marks omitted].) "This standard applies equally to additional insureds and named insureds." (Id.)
The Everest commercial-general-liability policy covers an additional insured "with respect to liability for 'bodily injury', 'property damage' or 'personal and advertising injury' but only to the extent caused, in whole or in part, by:... Your [United Fire's] acts or omissions; or... [t]he acts or omissions of those acting on your behalf... in the performance of 'your work' for an additional insured." (NYSCEF No. 34 at 39 § II.) To prove coverage, plaintiffs needed to show that United Fire's "causal conduct was negligent or otherwise at fault" and that the harm was not solely due to Commercial's negligence. (Old Republic Gen. Ins. Corp. v Consolidated Edison Co. of NY Inc., 193 A.D.3d 595, 597 [1st Dept 2021]; see also Burlington Ins. Co. v NYC Tr. Auth., 29 N.Y.3d 313, 322 [2017] [concluding that the words, "caused, in whole or in part," in a policy endorsement "require proximate causation"].)
Here, plaintiffs have alleged that Molina's "boss" at the time of the accident, and allegedly the only person to whom he reported, was United Fire's owner. (NYSCEF No. 25 at ¶ 24.) They further allege that the sprinkler pipe that caused Molina's injury fell after Molina had installed it based on instructions from a United Fire foreman and using "the same type of glue [as he had used] in other United Fire projects." (Id. at ¶ 24-25 ["Molina testified that at the outset of the project, 'Luis [i.e., the company's owner, Louis Chierchia] told us to use it [i.e., the glue]' to fasten the pipe to the ceiling."].) Moreover, the activity that allegedly caused Molina's injury was the work expressly designated to United Fire by Commercial under the parties' contract. (See NYSCEF No. 33 at 1 [requiring that United Fire "[s]upply all labor and material to complete the Sprinkler scope of work"].) The court concludes that plaintiffs have alleged sufficient facts to show that United Fire's conduct was a proximate cause of Molina's injury, and that his injury fell within the scope of the additional-insured clause of the commercial-general-liability policy and, consequently, the excess commercial-catastrophe policy.
III. Coverage Priority Between the Harleysville Policy and the Everest Primary Policy
The Harleysville policy provides that it is excess over "[a]ny other primary insurance available to you [i.e., Commercial] covering liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured by attachment of an endorsement." (NYSCEF No. 40 at 29 § IV [4] [b] [1] [(b)].) The Everest commercial-general-liability policy similarly provides that its insurance is excess over other primary insurance for which United Fire has "been added as an additional insured." (NYSCEF No. 34 at 20 § IV [4] [b] [2].) Further, both insurers' policies state that when the policy is excess, "we will have no duty... to defend... if any other insurer has a duty to defend." (NYSCEF No. 34 at 21 § IV [4] [b] [Everest Policy]; NYSCEF No. 40 at 29 § IV [4] [b] [2] [Harleysville Policy].)
Plaintiffs assert that Everest's "other insurance" policy provision is not triggered because its policy was issued to United Fire, who was not added to the Harleysville policy as an additional insured. (See NYSCEF No. 50 at ¶ 27.) Everest argues that there are triable issues of fact as to whether its policies are excess and "would not apply until all underlying policies-including the Harleysville Policy-are exhausted." (NYSCEF No. 44 at 12.) The court agrees with plaintiffs. Nothing is ambiguous about the policies' "other insured" provisions-they are conditional on the insured being named an additional insured on another primary insurance policy. Here, Commercial was named as an additional insured on the Everest policies in accordance with the parties' contract. United Fire, however, was not added as an additional insured on the Harleysville policy. Thus, the Harleysville policy is excess over that of Everest.
IV. The Effectiveness of Everest's Coverage Disclaimer
The Everest policies also contain an "Employer's Liability" exclusion, which excludes from coverage any "'[b]odily injury' to... [a]n 'employee of the insured arising out of and in the course of... [e]mployment by the insured; or... [p]erforming duties related to the conduct of the insured's business...." (NYSCEF No. 34 at 11 § I [2] [e].) The parties do not dispute that this provision of the policies applies to exclude coverage for Molina's injury. But plaintiffs argue that "Everest's 69 day delay in disclaiming coverage based on Exclusion - Employer's Liability precludes its right to disclaim coverage." (NYSCEF No. 25 at 3.) The court agrees.
Insurance Law § 3420 (d) (2) requires an insurer disclaiming coverage to do so by providing "written notice as soon as is reasonably possible." Its failure to do so "waives its affirmative defense of late notice." (Matter of Allcity Ins. Co. (Jimenez), 78 N.Y.2d 1054, 1056 [1991].) The Court of Appeals measures the timeliness of a disclaimer "from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage." (First Fin. Ins. Co. v Jetco Contr. Corp., 1 N.Y.3d 64, 68-69 [2003] [internal quotation marks omitted].) "Moreover, an insurer's explanation is insufficient as a matter of law where the basis for denying coverage was or should have been readily apparent before the onset of the delay." (Id. at 69.) An insurer's delay may be excused, however, when it is the result of a "prompt, diligent and good faith investigation of the claim." (2540 Assoc. v Assicurazioni Generali, 271 A.D.2d 282, 284 [1st Dept 2000] [internal quotation marks omitted].)
Here, plaintiffs allege that United Fire's broker emailed Everest Commercial's tender demand on November 15, 2016, and that Everest did not disclaim coverage until January 23, 2017. Plaintiffs also assert, and Everest does not dispute, that the status of Molina as an employee of United Fire was known to and identified by Everest when it received the claim. (See NYSCEF No. 25 at ¶ 13 ["Not only did CCM's defense counsel's tender demand letter unambiguously state that 'Jose Molina was an employee of United Fire Protection, Inc. at the time of the occurrence," but so did the complaint."]; NYSCEF No. 37 at 1 [email from Everest's third-party administrator to its claim examiner on November 18, 2016, noted that "The pltf. is actually an Employee of the Insd."].)
Everest, however, argues that its delay in disclaiming was reasonable because it was unable to contact the purported insureds as part of its coverage investigation until December 12, 2016. But Everest does not explain why its investigation into the purported insureds' entitlement to coverage was pertinent to its disclaimer when the ground on which it could disclaim-Molina's employment with United Fire-was readily apparent based on Commercial's tender demand. This court, thus, concludes that Everest's explanation for its delay is "insufficient as a matter of law." (First Fin. Ins. Co., 1 N.Y.3d at 69.) Plaintiffs' summary-judgment motion is granted to the extent that it seeks to preclude Everest from disclaiming coverage to Commercial under the employer-liability exclusion of the commercial-general-liability and commercial-catastrophe Everest policies.
Everest argues that the timeliness of its disclaimer is a question of fact that precludes summary judgment, relying on Admiral Insurance Co. v State Farm Fire & Cas. Co. (86 A.D.3d 486 [1st Dept 2011]). To the extent that Everest is citing Admiral Insurance for the proposition that, upon becoming aware of a ground to disclaim, Everest was entitled to delay issuing its disclaimer while investigating additional grounds to disclaim, that aspect of Admiral Insurance is no longer good law. See George Campbell Painting v National Union Fire Ins. Co. of Pittsburgh, PA, 92 A.D.3d 104, 105-106 [1st Dept 2012].) If Everest is relying on Admiral Insurance to support an argument that Everest acted reasonably in investigating the claim (and therefore that Everest's disclaimer was timely), that reliance is unpersuasive: Commercial's tender demand to Everest, unlike the letter to the insurer in Admiral Insurance, made it "readily apparent that [Everest] had the right to disclaim coverage. (Admiral Insurance, 86 A.D.3d at 490.)
Lululemon and 114 Fifth Avenue were not covered under the Everest policy to begin with, as discussed in Point I, supra. The untimeliness of Everest's disclaimer therefore does not foreclose Everest from denying coverage to them. (See Black Bull Contracting, LLC v Indian Harbor Ins. Co., 135 A.D.3d 401, 403 [1st Dept 2016].)
This court concludes that Everest has a duty to defend and indemnify Commercial in the underlying action, and that Everest is responsible for Commercial's associated legal fees. Everest, however, is not responsible for reimbursing Harleysville's post-tender defense costs, because section 3420 (d) does not apply to coinsurers. (See Greater NY Mut. Ins. Co. v Chubb Indem. Ins. Co., 105 A.D.3d 523, 524-525 [1st Dept 2013], citing Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 A.D.3d 84, 93 [1st Dept 2005].) Thus, Everest's written disclaimer under the employer-liability exclusion is timely and valid as to Harleysville.
Accordingly, it is
ORDERED that Everest Indemnity Insurance Company's (Everest) cross-motion for summary judgment is granted in part and denied in part; and it is further
ADJUDGED and DECLARED that Everest is not obliged to provide a defense to, and provide coverage for, 114 Fifth Avenue Associates, LLC and Lululemon USA Inc., in the action of Molina v 114 Fifth Avenue Associates LLC,, Index No. 156349/2016, Supreme Court, New York County, and the related third-party action; and it is further
ORDERED that plaintiffs' motion for partial summary judgment is granted in part and denied in part; and it is further
ADJUDGED and DECLARED that Everest is statutorily estopped under Insurance Law § 3420 (d) (2) from disclaiming coverage to Commercial Construction Management, Inc. (Commercial) under the Everest commercial-general-liability policy and the Everest catastrophe-liability policy in Molina v 114 Fifth Avenue Associates LLC and the related third-party action; and it is further
ADJUDGED and DECLARED that Everest is obliged to provide a defense to, and provide coverage for, Commercial as an additional insured in the action of Molina v 114 Fifth Avenue Associates LLC and the related third-party action; and it is further
ADJUDGED and DECLARED that Harleysville Insurance Company's (Harleysville) commercial-general-liability policy is excess over United Fire Protection Inc.'s commercial-general-liability policy; and it is further
ADJUDGED and DECLARED that Everest is not obliged to reimburse Harleysville for post-tender attorney fees and costs incurred in the action of Molina v 114 Fifth Avenue Associates LLC, et al. (or the related third-party action).