Opinion
Index Number: 113060/11 Motion Seq. No.: 004
02-10-2014
Hermitage Insurance Company, Plaintiffs, v. Bronx Steel Fabricators Inc., 77 Reade, LLC, LEECO Construction Corp., Concrete Courses Corp., Ancor Construction Services, Inc., SST Consultants, Inc., Weidlinger Associates, Inc., BKSK Architects LLP., Vacex, Inc., and 87 Chambers LLC and IBC Chambers, LLC as Tenants in Common, Defendants.
DECISION AND ORDER
KENNEY, JOAN M., J.
Recitation, as required by CPLR 2219(a), of the papers considered in review of this motion for summary judgment.
| Papers | Numbered |
| Notice of Motion, Affirmations, Exhibits, and Memo of Law | 1-20 |
| Opposition Affirmation and Exhibits | 21-23 |
| Reply Memo of Law | 24-25 |
In this declaratory judgment action, plaintiff Hermitage Insurance Company (Hermitage), moves for an Order, pursuant to CPLR 3215(a) granting it default judgment against defendant Bronx Steel Fabricators, Inc. (Bronx Steel); and, pursuant to CPLR 3212, granting it summary judgment declaring that plaintiff has no duty to defend or indemnify the remaining named defendants in an underlying property damage action.
Factual Background
This declaratory judgment action arises out of a property damage action currently pending in Supreme Court, New York County, entitled 87 Chambers, LLC and IBC Chambers, LLC As Tenants in Common v. 77 Reade, LLC, Leeco Construction Corp., Concrete Courses Corp., Ancor Construction Services, Inc., SST Consultants, Inc., Weidlinger Associates, Inc., and BKSK Architects LLP (the Chambers action).
The Chambers Action
It is alleged in the Chambers action that due to negligence and certain building code violations arising out of the demolition, excavation, underpinning, shoring, and construction activities at a neighboring construction site, the building located at 71 Reade Street, New York, NY (the premises or 71 Reade Street), partially collapsed on or about April 30, 2009, and sustained property damage. It is alleged that 71 Reade Street sustained significant structural damage, including collapse, as a result of the negligence of the owner, general contractor, and other subcontractors at the neighboring construction project at 77 Reade Street, New York, NY (the project or 77 Reade Street). 77 Reade LLC (77 Reade) was the owner of the project and Leeco Construction Corporation (Leeco) was the general contractor.
The 77 Reade Street project was comprised of two lots, including a one-story retail space at 73-75 Reade Street with a parking lot behind it and an existing five-story building at 77 Reade Street. The two lots were to be converted into eight-story condominiums. The existing one-story building and parking lot were to be demolished and removed. The existing five-story building, which also included a cellar and sub-cellar, was to be gut renovated. Excavation of the project included excavation of the cellar and sub-cellar at 73-75 Reade Street and of the sub-cellar at 77 Reade Street. The depth of the proposed building at 73-75 Reade Street would extend below the footing of the existing building at 71 Reade Street.
The project initially called for underpinning of the existing building at 71 Reade Street. Subsequently, the design called for the shoring of both 71 Reade Street and 77 Reade Street to protect these adjacent properties. The plans for the exterior shoring of these properties were prepared by SST Consultants, Inc. (SST), the underpinning and shoring engineers. On or about March 23, 2009, Leeco hired Bronx Steel to perform the shoring work on the project. Bronx Steel performed the shoring on all four sides of the project site. Bronx Steel fabricated the steel, which was purchased by Leeco and delivered on site. Bronx Steel installed horizontal walers to hold back the soil and support the sidewalks along the Chambers and Reade Street sides of the site. It also installed a racker system to the existing buildings on the west and east sides of the site. Bronx Steel then stopped its work with one or two rackers left to install on the east side of the site due to the issuance of a stop work order from the Department of Buildings on April 9, 2009.
On or about April 30, 2009, the building at 71 Reade Street sustained partial collapse. On April 6, 2010, 87 Chambers commenced suit against 77 Reade, LLC, Concrete Courses, Anchor Construction, SST, Weidlinger, and BKSK alleging that the building collapse occurred as a result of defendants' negligent construction activities and building code violations. With respect to Bronx Steel, it is alleged that it failed to take the necessary steps and precautions mandated by law to protect the premises from injury and damage during the course of the excavation at 77 Reade Street.
The Hermitage Insurance Policy
On or about April 16, 2008, Bronx Steel submitted an application for commercial general liability insurance to Hermitage's agent and wholesale broker, Morstan Agency, for general liability policy of insurance. The application described the nature of Bronx Steel's business and description of operations as "New venture steel fabricator. Incidental steel erection exposure. Residential and commercial work. Structural steel only. Insured has 12 years experience."
Hermitage issued a commercial general liability insurance policy to Bronx Steel for policy period July 25, 2008 through July 25, 2009. Hermitage's policy contained a Classification Limitation Endorsement, which provided in pertinent part:
Coverage under this policy only applies to those operations described in the Schedule of Insurance coverage parts and/or endorsements made a part of this policy.
The Hermitage Policy declarations designate two separate Classification Codes, which included 56915 Metal Works-Shop-Structural-Load Bearing and 97655 Metal Erection-Structural.
The Hermitage Policy also contained an additional insured endorsement entitled "Additional Insured - Owners, Lessees or Contractors - Scheduled Person or Organization," which provided for "unlimited additional insureds" for a flat rate fee of $1,500.00. Bronx Steel opted in and paid for the unlimited additional insured for the flat $1,500.00 premium. The Additional Insured Endorsement provided in pertinent part:
Section II - Who Is An Insured is amended to included as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury," "property damage," or "personal and advertising injury" caused, in whole or part by:
1. Your acts or omission; or
2. The acts or omissions of those acting on your behalf;
in the performance of our ongoing operations for the additional insured(s) at the location(s) designated above.
Furthermore, the Hermitage Policy contained an Additional Insured Limitation Endorsement, which stated in pertinent part:
This insurance does not provide coverage for an additional insured unless the Company gives their express written consent to add coverage for a specified entity to this policy.
On or about May 22, 2009, Hermitage was notified of the property loss by letter tendering the defense and indemnification of 77 Reade, LLC and Leeco for any claims arising out of the building collapse. The tender was based upon the indemnity and insurance procurement provisions in Leeco's contract with Bronx Steel. Leeco and Bronx Steel entered into a Subcontract Agreement on or about March 13, 2009, which provided in pertinent part:
The owner [77 Reade] and Leeco Construction Inc. shall be named as additional insured parties on all Comprehensive General Liability, excess Umbrella, and Comprehensive Automobile policies.
Additional Insured: 77 Reade LLC & Myles S. Group and Leeco Construction Inc.
Furthermore, Bronx Steel provided Leeco with a Certificate of Insurance (COI), dated March 18, 2009, issued by Bronx Steel's producer, Orrino Capital Services (Orrino). The COI listed the commercial general liability policy issued by Hermitage Insurance Company in effect from July 25, 2008 to July 25, 2009. Under the description of operations, Orrino noted "RE: shoring and welding at [the Project]. The following are listed additional insured as respects general liability: 77 Reade Street, LLC...and Leeco Construction Corp."
Nevertheless, Hermitage issued a disclaimer of coverage to its named insured, Bronx Steel based upon the Classification Limitation endorsement. Hermitage denied coverage of the claim as involving operations outside of the scope of the policy's coverage. Hermitage also disclaimed coverage based upon the Contractual Liability Limitation endorsement which changes the definition of "insured contract" to eliminate any coverage that otherwise existed for Bronx Steel's contractual liability. Hermitage also issued a separate disclaimer of coverage rejecting 77 Reade Street and Leeco's tender on the ground that they were not additional insureds pursuant to the Additional Insured Limitation endorsement, which requires Hermitage's express written consent to add a specific entity to the Hermitage Policy. Hermitage also disclaimed coverage of 77 Reade, LLC and Leeco pursuant to the Classification Limitation endorsement. Notwithstanding its disclaimer, Hermitage assigned counsel to defend the insured pending the outcome of this litigation.
Procedural History of the Declaratory Judgment Action
On or about November 17, 2011, plaintiff filed this declaratory action now before this Court pursuant to the provisions of its insurance policy issued to Bronx Steel. An Answer was interposed on behalf of Weidlinger on December 5, 2011, on behalf of BKSK on December 15, 2011, on behalf of SST on December 19, 2011, on behalf of 77 Reade, LLC and Leeco on January 27, 2012, on behalf of Concrete Courses on January 31, 2012, and on behalf of 87 Chambers on June 14, 2012. On or about January 13, 2012, NY Marine, the insurer for 77 Reade, LLC and Leeco, filed a motion to intervene as an interested party to this litigation. The motion was resolved by stipulation whereby NY Marine was joined as an intervenor in this action and is bound by any determination by the Court herein.
Bronx Steel was served with the Summons and Declaratory Judgment Complaint on or about November 22, 2011. On May 30, 2012, Bronx Steel was advised by letter of its default and the need to respond to Hermitage's complaint. On December 13, 2012, Bronx Steel was again advised by letter of its default and the need to respond. Bronx Steel has not appeared in this action or obtained an extension of time to answer.
Arguments
Plaintiff contends that it is entitled to a default judgment against Bronx Steel for its failure to answer the summons and complaint, and that it is entitled to summary judgment declaring that it is not obligated to defend or indemnify any and all defendants, intervenor, or any other party under the Hermitage Policy for the underlying action pursuant to the Classification Limitation and Additional Insured Limitation Endorsements limiting the scope of coverage of the policy.
Defendants 87 Chambers LLC and IBC Chambers LLC argue that plaintiff's motion must be denied because the language of the exclusions limiting the coverage of the Hermitage policy issued to Bronx Steel is ambiguous and can be construed to include the work performed by Bronx Steel, and cross-move to compel the deposition of Emilio Diaz, an employee of Hermitage and the underwriter of the policy in question.
Defendants 77 Reade LLC and Leeco and Intervenor NY Marine argue that plaintiff's motion must be denied because the Classification Limitation endorsement does not apply to the type of work Bronx Steel performed on the project, and because the Additional Insured Endorsement is ambiguous and attempts to exclude a bargained-for coverage. Defendants cross-move for summary judgment against Hermitage declaring Hermitage has a duty to defend and indemnify 77 Reade and Leeco in the underlying action.
Defendant Weidlinger Associates argues that plaintiff's motion must be denied because the Hermitage policy expressly includes the type of activity that Bronx Steel was engaged in at the project.
Discussion
Pursuant to CPLR 3215(a), "when a defendant has failed to appear, plead or proceed to trial of an action reached and called for trial, or when the court orders a dismissal for any other neglect to proceed, the plaintiff may seek a default judgment against him." However, even if there appears to be no opposition, the Court should not exercise its power to grant default judgments, whether statutory or inherent, in a manner or under circumstances where it could work an injustice to litigants or to non-parties. Rivera v. Laporte, 120 Misc.2d 733, 466 N.Y.S.2d 606, 607 (Sup. Ct. 1983). This is no less true in declaratory judgment actions, which should be granted only where necessary to serve some useful purpose of parties. Frasca v. Frasca, 129 A.D.2d 766, 767 (2d Dept. 1987). It has been said that declaratory relief should rarely, if ever, be granted solely upon default and without inquiry by the court into the merits. Tannenbaum v. Allstate Insurance Co., 66 A.D.2d 683 (1st Dept. 1978). Declaratory judgment should not be granted unless the plaintiff establishes prima facie entitlement to the relief sought, Levy v. Blue Cross and Blue Shield of Greater New York, 124 A.D.2d 900, 902 (3d Dept. 1986), and may not be granted where the judgment would affect the rights of other parties not in default or would affect the rights of non-parties. Merchants Mutual Insurance Co. v. Long Island Pet Cemetery, Inc., 206 A.D.2d 827 (4th Dept. 1994); Unitrin Advantage Insurance Co. v. Carothers, 17 Misc. 3d 1121(A), 851 N.Y.S.2d 74 (Sup. Ct. 2007), New South Insurance Co. v. Dobbins, 71 A.D.3d 652, 894 N.Y.S.2d 912 (2010).
Here, plaintiff has not established prima facie entitlement to a declaration that it has no obligation to defend or indemnify Bronx Steel for the underlying action pursuant to the Classification Limitation Endorsements having failed to establish that the activity performed by Bronx Steel was an "excluded" activity under the insurance policy. While the Classification Codes include structural load bearing and metal erection work, there is no specific exclusion for "shoring" activity-the activity allegedly performed by Bronx Steel.
Pursuant to CPLR 3212(b), "a motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the cause of action of defense has no merit. The motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party. Except as provided in subdivision 'c' of this rule the motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact. If it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion."
The rule governing summary judgment is well established: "The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." (Winegrad v New York University Medical Center, 64 NY2d 851 [1985]; Tortorello v Carlin, 260 Ad2d201 [1st Dept 1999]).
"A liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence, even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered." (Fitzpatrick v American Honda Motor Co., Inc., 78 NY2d 61 [1991]). "Insurer's duty to defend arises whenever the allegations of the complaint, for which the insured may stand liable, fall within the risk covered by the policy, or, in other words, where there is a reasonable possibility of recovery under the policy." (City of NY v Certain Underwriters at Lloyd's of London, England, 15 AD 3d 228 [1st Dept. 2005]). An insurer "may be relieved of its duty to defend only if it bears the heavy burden of demonstrating that the allegations of the complaint cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision." (Frontier Insulation Contractors, Inc. v. Merchants Mutual Insurance Co., 91 N.Y.2d 169, 690 N.E. 866 [1997]). Any exclusions or exceptions from policy coverage must be specific and clear in order to be enforced. They are not to be extended by interpretation or implication, but are to be afforded a strict and narrow construction. 242-44 East 77th Street, LLC v. Greater New York Mutual Ins. Co., 31 A.D.3d 100, 103, 815 N.Y.S.2d 507, 509 (2006).
Here, Hermitage issued a general commercial liability policy to Bronx Steel, which included a Classification Limitation Endorsement that served to limit coverage to those operations described in the schedule of insurance made part of the policy. As stated previously, the two classification codes included in the policy refer to "Metal Works-Shop-Structural-Load Bearing" and "Metal Erection-Structural-NOC." No further definition of either of these terms exists within the four corners of the policy. While it is undisputed that Bronx Steel's actual work was limited to the shoring of the existing buildings at 71 and 77 Reade Street, the Classification Limitation Endorsement does not include any language identifying "shoring" as one excluded activities. Because the Hermitage policy fails to contain a specific and clear exclusion for work involving "shoring," the activity of "shoring" can reasonably be considered an activity performed in connection with "structural," "load bearing," and "metal erection" as indicated by the classification codes. The classifications as listed by the Hermitage policy do not clearly and unambiguously exclude coverage for the shoring work performed at the project. Hermitage has failed to establish that the "shoring" performed by Bronx Steel was an excluded activity under the policy issued.
In order to compel the production of additional witnesses, the moving party "must show that the representatives already deposed had insufficient knowledge, or were otherwise inadequate; and there is a substantial likelihood that the persons sought for depositions possess information which is material and necessary to the prosecution of the case." Hayden v. City of New York, 26 A.D.3d 262, 809 N.Y.S.2d 75, 76 (N.Y. App. Div. 2006).
Here, defendants 87 Chambers LLC and IBC Chambers LLC have made a sufficient showing that the witness produced by the plaintiff, Natalia Jones, the underwriting supervisory, had insufficient knowledge of the pertinent facts of this case. Defendants have alleged with specificity that Ms. Jones does not possess any personal knowledge of the material facts of the case. In Ms. Jones' affidavit, she acknowledges that her knowledge of the case is based on a review of the records maintained in the ordinary course of business and from her general experience as an underwriter. When asked if she had personal knowledge of the facts regarding the policy in question, Ms. Jones directly answered that she did not have any personal knowledge with regards to this specific policy. Further, defendants have sufficiently shown that the person sought to be deposed, Emilio Diaz, does contain information material and necessary to the prosecution of the case because he was the actual underwriter of the policy in question who made the actual determinations of what classification codes to use and which exclusions to include in the policy. Mr. Diaz is the appropriate person to testify regarding material facts of the case as he was the underwriter of the policy in question and he is within the control of plaintiff. The outcome of this case largely depends on those determinations made regarding the terms and language and exclusions of that policy, and as such a witness with personal knowledge of the considerations taken when underwriting that policy is considered material and necessary.
The "standard for determining whether additional named insured under...insurance policy was entitled to defense was same standard that was used to determine if named insured was entitled to defense." (BP Air Conditioning Corp. v One Beacon Ins. Group, 8 NY3d 708 [2007]; Sport Rock Intern., Inc. v American Cas. Co. of Reading, PA, 65 AD3d 12 [1st Dept. 2009]). "[T]he well-understood meaning of the term [additional insured] is an entity enjoying the same protection as the named insured." (BP Air Conditioning, 65 AD3d 12 [1st Dept. 2009]). It is well established that the party claiming insurance coverage bears the burden of proving entitlement. Moleon v. Kreisler Borg Florman General Construction Co., Inc. 304 A.D.2d 3337, 339, 758 N.Y.S.2d 621, 623 (N-Y.App.Div.2003). A party that is not named an insured or additional insured on the face of the policy is not entitled to coverage (see McKenzie v. New Jersey Transit Rail Operations, Inc., 772 F.Supp. 146, 149, citing Stainless, Inc. V. Employers' Fire Ins.Co., 49 N.Y.2d 924, 406 N.E.2d 490 [1980]).
Here, Hermitage presented its policy which did not name 77 Reade, LLC or Leeco as additional insured. In response, 77 Reade, LLC and Leeco submitted the Certificate of Insurance. However, the certificate contains a disclaimer which states that "this certificate is issued as a matter of information only and confers no rights upon the certificate holder [and that] this certificate does not amend, extend, or alter the coverage afforded by the policies below." The law is clear that a certificate of insurance issued by a broker listing a party as an additional insured is insufficient to alter the language of the policy itself, especially where the certificate recites that it is for information purposes only; that it confers to rights upon the holder; and that it did not amend, alter, or extend the coverage afforded by the policy. See McKenzie v. New Jersey Transit Rail Operations, Inc., 772 F.Supp. 146; Moleon v. Kreisler Borg Florman Gen. Const. Co., Inc., 304 A.D.2d 337, 758 N.Y.S.2d 621 (N.Y.App.Div. 2003)). Accordingly, the certificate is insufficient to establish that 77 Reade, LLCC and Leeco are additional insured under a policy such as here, where Hermitage's Additional Insured Limitation Endorsement requires that written consent must be obtained from Hermitage to add coverage for a specific entity. Accordingly, it is hereby
ORDERED, that plaintiff's motion for default judgment against defendant Bronx Steel Fabricator, Inc., is denied; and it is further
ORDERED, that plaintiff's motion for summary judgement declaring that it is not obligated to defend or indemnify any and all defendants, intervenor, or any other party under the Hermitage Policy in the Chambers action, pursuant to the Classification Limitation, is denied; and it is further
ORDERED, that the cross-motion of defendants 87 Chambers LLC and IBC Chambers LLC to compel Emilio Diaz for deposition in this action is granted, and said deposition shall take place on or before March 3, 2014. The parties will arrange the place and time to appear for deposition; and it is further
ORDERED, that plaintiff's motion for summary judgment declaring that it is not obligated to provide additional insured coverage to 77 Reade LLC and Leeco is granted; and plaintiff shall submit order accordingly, no later than March 7, 2014 to Motion Support Office at 60 Centre Street, Room 119A, New York, New York, 10007; and it is further
ORDERED, that the cross-motion of defendants, 77 Reade LLC and Leeco, and intervenor, NY Marine, for summary judgment declaring that Hermitage has a duty to defend and indemnify them, is denied; and it is further
ORDERED, that the parties proceed to mediation/trial forthwith.
ENTER:
__________
Joan M. Kenney, J.S.C.