Opinion
111128/2006.
Decided July 29, 2010.
Paul Hugel, Clayman Rosenberg, New York, NY, for Plaintiff.
Arnold Stream, Burns, Russo, Tamigi Reardon, LLP, Garden City, NY, for Defendant.
Motion sequence numbers 002 and 003 are consolidated for disposition herein. In this action, plaintiff Denis Kelleher ("Kelleher") seeks a judgment declaring that defendant Admiral Indemnity Company ("Admiral") is required to defend and indemnify Kelleher under a commercial general liability policy (the "Policy") issued by Admiral with respect to a third-party action brought against Kelleher in Bronx County Supreme Court (the "underlying action"). Although the settlement of the underlying action has obviated Kelleher's request for defense, Kelleher continues to seek indemnification from Admiral for losses he has incurred in connection with the underlying action. Both parties move for partial summary judgment pursuant to CPLR 3212.
Factual Background
The underlying action stems from an altercation that occurred at Kelleher's former residence at the Northmoore Condominium ("Northmoore") in New York, NY. As testified to at his deposition, on the evening of December 24, 2005, Kelleher, who was a member of the board of directors of the Northmoore, returned to the Northmoore accompanied by his wife and two young children. As he approached the building, Kelleher observed through the glass lobby doors Abraham Baawuah ("Baawuah"), an employee of an independent security contractor, sitting behind the lobby desk and speaking on the telephone. Kelleher and his wife were carrying their children and Christmas packages and were unable to easily open the doors to the building. Baawuah did not assist the Kelleher family in entering the lobby.
After entering the building, Kelleher rebuked Baawuah for not having opened the lobby doors. Kelleher and Baawuah entered into a verbal dispute as to whether opening the doors was part of Baawuah's duties. Baawuah maintained that he was a security guard who was not required to open doors for residents. During the course of this argument, Kelleher stated his intention to call the board president to report Baawuah. In his deposition, Kelleher averred that, while he was dialing the board president on his cellular phone, Baawuah approached Kelleher, slapped his cellular phone from his hand, grabbed Kelleher by the coat, and pulled him toward the front doors.
Kelleher maintained in his deposition that, as Baawuah was pulling him, he pushed Baawuah away from him in self-defense. Baawuah fell to the ground in between the two entrance doors. Kelleher contacted the police who, after responding to the call, initially suggested that Kelleher and Baawuah drop the matter. However, the police returned to the Northmoore later in the evening and Kelleher was arrested and charged with criminal assault. This criminal charge was later dismissed.
In or about January 2006, Baawuah filed an action against Kelleher in Bronx County Supreme Court, alleging causes of action for intentional assault and battery, intentional infliction of emotional distress, and negligence. The underlying action has been settled.
Kelleher gave notice to Admiral of the underlying action and requested that Admiral defend and indemnify him with respect thereto. Kelleher grounded his request in the Policy issued by Admiral to the Northmoore, contending in his notice to Admiral and in his complaint herein that he is an additional insured under the Policy. As it pertains to Kelleher's claimed coverage, the provision in the Policy titled "WHO IS AN INSURED" provides in relevant part:
(1) If you are designated in the Declarations as:
. . .
(d) An organization other than a partnership, a joint venture or limitedliability company, you are an insured. Your "executive officers" and directors are insureds, only with respect to their duties as your officers or directors.
In his motion papers, Kelleher asserts that he qualifies as an insured because he was operating within the scope of his duties as a Northmoore board member in that he was reporting Baawuah's failure to perform doorman service to the board president.
Admiral denied coverage in letters to Kelleher dated April 4, 2006 and May 23, 2006. Coverage under the Policy was denied on several grounds, including the applicability of the Policy's "Employment-Related Practices Exclusion" (the "ERPE"), which reads in relevant part:
This insurance does not apply to:
"Bodily Injury" to:
(1) A person arising out of any:
(a) Refusal to employ that person;
(b) Termination of that person's employment; or
(c) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person . . .
. . .
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity . . .
In light of Admiral's denial of coverage, Kelleher brought this declaratory judgment action, seeking to compel Admiral to defend and indemnify Kelleher in the underlying action. Kelleher alleges that, because he was acting within the scope of his duties as a member of the board of directors, Admiral is required to provide the coverage stated in the Policy.
In its summary judgment motion, Admiral contends that the ERPE bars coverage under the Policy because the bodily injury to Baawuah arose from Kelleher's discipline of Baawuah during the course of Baawuah's employment at the Northmoore. Moreover, Admiral argues that the clause in the ERPE stating that coverage is excluded whether the insured is liable "as an employer or in any other capacity" indicates that the injured party need not be an employee of the insured in order for coverage of the incident to be excluded under the Policy. Admiral further contends that, as a threshold matter, Kelleher is not an insured under the Policy because he was not acting within the scope of his duties as a board member when the altercation occurred.
In his motion for partial summary judgment, Kelleher argues that the ERPE should be construed so as to exclude coverage only where the injured person was a current, former, or potential employee of the insured. Because Baawuah was an employee of an independent security contractor, Kelleher contends that the ERPE is inapplicable here. Kelleher further asserts that the injuries sustained by Baawuah did not "arise out of" Kelleher's reprimanding of Baawuah over not having opened the lobby doors, and that therefore the ERPE is inapplicable.
Discussion
New York law places a considerable burden on an insurer seeking to disclaim coverage via a policy exclusion. "To negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case." Cont'l Cas. Co. v. Rapid-American Corp., 80 NY2d 640, 652 (1993).
Here, Admiral has shown that Baawuah's claim against Kelleher arose from the employment-related practices specified in the ERPE. The phrase "arising out of" is construed broadly in that it "requires only that there be some causal relationship between the injury and the risk for which coverage is provided." Worth Constr. Co. v. Admiral Ins. Co. , 10 NY3d 411, 415 (2008) (quoting Maroney v. NY Cent. Mut. Fire Ins. Co. , 5 NY3d 467 , 472 (2005)). Baawuah's injury proceeded directly from Kelleher's argument with Baawuah over the latter's job duties; the physical altercation between Kelleher and Baawuah began while Kelleher was in the act of attempting to report Baawuah's actions to the board president. The spatial and temporal proximity of the argument, the physical altercation, and Baawuah's injury demonstrates that Baawuah's injuries arose from the type of employment-related practice contemplated by the ERPE.
Although Admiral has established that Baawuah's injury arose from the type of employment-related practices described in the ERPE, it has not shown that the ERPE clearly and unambiguously applies even if the injured party was not a current, former, or potential employee of the insured. Here, the term "person" (rather than "employee") is used in the ERPE to describe the injured individual, but "person" is not expressly defined to include independent contractors. Both the title of the ERPE and the list of practices enumerated therein — actions commonly associated with those of an employer interacting with an employee — suggest that it is reasonable to interpret the ERPE as being inapplicable to injuries suffered by independent contractors.
In fact, Admiral argues that the "obvious purpose of the [ERPE] is to eliminate coverage as to any claim for bodily injury arising out of or even relating to employment" (emphasis supplied), seemingly conceding that the ERPE could be construed so as to require an employer-employee relationship between the insured and the injured party. This, coupled with the lack of express language in the Policy clearly defining the ERPE to apply where there is no employment relationship, supports this Court's adherence to the rule that "policy exclusions are given a strict and narrow construction, with any ambiguity resolved against the insurer." Belt Painting Corp. v. TIG Ins. Co., 100 NY2d 377, 383 (2003).
Admiral also has failed to show that its interpretation of the ERPE is the only reasonable interpretation of the exclusion. "When the issue is the appropriate construction or interpretation to be placed upon an exclusionary clause in a policy, the carrier must establish that its construction or interpretation of the policy is the only construction that can fairly be placed thereon." Am. Home Assur. Co. v. Port Auth. of NY NJ, 66 AD2d 269, 276 (1st Dep't 1979) (emphasis in original). To refute Kelleher's position that the ERPE only applies to situations where the injured party is a current, former, or potential employee of the insured, Admiral relies on the language in the ERPE stating that the exclusion is applicable "whether the insured may be liable as an employer or in any other capacity." Admiral contends that this clause establishes that the ERPE applies where the injured individual had no employment relationship with the insured. However, Admiral itself interprets the identical clause in a separate exclusion section in the Policy to apply only to employees, not independent contractors. The exclusion titled "Employer's Liability" provides in pertinent part that coverage does not apply to:
"Bodily Injury" to:
(1) An "employee" of the insured arising out of an in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured's business
. . .
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity.
Admiral acknowledges in its motion papers that the "Employer's Liability" exclusion pertains only to injuries to employees of the insured, despite the exclusion's "or in any other capacity" language. Yet, Admiral argues that the "or in any other capacity" clause in the ERPE should be interpreted, as a matter of law, in the exact opposite manner, i.e. to encompass non-employees.
Moreover, Kelleher has shown that one reasonable interpretation of the ERPE is that it only applies to claims asserted by current, former, or potential employees. Although there is no New York precedent on point, other state courts have interpreted similar exclusion language as applying only to current, former, or potential employees. See Nat'l Union Fire Ins. Co. of Pittsburgh Pa. v. Starplex Corp., 188 P.3d 332, 349 (Or. Ct. App. 2008) (interpreting identical employment-related practices exclusion to bar coverage only for claims by potential, current or former employees); N. Am. Bldg. Maint. v. Fireman's Fund Ins. Co., 137 Cal. App. 4th 627, 641 (Cal. Ct. App. 2006) (determining that nearly-identical exclusion is ambiguous and finding "no unmistakable meaning to the term as an employer or in any other capacity'"); Forguesex. rel. Martine v. Heart of Tex. Dodge, 668 N.W.2d 562, 2003 WL 21801424, at *33 (Wis. Ct. App. 2003) ("The phrase or in any other capacity' may simply mean that the exclusion applies even if an employee seeks to hold an employer liable in a capacity other than its employer' capacity."). These cases, although non-binding, demonstrate the ambiguity of the ERPE and the reasonableness of Kelleher's tendered interpretation, as opposed to Admiral's interpretation.
In fact, this action illustrates the type of scenario for which it could reasonably be argued that the "or in any other capacity" language was devised. Assuming arguendo that Baawuah was an employee of the Northmoore and that Kelleher was otherwise covered under the Policy, the "or in any other capacity" clause in the ERPE would serve to bar coverage despite Baawuah having sued Kelleher as an individual instead of the Northmoore as an employer.
The First Department case relied on by Admiral, Nautilus Ins. Co. v. Matthew David Events, Ltd. , 69 AD3d 457 (1st Dep't 2010) does not dictate a different result. The "or in any other capacity" language was discussed by the Nautilus court in dicta as additional support for its finding that an employee exclusion applied to a claim by an independent contractor. Id. at 460. However, the court in Nautilus held that independent contractors were specifically and clearly included in the exclusion's definition of "employee." Id. Here, where the ERPE is ambiguous as to the required employment status of the injured party, Admiral has failed to establish, as a matter of law, that its interpretation of the ERPE is the only reasonable one.
Kelleher maintains that, if his interpretation of the ERPE is found to be reasonable, this Court must adhere to the rule that "where an insurance policy reasonably lends itself to two conflicting interpretations, its terms are ambiguous and must be construed in favor of the insured and against the insurer, the drafter of the policy language." 242-44 E. 77th St., LLC v. Greater NY Mut. Ins. Co. , 31 AD3d 100 , 105 (1st Dep't 2006); see also Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 326 (1996). While acknowledging this general rule of construction, this Court "do[es] not find the application of this rule disposes of the instant issue as a matter of law." Sekulow v. Nationwide Mut. Ins. Co., 193 AD2d 395, 396 (1st Dep't 1993) (reversing trial court's grant of summary judgment where factual inquiry was required to determine whether the insured could reasonably have expected to receive coverage in the particular circumstances). Here, there are remaining factual determinations to be made that preclude summary disposition of the applicability of the ERPE and require denial of Kelleher's motion for partial summary judgment.
In particular, Baawuah's occupational status with respect to the Northmoore is an unresolved issue affecting whether the ERPE applies. It is undisputed that Baawuah was an employee of an independent security contractor, but there is an issue of fact as to the authority the Northmoore exercised with respect to Baawuah's employment at the condominium. Admiral asserts that Baawuah was an "indirect employee" of the Northmoore; the April 4, 2006 letter disclaiming coverage to Kelleher posits that Baawuah might have been a "special employee." Such a determination could place Baawuah within the narrow interpretation of the ERPE posited by Kelleher. See Thompson v. Grumman Aerospace Corp. 78 NY2d 553, 557 (1991) ("A special employee is described as one who is transferred . . . to the service of another. General employment is presumed to continue, but this presumption is overcome upon clear demonstration of surrender of control by the general employer and assumption of control by the special employer." (internal citations omitted)). Kelleher's argument with Baawuah and his attempt to report Baawuah's actions to the board president suggest that the Northmoore may have maintained a degree of influence over Baawuah's employment status. The parties did not fully brief this issue and submitted insufficient evidence on these motions with respect to Baawuah's occupational relationship to the Northmoore. Moreover, because "a person's categorization as a special employee is usually a question of fact," Thompson, 78 NY2d at 557, the resolution of this issue is inappropriate for determination as a matter of law.
In addition, although it is not necessary for a determination as to the particular applicability of the ERPE, the parties' motion papers addressed the question of whether Kelleher qualifies as an insured under the Policy. This Court finds that Kelleher has not affirmatively established that he is an insured. "The party claiming insurance coverage bears the burden of proving entitlement, and is not entitled to coverage if not named as an insured or an additional insured on the face of the policy." Nat'l Abatement Corp. v. Nat'l Union Fire Ins. Co. , 33 AD3d 570, 571 (1st Dep't 2006) (internal citations omitted). Here, Kelleher asserts that he is covered as an insured under the Policy because he was acting within the scope of his duties as a member of the Northmoore board of directors. However, Kelleher has not submitted any by-laws, corporate documents, or an affidavit showing that Kelleher's duties as a board member encompassed either rebuking Baawuah or reporting Baawuah's alleged dereliction to the board president. Because of the lack of admissible evidence as to Kelleher's board duties, there is a question of fact as to whether Kelleher qualified as an insured under the Policy. See generally Sekulow, 193 AD2d at 396.
In accordance with the foregoing, it is
ORDERED that defendant Admiral Indemnity Company's motion for partial summary judgment is denied. It is further
ORDERED that plaintiff Denis Kelleher's motion for partial summary judgment is denied.
This constitutes the decision and order of the Court.