Opinion
21646/2007.
March 6, 2009.
The following papers numbered 1 to 27 read on this motion by plaintiff Yeshiva Ohr Torah Community School, Inc. (Yeshiva) for leave to add GuideOne Specialty Mutual Insurance Company (GuideOne) as a plaintiff and assert a cause of action against Flik International Corp., and for summary judgment; a cross motion by defendant Flik International Corp. s/h/a Flick International Corp. (Flik) to dismiss the complaint and for summary judgment; a cross motion by defendant Zurich American Insurance Company (Zurich) for summary judgment; and a cross motion by defendants Providence Washington Insurance Companies (Providence) and City Wide General Cleaning Maintenance Service, Inc. (City Wide) for summary judgment.
Numbered
Papers Notice of Motion — Affidavits — Exhibits ......... 1-5 Notices of Cross Motion — Affidavits — Exhibits .. 6-17 Answering Affidavits — Exhibits .................. 18-23 Reply Affidavits ................................. 24-27Upon the foregoing papers it is ordered that the motion and cross motions are determined as follows:
Plaintiff Yeshiva commenced this action on August 29, 2007, by filing a complaint seeking a judgment declaring that defendants are obligated to defend and indemnify Yeshiva in an underlying personal injury action entitled Benedicto v Yeshiva Ohr Torah Community School, Inc., et al., then pending in this court under Index No. 11768/04, as well as reimbursement for attorney's fees already expended. Yeshiva, Flik and City Wide were codefendants in the underlying action wherein Nicolas Benedicto alleged that he had been injured on premises owned by Yeshiva when he fell on a ramp leading to the kitchen area while making a delivery to a school known as the Manhattan Day School. Pursuant to separate contracts with Yeshiva, Flik operated a food service program at the school and City Wide performed cleaning/janitorial services for the premises. The separate causes of action against Zurich and Providence in the original complaint herein allege that Yeshiva is entitled to coverage as an additional insured on a general liability insurance policy issued by Zurich to Flik and on another policy issued by Providence to City Wide, while the distinct causes of action against Flik and Providence assert that each breached its respective contractual obligation to procure insurance naming Yeshiva as an additional insured. Subsequent to the commencement of this action, the parties to the underlying action submitted their dispute to mediation and settled the action in a post-mediation agreement dated March 24, 2008. The agreement provided that all claims and cross claims would be discontinued with prejudice except that the settlement would not preclude Yeshiva and its insurer, GuideOne, from pursuing a claim for attorney's fees in a declaratory judgment action. GuideOne had provided a defense and indemnity to Yeshiva in the underlying action pursuant to the terms of an insurance policy it had issued to Yeshiva.
In connection with its current application to add GuideOne as a party to this action, Yeshiva also seeks leave to serve an amended complaint and submits a proposed amended complaint that asserts essentially the same claims as the original complaint, but seeks relief on behalf of GuideOne as well as Yeshiva. Despite the continued demand for defense and indemnity coverage in the proposed amended complaint, the affirmation of Yeshiva's counsel limits the relief sought in the instant motion to the provision of, and reimbursement for, a defense in the underlying action, as countenanced by the mediation settlement.
Having provided a defense for Yeshiva in the underlying action, GuideOne is entitled to be subrogated to whatever claims its insured has against third parties from which Yeshiva had been entitled to receive a defense. (See, generally, North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294; Pennsylvania Gen. Ins. Co. v Austin Powder Co., 68 NY2d 465, 470 .) Thus, GuideOne is the real party in interest on the causes of action seeking a declaration of Yeshiva's rights against Zurich and Providence. (See, Continental Ins. Co. v Joseph E. Marx Co., Inc., 220 AD2d 343; Tower Mineola Ltd. Partnership v Potomac Ins. Co. of Ill., 14 Misc 3d 1238 [A]; 2007 NY Slip Op 50418[U], *13, *15 [2007].) Absent proof of the execution of a loan or subrogation receipt, GuideOne's subrogation claim may not be prosecuted in Yeshiva's name. (CPLR 1004.) The proper procedure, however, is not just to add GuideOne as a party plaintiff, but also to substitute GuideOne, as subrogee of Yeshiva, in place of Yeshiva on the causes of action against Zurich and Providence. (See, Pennsylvania Gen. Ins. Co., 68 NY2d at 470; cf., Coniglio v State of New York, 35 AD2d 1021.) Furthermore, GuideOne is not a proper plaintiff on the causes of action against Flik and City Wide for breach of a contractual obligation to procure insurance. Inasmuch as Yeshiva obtained its own liability insurance, its damages should it prevail against Flik and/or City Wide on these causes of action will be limited to out-of-pocket damages caused by the breach, such as the premium and any deductible for the insurance procured from GuideOne. (See, Inchaustegui v 666 5th Ave. Ltd. Partnership, 96 NY2d 111.) Since these out-of-pocket expenses were not reimbursed by GuideOne, the subrogation doctrine is not applicable with regard to them.
To the extent Yeshiva's motion papers discuss adding a claim against Flik on behalf of itself and GuideOne, as subrogee, for reimbursement for attorney's fees based upon contractual indemnification (see, American Ref-Fuel Co. of Hempstead v Resource Recycling, Inc., 307 AD2d 939), no such cause of action is pleaded in the proposed amended complaint. Moreover, a contractual indemnification claim asserted now would be barred by the terms of the post-mediation agreement settling the underlying action and releasing any and all claims arising from the matter. The limited exception allowing Yeshiva and GuideOne to pursue Yeshiva's claim for attorney's fees in a declaratory judgment action cannot be construed to permit the assertion of a new cause of action for contractual indemnification when the declaratory judgment action pending at the time of the settlement did not allege a claim for contractual indemnification and Yeshiva's cross claims for contractual indemnification in the underlying action were to be discontinued with prejudice pursuant to the post-mediation agreement. Accordingly, GuideOne is added as a party plaintiff and the caption is deemed amended to reflect the addition. The complaint is deemed amended only to the extent of substituting GuideOne as the plaintiff on the causes of action for declaratory relief against Zurich and Providence.
The contract between Yeshiva and Flik obligated Flik to procure and maintain a general liability policy naming Yeshiva as an additional insured. Flik obtained a policy from Zurich containing an endorsement under which Yeshiva qualifies as an additional insured by virtue of the written contract obligating Flik to provide insurance coverage. The Zurich policy, however, contains a self-insured retention (SIR) endorsement requiring Flik to pay all damages and pro rata defense costs up to $500,000 per occurrence before Zurich is obligated to provide coverage. As defined in the endorsement, the SIR clearly applies to all damages and defense costs, whether they are incurred by the named insured or by "any insured," thus including an additional insured. (See, Continental Cas. Ins. Co. v Zurich Am. Ins. Co., 2009 US Dist LEXIS 7301 [Or 2009]; Power Auth. of State of New York v National Union Fire Ins. Co. of Pittsburgh, 306 AD2d 139; cf.,American Ref-Fuel Co. of Hempstead v Resource Recycling, Inc., 248 AD2d 420, 424.) Since it is undisputed that the SIR will not be exhausted by the damages and pro rata defense costs incurred by Zurich's insureds for the subject occurrence, coverage under the policy is not triggered and Zurich is not obligated to provide a defense to Yeshiva or reimburse GuideOne for attorney's fees incurred in its defense of Yeshiva. (Id.) It is also noted that the time requirements for disclaiming coverage under Insurance Law § 3420(d) are not implicated here where no coverage existed under the policy's terms. (See, Zappone v Home Ins. Co., 55 NY2d 131; Power Auth. of State of New York, 306 AD2d at 140.)
By procuring insurance that does not provide coverage until the SIR amount of $500,000 per occurrence has been exhausted, Flik breached its contractual obligation to Yeshiva. As discussed above, however, Yeshiva's damages on its cause of action for this breach is limited to its out-of-pocket losses. (See, Inchaustegui, 96 NY2d at 114.)
The insurance policy issued by Providence to City Wide extends additional insured coverage to anyone with whom City Wide has agreed "by written contract or agreement" to secure liability insurance coverage. Absent any extrinsic evidence as to the intent of the parties, any ambiguity within the quoted phrase must be resolved against the insurer. (See, Westview Assocs. v Guaranty Natl. Ins. Co., 95 NY2d 334, 339; Tri Town Antlers Found., Inc. v Fireman's Fund Ins. Co., 76 NY2d 841, 842.) Applying this principle, the word "agreement" as used in the additional insured provision includes both oral and written agreements. (See, Superior Ice Rink, Inc. v Nescon Contr. Corp., 52 AD3d 688; Bassuk Bros., Inc. v Utica First Ins. Co., 2002 NY Slip Op 40508[U] [2002], affd on other grounds 1 AD3d 470.) Implicitly conceding that the written contract between Yeshiva and City Wide did not contain a provision requiring City Wide to name Yeshiva as an insured on its policy, Yeshiva and GuideOne contend that there was an oral agreement obligating City Wide to secure liability coverage for Yeshiva. The evidence in the record defeats this assertion as a matter of law.
In support of their claim that an oral agreement existed, Yeshiva and GuideOne do not present an affidavit or sworn testimony from any representative of Yeshiva with knowledge of the facts. Rather, they rely on a three word response by Joel Bates, the vice-president of City Wide, to a question posed at his deposition in the underlying action. Viewed in context, however, the response does not establish the oral agreement. Bates had already testified in response to questioning by the injured plaintiff's attorney that City Wide obtained the account to do the cleaning at the Manhattan Day School sometime around the year 2000 pursuant to a written contract. The vice-president was then presented with a document that he identified as the agreement between the school and City Wide that was in effect on the date of the accident. In subsequent questioning of Bates, Yeshiva's counsel asked whether City Wide was required to provide a certificate of insurance pursuant to the contract with Manhattan Day School and then inquired whether "they [were] required to name Manhattan Day School as additional insured on the contract." It was the vice-president's response of "I am sure" to the latter question on which Yeshiva and GuideOne rely in claiming an oral agreement to provide insurance. In context, the question must be seen as being addressed to the terms of the already referenced written contract, and Bates appears to have responded as to what he thought to be one of those terms. This response does not alter the actual provisions of the written contract and is insufficient, without more, to raise an issue of fact as to the existence of an oral agreement between City Wide and Yeshiva regarding insurance coverage.
Furthermore, in support of their cross motion, Providence and City Wide have submitted an affidavit from Joel Bates. The vice-president, who signed the written agreement on behalf of City Wide, amplifies his deposition response by stating that he had assumed City Wide was required to name the school as an additional insured because clients traditionally require City Wide to do so. Bates adds that after reviewing the written agreement, it is evident that there is no provision requiring City Wide to procure insurance covering the school. He also avers that he did not orally agree to name the school as an additional insured and that the issue of additional insured status was never discussed. This affidavit does not contradict the prior deposition testimony given by Bates but can be reconciled with it (see, Castro v New York City Tr. Auth., 52 AD3d 213, 214; Kalt v Ritman, 21 AD3d 321, 323; Faulkner v Allied Manor Rd. Co., 306 AD2d 224, 225), and, together with the parties' written contract, establishes, prima facie, that City Wide was not obligated by oral or written agreement to obtain insurance covering Yeshiva. Thus, Yeshiva is not an additional insured under the Providence policy and is not entitled to a defense by Providence in the underlying action. In addition, Yeshiva's claim against City Wide for breach of contract is without merit.
Accordingly, Zurich, Providence and City Wide are awarded summary judgment dismissing the amended complaint as against them. Plaintiff Yeshiva is granted summary judgment on the issue of liability on its cause of action against Flik for breach of the contractual obligation to procure insurance, with its damages to be limited to out-of-pocket expenses. In all other respects, Flik is granted summary judgment dismissing the amended complaint against it and the application on behalf of Yeshiva and GuideOne for summary judgment is denied. It is declared that neither Zurich nor Providence, City Wide or Flik is obligated to defend Yeshiva in the underlying action or to reimburse GuideOne for the expenses it incurred in providing a defense to Yeshiva.