Devoe Properties, LLC v. Atlantic Casualty Insurance Company
Filing
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ORDER granting 17 Motion for Summary Judgment. Ordered by Senior Judge I. Leo Glasser on 10/4/2011. (Green, Dana)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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DEVOE PROPERTIES LLC,
Plaintiff,
Memorandum and Order
09-cv-672
- against ATLANTIC CASUALTY INSURANCE CO.
Defendant.
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GLASSER, United States District Judge:
Plaintiff Devoe Properties, LLC (“plaintiff” or “Devoe”) filed this action against
Atlantic Casualty Insurance Company (“defendant” or “Atlantic”) pursuant to New York
State Insurance Law § 3420(b), which provides, in substance, that any person who has
obtained a judgment against an insured may maintain an action against the insurer, if
the judgment against the insured remains unsatisfied for more than thirty days. Devoe,
as explained hereafter, obtained a default judgment against Lexus Construction, Inc.
(“Lexus”),1 Atlantic’s insured. Pending before the Court is Atlantic’s motion for
summary judgment, dismissing the case. Despite four extensions of time to respond to
the motion, Devoe has not submitted one. For the following reasons, the defendant’s
motion is GRANTED.
1 In its Verified Complaint, Devoe states that Lexus has altered its name with the Secretary of State and
now does business as Four-Cap Construction Corp. See Verified Complaint, dated January 1, 2009, (“Ver.
Compl.”) ¶ 4.
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BACKGROUND
I.
Construction at the Devoe Property
The following facts are undisputed, unless otherwise noted. On or about March
27, 2006, plaintiff hired Fung Shung Dee Construction, Inc. (“Fung Shung Dee”) as a
general contractor and supervisor for the demolition of a pre-existing structure and the
construction of a new condominium on land Devoe owned at 291 Devoe Avenue,
Brooklyn, New York (“the Devoe Property”). Statement Pursuant to Rule 56.1 (“R.
56.1”) ¶¶ 6-7 & Ex. L, ¶ 7. Immediately adjacent to the Devoe Property was a building at
293 Devoe Street, Brooklyn, New York, (the “Neighboring Property”) owned by Vincent
Ragone (“Ragone”). R. 56.1 ¶ 13.
Lexus was hired to perform part of the construction work at the Devoe Property.
R. 56.1 ¶ 9 & Ex. P, at 11-12, 31. This work consisted of excavating an old foundation and
removing soil to create a hole approximately 20 feet wide, 60 feet long, and ten feet deep
to prepare the site for the new condominium’s concrete foundation. R. 56.1 Ex. L, ¶ 8;
Ex. N, at 20, 23-29; Ex. C, at 39. To accomplish this work, Lexus used an excavator2 and
trucks to remove the soil. R. 56.1, Ex. N, at 28-29, 72. Another company, Europa
Construction Corp. (“Europa”), was hired to pour the new foundation. R. 56.1, Ex. N, at
20. Together, Lexus and Europa also performed underpinning work, removing
supporting soil from under the Neighboring Property and replacing it with concrete. R.
56.1, Ex. Q, at 14-16. Lexus also completed the “backfilling,” regrading soil against the
concrete underpinnings. Id.
2 Although there is some confusion in the record regarding what machine Lexus used, the witnesses’
descriptions at deposition match that of an excavator. See R. 56.1, Exs. B, N, P & Q. An excavator, also
commonly called a “digger,” is a heavy construction machine consisting of a bucket and hydraulic boom
attached to a rotating platform on tracks or wheels.
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II.
Underlying Litigation
On July 12, 2006, the New York Department of Buildings (“NYDB”) issued a
stop-work order, finding there was a “failure to protect adjoining structure during
excavation operations” and that “due to unsafe excavation and underpinning work,” the
Neighboring Property was damaged. R. 56.1 ¶ 24 & Ex. R. Ragone subsequently filed
suit against Devoe for property damage and other relief (the “Underlying Action”).
Ragone v. Devoe Properties, LLC, 035209/2006 (N.Y. Sup. 2006). The complaint in the
Underlying Action (the “Underlying Complaint”) alleged that during the course of the
excavation, Devoe caused extensive damage to Ragone’s foundation wall and interior
walls. R. 56.1 ¶¶ 15-16 & Ex. K. This damage included cracks in the foundation and
basement floor, mud and water seeping through those cracks, and movement of the
foundation wall towards the excavation. Id.
On December 27, 2006, Devoe filed a Third-Party Summons and Verified
Complaint against Fung Shung Dee, Lexus, and Europa (the “Third-Party Action”). R.
56.1 ¶ 17 & Ex. L. The Third-Party Action alleged that the damage to the Neighboring
Building was “solely as a result of the negligence of third party defendants . . . in
performing their obligations at the [Devoe Property] during the course of the excavation
and the construction of the foundation. . . .” R. 56.1, Ex. L ¶ 14. Devoe sought
contribution for any damage for which it was held liable in the Underlying Action. Id. at
¶ 19. Subsequently, Devoe settled the Underlying Action, purchasing the Neighboring
Property for approximately $850,000. R. 56.1, Ex. N, at 60.
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III.
Reporting of the Occurrence to Atlantic
Prior to construction at the Devoe Property, Atlantic issued to Lexus commercial
general liability insurance, Policy L044000966, for the period of February 6, 2006 to
February 7, 2007 (the “Policy”). R. 56.1 ¶ 1 & Ex. A. Among other things, the Policy
obligated the insured to notify Atlantic “as soon as practicable” of any “occurrence” that
might result in a claim. R. 56.1, Ex. A, at § IV(2)(a). The parties dispute when Lexus
first became aware that the Neighboring Property had been damaged or that the damage
might result in a claim against Lexus. In any event, Atlantic did not become aware of
the Third Party Action until March 15, 2007. R. 56.1 ¶ 18 & Ex. B; Ex. C,at 183.
Following an investigation, Atlantic disclaimed the Policy’s coverage of Lexus’s work at
the Devoe Property on the ground that Lexus failed to make a timely report of the
occurrence and for the additional reason that the Policy did not insure excavation work.
R. 56.1 ¶ 26 & Ex. D.
IV.
Entry of Default Judgment
Neither Atlantic nor Lexus responded to the Third-Party Complaint. See R.56.1
Ex. M. On August 11, 2008, a default judgment was entered in favor of Devoe against
Lexus in the amount of $547,962.00 (the “Underlying Judgment”). R. 56.1 ¶ 31 & Ex.
M. Devoe filed this action January 5, 2009, in the New York Supreme Court, Kings
County, seeking to enforce that judgment against Atlantic, pursuant to New York State
Insurance Law § 3420(b). R. 56.1 ¶ 32 & Ex. I. On February 13, 2009, Atlantic removed
the action to federal court, pursuant to 28 U.S.C. § 1442(b).
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JURISDICTION
This court has jurisdiction over this action pursuant to diversity of citizenship.
28 U.S.C. § 1332(a)(1). Plaintiff is a Limited Liability Company organized in the State of
New York with its principal place of business in New York. Ver. Compl. ¶ 1. Atlantic is a
North Carolina corporation with its principal place of business in North Carolina.
Notice of Removal, dated February 13, 2009 ¶ 4. The amount in controversy exceeds
$75,000.
DISCUSSION
Reviewing the evidence with the proper deference granted to the non-movant on
a motion for summary judgment, it is clear that the judgment against Lexus derives
from work that is excluded from the Policy’s coverage. Because the Court finds that
Lexus’s work was not insured by the Policy, it is unnecessary to address the issue of
timeliness.
I.
Standard of Review
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits . . . show that there is
no genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 585-87, 106 S. Ct. 1348, 1355-56, 89 L. Ed. 2d 538 (1986). As an initial
matter, the moving party has the burden of demonstrating that no genuine issue of
material fact exists. Matsushita, 475 U.S. at 586. Once the movant points to the
absence of an issue, the non-moving party “may not rest upon the mere allegations or
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denials” in its pleadings but must produce evidence of a genuine issue of material fact.
See Fed R. Civ. P. 56(e). See also Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct.
2548, 2553, 91 L. Ed. 2d 265 (1986). A genuine issue of material fact exists when there
is sufficient evidence favoring the nonmoving party such that a jury could return a
verdict in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505,
91 L. Ed. 2d (1986).
Credibility assessments and choices between conflicting versions of events, when
material to the inquiry, are determinations that the Court must leave for a jury. See
Fischl v. Armitage, 128 F.3d 50, 55 (2d Cir. 1997). “The courts must view the evidence
in the light most favorable to the party against whom summary judgment is sought and
must draw all reasonable inferences in his favor.” L.B. Foster Co. v. Am. Piles, Inc., 138
F.3d 81, 87 (2d Cir. 1998) (citing Matushita, 475 U.S. at 587). If there remains no
genuine issue of material fact then the moving party is entitled to judgment as a matter
of law.
II.
Scope of the Policy
The parties do not contest that New York law applies to the Policy. “The New
York approach to the interpretation of contracts of insurance is ‘to give effect to the
intent of the parties as expressed in the clear language of the contract.’” Mount Vernon
Fire Ins. Co. v. Belize N.Y., 277 F.3d 232, 236 (2d Cir. 2002) (quoting Vill. of Sylvan
Beach, N.Y. v. Travelers Indem. Co., 55 F.3d 114, 115 (2d Cir. 1995)). “Unambiguous
terms are to be given their plain and ordinary meaning, and ambiguous language should
be construed in accordance with the reasonable expectations of the insured when he
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entered into the contract.” McCarthy v. Am. Int’l. Grp., Inc., 283 F.3d 121 (2d Cir.
2002).
The Policy contains endorsements and exclusions, both relevant to the
determination of whether the Policy applies to Lexus’s work at the Devoe Property. It is
well-settled that “exclusions from insurance policy coverage are given strict
construction.” Kimmins Indus. Serv. Corp. v. Reliance Ins. Co., 19 F.3d 78, 81 (2d Cir.
1994). See also Critchlow v. First UNUM Life Ins. Co. of Am., 378 F.3d 246 (2d Cir.
2004); State of New York v. Blank, 27 F.3d 783 (2d Cir. 1994). Policy exclusions are
interpreted in a manner most beneficial to the insured. MH Lipiner & Son, Inc. v.
Hanover Ins. Co., 869 F.2d 685, 687 (2d Cir. 1989); see also Miller v. Cont’l Ins. Co., 40
N.Y.2d 675, 678, 389 N.Y.S.2d 565 (1976) (“New York follows the “hornbook rule that
policies of insurance . . . are to be liberally construed in favor of the insured.”). “The
insurer bears the burden of proving that the exclusion applies, that it is stated in clear
and unmistakable language, and is subject to no other reasonable interpretation.” U. S.
Underwriters Ins. Co. v. Kum Gang, Inc., 443 F. Supp. 2d 348, 356 (E.D.N.Y. 2006)
(citing Cont’l Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 652, 593 N.Y.S.2d 966,
609 N.E.2d 506 (1993)). Where a policy contains an endorsement, “[u]nder New York
law, an endorsement must be read in conjunction with the entire policy, and the words
of the policy remain in full force and effect except as modified by the endorsement.” Id.
(citing Cnty. of Columbia v. Cont’l Ins. Co., 83 N.Y.2d 618, 628, 612 N.Y.S.2d 345, 634
N.E.2d 946 (1994)).
Under New York law, “[d]etermining whether an insurer has a duty to defend
requires an examination of the policy language and the allegations of the complaint to
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see if the underlying complaint alleges any facts or grounds which bring the action
within the protection purchased.” Int’l Bus. Machs. Corp. v. Liberty Mutual Fire Ins.
Co., 303 F. 3d 419, 424 (2d Cir. 2002) (citation omitted). An insurer will be relieved of
this duty “only if it could be concluded as a matter of law that there is no possible factual
or legal basis on which [the insurer] might eventually be held to be obligated to
indemnify [the insured] under any provision of the insurance policy.” Servidone Constr.
Corp. v. Sec. Ins. Co. of Hartford, 64 N.Y. 2d 419, 424, 477 N.E.2d 441, 444 (N.Y. 1985).
In contrast, “the narrower duty to indemnify arises only if the claim for which the
insured has been judged liable lies within the policy's coverage. Thus . . . the duty to pay
is determined by the actual basis for the insured's liability to a third person.” Allianz
Ins. Co. v. Lerner, 416 F.3d 109, 115 (2d Cir. N.Y. 2005). Because a judgment has
already been entered against Lexus, the dispositive issue in this case is whether the
tortious acts that formed the basis for that judgment are within the Policy’s coverage.
It is clear and unambiguous that the Policy did not apply to the work Lexus
performed at the Devoe Property. Under the terms of the Policy, Atlantic agreed to
defend and indemnify Lexus against bodily injury and property damage “to which this
insurance applies.” R. 56.1 Ex. A, § I(1)(a). By an endorsement, the Policy stated the
insurance would only apply to damage “classified or shown on the Commercial General
Liability Coverage Declarations, its endorsements or supplements.” R. 56.1 Ex. A.
Those declarations stated that Lexus’s business was “INTERIOR & EXTERIOR
DEMOLITION (HAND TOOLS ONLY)” with an additional premium for “Carpentry.”
Id. Excluded from the Policy was property damage caused by “structural damage to any
building or structure due to grading of land, excavation, borrowing, filling, backfilling . .
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. moving, shoring or underpinning, raising or rebuilding of any building or part thereto.”
Id.
Even drawing all reasonable inferences in favor of the non-moving party, the
evidence indisputably shows that Lexus’s work at the Devoe Property consisted of using
an excavator – a heavy construction machine – to excavate the prior foundation,
excavate additional subsoil to expose the Neighboring Property’s foundation, and then
underpin and backfill that foundation. This work and the structural damage that it
caused to the Neighboring Property is the sole basis for the Underlying Judgment
against Lexus and this work fell squarely within the policy exclusions. Consequently, it
is clear that Atlantic is not liable to indemnify Lexus for the Underlying Judgment.
CONCLUSION
For the foregoing reasons, summary judgment is granted and the Verified
Complaint dismissed with prejudice.
SO ORDERED.
Dated:
Brooklyn, New York
October 4, 2011
__/s/__________________
I. Leo Glasser, U.S.D.J.
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