Lighton Industries, Inc. v. Allied World National Assurance Company et al
Filing
58
ORDER denying (51) Motion to Strike ; granting (53) Motion for Leave to File Amended Local Rule 56.1 Statement; denying (23) Motion for Summary Judgment; denying (24) Motion for Summary Judgment; granting in part and denying in part (25) Motion for Summary Judgment; granting (27) Motion for Partial Summary Judgment in case 1:16-cv-03812-KAM-SMG; granting (28) Motion for Partial Summary Judgment; denying (41) Motion to Strike ; granting (43) Motion for Leave to File Amended Local Rule 56 .1 Statement in case 1:16-cv-05302-KAM-SMG. For the reasons set forth in the attached memorandum and order, (1) Lighton's motion for leave to file an amended Local Rule 56.1 statement is GRANTED; (2) Allied's objection to Lighton& #039;s amended Local Rule 56.1 Statement is OVERRULED, and Mt. Hawley's motion to strike the amended Local Rule 56.1 statement is DENIED; (3) Hibuild's motion for partial summary judgment is GRANTED in its entirety; (4) Lighton's motio n for summary judgment is GRANTED as to Allied and Mt. Hawley's duty to defend Lighton and DENIED as to Allied and Mt. Hawley's duty to indemnify Lighton; (5) Allied's motion for summary judgment is DENIED in its entirety; (6) Mt. Hawl ey's motion for summary judgment is DENIED in its entirety; and (7) Hibuild's indemnification claim against Mt. Hawley and Lighton's indemnification claims against Allied and Mt. Hawley are DISMISSED without prejudice as premature. The Clerk of Court is respectfully directed to enter judgment in favor of Hibuild that Mt. Hawley is obligated to defend it, and in favor of Lighton that Mt. Hawley and Allied are obligated to defend it, in each case in the underlying State Co urt action, i.e., the Tunkara Action, and in any other proceeding seeking to impose liability on Lighton and/or Hibuild as a result of Tunkara's alleged fall from a ladder on August 16, 2014. The Clerk of Court's judgment shall furt her dismiss Hibuild and Lighton's indemnification claims without prejudice and, following entry of judgment, the Clerk of Court is respectfully directed to close these consolidated cases. Ordered by Judge Kiyo A. Matsumoto on 9/28/2018. Associated Cases: 1:16-cv-03812-KAM-SMG, 1:16-cv-05302-KAM-SMG (Flores, Diego)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
LIGHTON INDUSTRIES, INC.,
Plaintiff,
-against-
MEMORANDUM & ORDER
ALLLIED WORLD NATIONAL ASSURANCE
COMPANY and MT. HAWLEY INSURANCE
COMPANY,
16-CV-3812(KAM)(SMG)
Defendants.
----------------------------------X
----------------------------------X
HIBUILD LIMITED LIABILITY COMPANY,
Plaintiff,
-against-
16-CV-5302(KAM)(SMG)
MT. HAWLEY INSURANCE COMPANY,
Defendant.
----------------------------------X
MATSUMOTO, United States District Judge:
Presently before the court are the parties’ crossmotions for summary judgment in Lighton Industries Inc. v.
Allied World National Assurance Company et al., case number 16CV-3812 (the “Lighton Action”) and Hibuild LLC v. Mt. Hawley
Insurance Company, case number 16-CV-5302 (the “Hibuild
Action”), which have been consolidated pursuant an order issued
February 2, 2017 by the Honorable Steven M. Gold, United States
Magistrate Judge. 1
(See Minute Entry, ECF No. 20.)
Both actions
relate to the applicability of insurance coverage to an alleged
accident on the campus of Brooklyn College on August 16, 2014.
Also before the court are an objection to, and a motion to
strike, a late-filed Local Rule 56.1 statement, and a motion to
authorize the filing of the same statement.
Plaintiff Lighton Industries, Inc. (“Lighton”) seeks
summary judgment on its claims for declaratory judgment that
defendants Allied World National Assurance Company (“Allied”)
and Mt. Hawley Insurance Company (“Mt. Hawley,” and together
with Allied, “defendants”) have a duty to defend Lighton and a
duty to indemnify Lighton with respect to litigation and
potential liability arising from the alleged accident.
(Lighton
Memorandum in Support of Motion for Summary Judgment (“Lighton
Mem.”), ECF No. 25-1, at 1-2.)
Plaintiff Hibuild Limited Liability Company
(“Hibuild,” and together with Lighton, “plaintiffs”) seeks
summary judgment that Mt. Hawley has a duty to defend Hibuild in
the same litigation, but does not seek summary judgment
regarding indemnification, as Hibuild concedes that issue is not
ripe.
(Hibuild Memorandum in Support of Motion for Summary
Because the court has consolidated these cases, most relevant documents
have been filed on the docket of the Lighton Action. Accordingly, citations
to ECF filings are to the Lighton Action unless otherwise indicated. Where a
citation is to an ECF filing in the Hibuild Action, the document is
identified as “ECF/Hibuild No. __.”
1
2
Judgment (“Hibuild Mem.”), ECF No. 27-1, at 1 and n.1.)
Conversely, defendants seek summary judgment that they do not
have any duty to defend or indemnify plaintiffs.
(Allied
Memorandum in Support of Motion for Summary Judgment (“Allied
Mem.”), ECF No. 23-1, at 1; Mt. Hawley Memorandum in Support of
Motion for Summary Judgment (“Mt. Hawley Mem.”), ECF No. 24-14,
at 1-2.)
Additionally, Allied objects to, Mt. Hawley seeks to
strike, and Lighton seeks to have the court receive and
consider, Lighton’s belatedly-filed Amended Local Rule 56.1
Statement of Undisputed Material Facts.
(See Allied Objection
to Lighton Amended 56.1 Statement, ECF No. 50; Mt. Hawley Motion
to Strike Lighton Amended 56.1 Statement, ECF No. 51.)
Lighton
filed this statement with its reply papers, in response to
Allied and Mt. Hawley’s observations that Lighton’s initial
Local Rule 56.1 statement did not comply with Local Rule 56.1.
(See Lighton Amended Rule 56.1 Statement, ECF No. 49-1; Allied
Rule 56.1 Counter-statement, ECF No. 26-1; Mt. Hawley Rule 56.1
Counter-statement to Lighton, ECF No. 28.)
Background
I.
Factual Background
Except as indicated, the following undisputed facts
are drawn from the parties’ statements of undisputed material
facts pursuant to Local Rule 56.1, and the supporting exhibits
3
set forth in the parties’ joint stipulation as to exhibits
applicable to all motions (“Joint Stip.” or the “joint
stipulation,” ECF No. 22).
A.
Plaintiffs and Relevant Third Parties
This action relates to a masonry repair project (the
“James Hall Repairs”) at Brooklyn College’s William James Hall,
a five-story building located at 2900 Bedford Avenue, Brooklyn,
New York (“James Hall”).
(Mt. Hawley Requests for Admission
(“Mt. Hawley RFA”), Joint Stip. Ex. A, ECF No. 22-1, No. 1, 7-8,
11-12; Lighton Responses to Mt. Hawley RFA (“Lighton RFA
Resp.”), Joint Stip. Ex. B, ECF No. 22-2, No. 1, 7-8, 11-12;
Hibuild Responses to Mt. Hawley RFA (“Hibuild RFA Resp.”), Joint
Stip. Ex. C ECF No. 22-3, No. 1, 7-8, 11-12.)
Lighton and Hibuild are both construction companies
involved in the James Hall Repairs.
Specifically, the Dormitory
Authority of the State of New York (“DASNY”) retained Lighton to
serve as general contractor for the James Hall Repairs.
(Mt.
Hawley RFA No. 15; Lighton RFA Resp. No. 15; Hibuild RFA Resp.
No. 15.)
Lighton, in turn, retained Hibuild to serve as
subcontractor and/or project manager.
(Mt. Hawley RFA Nos. 16-
17 (asserting Hibuild was subcontractor or project manager);
Lighton RFA Resp. Nos. 16-17 (admitting Hibuild was
subcontractor); Hibuild RFA Resp. Nos. 16-17 (admitting Hibuild
was Project Manager).)
Additionally, Hibuild retained non-party
4
Rock Scaffolding Corporation (“Rock”) to serve as a
subcontractor. 2
(Mt. Hawley RFA No. 18; Lighton RFA Resp. No.
18; Hibuild RFA Resp. Nos. 18.)
The specific contractual arrangements involving DASNY,
Lighton, Hibuild, and Rock are as follows: on December 14, 2012,
Lighton entered into a construction contract with the Dormitory
Authority of the State of New York (“DASNY”).
Joint Stip. Ex. F, ECF No. 22-6.)
(See Contract,
The contract referenced a job
order and required Lighton to, in relevant part, “perform the
tasks required by each individual Job Order issued pursuant to”
the contract.
(Id. at 1.)
DASNY subsequently issued a job
order on November 5, 2013 calling for Lighton to carry out
“[c]ornice repair” at James Hall building (i.e., the James Hall
Repairs).
(Job Order, Joint Stip. Ex. G, ECF No. 22-7, at 002.)
More specifically, Lighton was to “[p]rovide the labor[] and
equipment to remove and replace the deteriorated areas on . . .
the James Hall Building on the south, north, and east sides.”
(Id. at 004.) 3
On December 21, 2012, Lighton entered into a
subcontracting agreement with Hibuild for the James Hall
2
Rock is apparently now known as “R.S.C. of NY Corp.” (See, e.g., Mt.
Hawley RFA No. 2; Lighton RFA Resp. No. 2; Hibuild RFA Resp. No. 2.)
Consistent with the parties’ papers in the instant actions, this Memorandum
and Order refers to the entity as “Rock.”
3
Page number references in citations to the Job Order are to the numbers
Bates-stamped on the document.
5
Repairs.
No. 22-8.)
(See Subcontracting Agreement, Joint Stip. Ex. H, ECF
The subcontracting agreement called for Hibuild to
“provide all necessary equipment, material and labor to complete
all work as per individual work orders issued under DASNY JOC
Contract 173254/CR276” (Subcontracting Agreement Art. 8), which
the DASNY Job Order indicates is the contract between Lighton
and DASNY relevant to this action.
(See Job Order at 002.) 4
Hibuild, in turn, entered into a subcontracting
agreement with Rock.
The agreement states that it is “[f]or the
following Project: JOB ORDER CONTRACT REGION-1 CONTRACT NO.
173254CR276.”
(Rock-Hibuild Subcontracting Agreement, Joint
Stip. Ex. J, ECF No. 22-10, at 1.)
Further, pursuant to the
agreement between Rock and Hibuild, Rock was to “[p]rovide all
Plant, Labor, Material, Equipment, tools and supervision
(English speaking) necessary to perform work outlined in
individual Work Order also known as Individual Job Order [sic].”
(Id. Art. 8.)
Additionally, Lighton and Hibuild are parties to an indemnity
agreement, dated December 27, 2012, pursuant to which Hibuild agreed that it
would
[t]o the fullest extent permitted by law . . . indemnify
and hold harmless [Lighton] . . . from and against all
claims, damages, losses and expenses . . . arising out of
or resulting from the performance of [Hibuild’s] [services,
labor or materials] . . . provided that such claim, damage,
loss or expense is . . . cause[d] in whole or in part by
any negligent or willful act or omission of [Hibuild], any
sub-subcontractor of [Hibuild], anyone directly or
indirectly employed by any of them or anyone for whose acts
any of them may be liable.
(Indemnity Agreement, Joint Stip. Ex. I, ECF No. 22-9, ¶ 1.)
4
6
B.
The James Hall Repairs
James Hall is a five-story building with brick pillars
lining the exterior walls.
(Mt. Hawley RFA Nos. 1, 5, 7-8, 11-
12; Lighton RFA Resp. Nos. 1, 5, 7-8, 11-12; Hibuild RFA Resp.
Nos. 1, 5, 7-8, 11-12.)
As noted above, the Job Order between DASNY and
Lighton for the James Hall Repairs stated that the project
involved, inter alia,
“cornice repair” on the exterior of the
building (Job Order, Joint Stip. Ex. G, at 002), but Lighton and
Hibuild both deny that the Project actually involved repairs to
a cornice on the exterior of James Hall.
(Mt. Hawley RFA No. 6;
Lighton RFA Resp. No. 6; Hibuild RFA Resp. No. 6.)
The parties
agree that the James Hall Repairs also involved masonry patching
work on the exterior of the building, repointing and/or
restoration of the brick pillars on the exterior walls, and the
erection of a scaffold that scaled the full height, i.e. five
stories, of the building on at least one of its sides.
(Mt.
Hawley RFA Nos. 4, 5, 7, 8; Lighton RFA Resp. Nos. 4, 5, 7, 8;
Hibuild RFA Resp. Nos. 4, 5, 7, 8.)
Repairs involved no interior work.
Notably, the James Hall
(Mt. Hawley RFA No. 9;
Lighton RFA Resp. No. 9; Hibuild RFA Resp. No. 9.)
7
C.
The Insurance Policies
Allied and Mt. Hawley are both insurance companies.
Allied issued one insurance policy, and Mt. Hawley issued two
insurance policies, relevant to the instant action.
1.
The Allied Policy
Allied issued Policy No. 5050-0003 (the “Allied
Policy”) to Lighton for the policy period of April 14, 2014 to
April 14, 2015.
52.)
(Allied Policy, Joint Stip. Ex. RR, ECF No. 22-
The Allied Policy includes a coverage limit of $1,000,000
per occurrence and, as well as a $2,000,000 “General Aggregate
Limit.”
(Id. at AW000241.) 5
By endorsement, the named insured
under the Allied Policy was amended to include both Lighton and
Lighton Electric, Inc.
(Id. at AW000247.)
Additionally, the Allied Policy contains an
endorsement that creates an exclusion for work by “uninsured or
underinsured subcontractors” (the “Subcontractor Exclusion”).
(See id. at AW000312-13.) 6
The Subcontractor Exclusion provides
as follows:
Solely with respect to operations or work
performed in the State of New York, SECTION I –
COVERAGES, COVERAGE A BODILY INJURY AND PROPERTY
DAMAGE LIABILITY, 2. Exclusions is amended to
include the following additional exclusion:
Page number references in citations to the Allied Policy are to the
page numbers Bates-stamped on the document.
6
The Bates numbering in the exhibit that contains the Allied Policy is
not consecutive. Pages AW000312-13 correspond to ECF pages 74 and 75 of 90.
5
8
This insurance does not apply to:
Work Done On Your Behalf By Uninsured or
Underinsured Subcontractors
Any claim, “suit”, demand or loss that alleges
“bodily injury” to any “worker” that in any way,
in whole or in part, arises out of, relates to or
results from operations or work performed on your
behalf by a subcontractor, unless such
subcontractor:
(1) Has in force at the time of such injury or
damage a Commercial General Liability insurance
policy and an Excess Liability insurance policy
that:
(a) names you as an additional insured and such
insurance afforded you will be primary to, and
non-contributory with, any other insurance
available to you;
(b) provides limits of liability equal to or
greater than:
Commercial General Liability Limits:
General Aggregate Limit (Per Project)
$2,000,000,
Products Completed Operations Aggregate
Limit $2,000,000,
Each Occurrence Limit $1,000,000,
Personal & Advertising Injury Limit
$1,000,000, and
Excess Liability Limits:
Each Occurrence Limit $1,000,000, and
Aggregate Limit (Per Project) $1,000,000;
and
(c) covers such claim, “suit”, demand or loss;
and
(2) Has agreed in writing to defend, indemnify
and hold harmless the Named Insured and any other
insured under the policy for any claim or “suit”
9
for “bodily injury” to any “worker” arising out
of the work performed by such Subcontractor.
(Id. at AW000312 (bold and italic text in quoted material).)
2.
The Mt. Hawley Policies
Mt. Hawley issued two insurance policies to Hibuild
that are relevant to the instant action.
The first, Commercial
General Liability Policy No. MGL0177275 (the “Mt. Hawley CGL
Policy,” Joint Stip. Ex. O, ECF No. 22-15), was issued for the
period November 19, 2013 to November 19, 2014.
The Mt. Hawley
CGL Policy, in relevant part, provided coverage for bodily
injury liability subject to a $2 million general aggregate
limit, $1 million per-occurrence limit, and a $1 million
products-completed operations limit.
(Id. at MH002278.) 7
The second, Excess Liability Policy No. MXL0418432
(the “Mt. Hawley Excess Policy,” Joint Stip. Ex. Q, ECF No. 2225), was issued for the same coverage period.
The Mt. Hawley
Excess Policy provides that it applies, in relevant part, “(a)
only in excess of the underlying insurance; [and] (b) only after
the underlying insurance has been exhausted by payment of the
limits of liability of such insurance.”
(Id. at MH000300.)
Its
general aggregate limit, per-occurrence limit, and products-
Page number references in citations to the Mt. Hawley CGL Policy and
Mt. Hawley Excess Policy (as defined herein) are to the page numbers Batesstamped on the document.
7
10
completed operations limit are each $2 million.
(Id. at MH
000297.)
a.
The Classification Limitation
The Mt. Hawley CGL Policy contains an endorsement
setting forth a classification limitation (the “Classification
Limitation”), 8 which provides that
[t]his insurance applies only to “bodily injury,”
“property damage” and/or “personal and
advertising injury” resulting from the
Classification or Operations as per application:
[Hibuild’s] operations as a General Contractor
with incidental exterior work not to exceed two
stories.
(Mt. Hawley CGL Policy at MH002299.)
The first page of the Mt. Hawley CGL Policy states
that Hibuild’s classification is “GC – Interior Renovation” (id
at MH002278), and Hibuild’s application materials made several
representations regarding the nature of Hibuild’s operations.
For instance, in a “Contractors Supplemental Application,”
Hibuild described its operations as consisting of “[i]nterior
retrofitting.”
(Hibuild Contractors Supplemental Application,
Joint Stip. Ex. P(1), ECF No. 22-16, at RSG-000017.) 9
The same
A limitation is distinct from an exclusion in that “classification
limitations of coverage merely define the activities that [a]re included
within the scope of coverage ‘in the first instance,’ and do not constitute
exclusions from coverage that would otherwise exist.” Black Bull
Contracting, LLC v. Indian Harbor Ins. Co., 23 N.Y.S.3d 59, 61 (N.Y. App.
Div. 2016) (quoting Worcester Ins. Co. v. Bettenhauser, 734 N.E.2d 745, 747
(N.Y. 2000)).
9
Page number references in citations to Exhibit P to the parties’ joint
stipulation and its sub-exhibits (e.g., P(1), P(2)) are to the page numbers
Bates-stamped on the document. Additionally, and as explained in greater
8
11
document also indicated that Hibuild performed no work over two
(2) stories in height from grade (other than interior only),”
and indicated that Hibuild had zero payroll costs or subcontract
costs for any work involving “Exterior Restoration,” “Façade
Work,” “Masonry,” “Plastering,” or “Siding/Windows,” and that
all of its work over the coming 12-month period would consist of
“Carpentry,” “Electrical,” “Maintenance,” “Mechanical,”
“Painting,” “Plumbing,” and “Supervisory” work.
(Id. at RSG-
000018-19.)
Hibuild also submitted a Commercial Insurance
Application to Mt. Hawley that described Hibuild’s business as
“Commercial Contractor – Carpentry” (Hibuild Commercial
Insurance Application, Joint Stip. Ex. P(1) at RSG-000022), and
a “Schedule of Hazards” in a document titled “Commercial General
Liability Section” lists only “GC – Interior Renovation.”
(Id.
at RSG 000025.) 10
In responding to Mt. Hawley’s requests for admission,
Hibuild admitted that the signatures on the “Commercial
Insurance Application” and “Contractors’ Supplemental
Application” documents annexed to Mt. Hawley’s requests for
detail in note 11 below, the record contains at least two other copies of
this application: one is in Exhibit P(2) (ECF No. 22-17) beginning at page
RSG-000273, and another is in Exhibit A.
10
Like the Contractor’s Supplemental Application, the Commercial
Insurance Application and “Commercial General Liability Section” documents
appear at least two other times in the record. The first additional instance
is in Exhibit P(2) at RSG-000278-84, and the second is in Exhibit A, as
discussed in note 11 below.
12
admission 11 “appear[] to be th[ose] of [Hibuild’s] Vice
President,” but otherwise declined to admit or deny the
documents’ authenticity.
Nos. 26-27.)
(Hibuild RFA Resp., Joint Stip. Ex. C,
Hibuild also stated that it “has no recollection
of ever seeing, submitting, or causing to be submitted” either
document “in connection with [Hibuild’s] 2013 insurance
application.”
(Id.)
b.
The Designated Ongoing Operations Exclusion
The Mt. Hawley CGL Policy also contains an endorsement
setting forth an exclusion for “Designated Ongoing Operations”
(the “Designated Ongoing Operations Exclusion”), which provides
that the Mt. Hawley CGL Policy does not apply to “‘bodily
injury’ or ‘property damage’ arising out of the ongoing
operations described in the Schedule of th[e] endorsement.”
(Id. at MH002305.)
The schedule, in turn, designates
“[e]xterior work/projects above 2 stories” as ongoing operations
within the Designated Ongoing Operations Exclusion.
(Id.)
The Commercial General Liability Section, Commercial Insurance
Application, and Contractor’s Supplemental Application documents annexed to
Mt. Hawley’s requests for admission are substantially identical to those in
Exhibit P(1) to the parties’ Joint Stipulation. (Compare Mt. Hawley RFA Ex.
6-8, Joint Stip. Ex. A, at ECF pp. 50-64 with Joint Stip. Ex. P(1) at RSG000017-28.) The only difference is that page two of the Commercial Insurance
Application as annexed to Mt. Hawley’s requests for admission is signed, but
the version included in Exhibit P(1) is not; the documents are otherwise
identical in all respects. (Id.) For ease of reference, the court cites to
the documents contained in Exhibit P(1) to the Joint Stipulation with the
understanding that the Commercial Insurance Application was signed, as
Exhibit A includes multiple exhibits and is not consecutively paginated
throughout.
11
13
c.
Incorporation into Mt. Hawley Excess Policy
The Mt. Hawley Excess Policy provides that it “is
subject to all of the conditions, agreements, exclusions, and
limitations of and shall follow the underlying insurance in all
respects . . . includ[ing] changes by endorsement.”
Excess Policy at MH000300.)
(Mt. Hawley
Therefore, the Classification
Limitation and the Designated Ongoing Operations Exclusion are
incorporated into the Mt. Hawley Excess Policy.
D.
The Tunkara Action
On November 3, 2014, Mr. Babalemmeh Tunkara
(“Tunkara”) filed a notice of claim (the “Notice of Claim,”
Joint Stip. Ex. L, ECF No. 22-12) against DASNY asserting that,
while working on James Hall on August 16, 2014 as an employee of
Rock, he “was walking down a ladder from scaffold [sic] and was
injured from his fall from said ladder.”
2.)
(Notice of Claim at
On October 13, 2015, Tunkara filed a Summons and Verified
Complaint (the “Tunkara Complaint”) in the Supreme Court of New
York, Kings County (the “State Court”), thereby commencing an
action captioned Babalemmeh Tunkara v. Dormitory Auth. of State
of N.Y., Lighton Indus., Inc., and Hibuild LLC, and assigned
Index Number 12345/2015 (the “Tunkara Action”). 12
(See Tunkara
In November 2014, prior to commencing the Tunkara Action, Tunkara filed
a Notice of Claim directed to DASNY and relating to the same subject matter
as the Tunkara Action, as described more fully below. (See Tunkara Notice of
Claim, Joint Stip. Ex. L, ECF NO. 22-12.)
12
14
Action Summons and Verified Complaint, Joint Stip. Ex. M, ECF
No. 22-13.)
In the Tunkara Action, Tunkara alleges that he was
injured on August 16, 2014, while the Allied and Mt. Hawley
policies were in effect, when he sustained a fall while walking
down a ladder from a scaffold in the course of his employment by
Rock, while working on the James Hall Repairs.
(Mt. Hawley RFA
Nos. 1-3; Lighton RFA Resp. Nos. 1-3; Hibuild RFA Resp. Nos. 13; see also Tunkara Action Complaint at ¶¶ 70-72; see also
Notice of Claim at 2.)
After commencing the Tunkara Action, and upon a demand
by DASNY, Tunkara filed a Verified Bill of Particulars (the
“Bill of Particulars,” Joint Stip. Ex. N, ECF No. 22-14) with
the State Court.
According to the Bill of Particulars by
Tunkara, the “subject occurrence took place on August 16, 2014
at approximately 1:00 p.m. . . . in front of [James Hall], on
the left side, as one is facing the building, at the corner
where the side and front of the building meet.”
Particulars ¶¶ 1-2.)
(Bill of
Further, the Bill of Particulars asserts
that DASNY “by and through [its] agents . . . [was] negligent:
in that [it] . . . fail[ed] to provide proper and/or adequate
ladder and scaffolding for [Tunkara] to climb down from an
elevated area” and “fail[ed] to properly secure the ladder which
15
plaintiff was using to climb down from an elevated area.”
(Id.
¶ 3.)
The Notice of Claim, the Tunkara Action Complaint, and
the Bill of Particulars are all silent as to (1) the specific
floor on which Tunkara was (or to which he was level) at the
time of his fall, (2) the nature of the James Hall Repairs, and
(3) the extent to which the James Hall Repairs involved exterior
work relative to the extent to which it involved interior work.
As noted above, however, Lighton and Hibuild admitted in their
responses to Mt. Hawley’s requests for admission that the James
Hall Repairs were entirely comprised of exterior work and
involved no interior work.
Based on these allegations, the Tunkara Action
Complaint asserts claims, in each case against DASNY, Lighton,
and Hibuild, for negligence (Tunkara Action Complaint ¶¶ 1-91),
violation of section 200 of the New York Labor Law (id. ¶¶ 9294), violation of section 240(1) of the New York Labor Law (id.
¶¶ 95-98), and violation of section 241(6) of the New York Labor
Law.
(Id. ¶¶ 99-102).
The Tunkara Action Complaint does not
state the amount of damages that Tunkara seeks, but Tunkara’s
Notice of Claim states that he seeks damages of $2,000,000.
(Notice of Claim at 4.)
16
E.
Defense and Indemnification Requests
In December 2014, after Tunkara filed his Notice of
Claim, but before he commenced the Tunkara action, DASNY sent
Allied a letter (the “DASNY Demand Letter”) informing Allied of
the Notice of Claim.
(See DASNY Demand Letter, Joint Stip. Ex.
MM, ECF No. 22-47.)
The letter is dated December 12, 2014, but
it is not clear when Allied received the letter.
(Id. at 1.)
In the letter, DASNY noted that Lighton was Allied’s insured,
and that Lighton was “obligated, pursuant to [its] contract
[with DASNY] to obtain primary insurance coverage on behalf of
DASNY and the City University of New York.”
(Id. at 1.)
DASNY
thus demanded that Allied “assume the defense and agree to
indemnify and hold harmless DASNY and the City University of New
York . . . as additional insureds on the [Allied Policy].”
(Id.)
Also in December 2014, after DASNY sent the DASNY
Demand Letter to Allied, Rockville Risk Management (“RRM”),
Allied’s third party claim administrator, sent Mt. Hawley a
letter on behalf of Lighton seeking defense and indemnification.
(See RRM Request Letter, Joint Stip. Ex. U, ECF No. 22-29.)
The
letter is dated December 23, 2014, and is stamped as received as
of December 29, 2014.
(Id. at 1.)
In January 2015, Mt. Hawley sent several letters
denying coverage for the Tunkara Claim and citing, in relevant
17
part, the Designated Ongoing Operations Exclusion.
(See January
7, 2015 Letter, Joint Stip. Ex. S, ECF No. 22-27 (disclaiming
coverage to Hibuild, with copies to other party and non-party
entities); January 9, 2015 Letter, Joint Stip. Ex. T, ECF No.
22-28 (same); January 8, 2015 Letter, Joint Stip. Ex. V, ECF No.
22-30 (asserting to RRM that Mt. Hawley has no duty to defend or
indemnify Lighton or its indemnities); January 9, 2015 Letter,
Joint Stip. Ex. W, ECF No. 22-31 (same).)
Each of the letters
also expressly reserved all other defenses to coverage.
(Id.)
Following Mt. Hawley’s denial of coverage, on March 17, 2015,
Allied, through RRM, sent a letter to Lighton denying coverage
for the Tunkara claim based on the Subcontractor Exclusion.
(Allied Claim Denial Letter, Joint Stip. Ex. KK, ECF No. 22-45.)
By letter dated November 23, 2015, after the Tunkara
Action was initiated, RRM, on behalf of Lighton, its indemnities
(which the letter does not identify), and Allied, sent Mt.
Hawley a demand for defense and indemnification in the Tunkara
Action.
(RRM Demand Letter, Joint Stip. Ex. AA, ECF No. 22-35.)
On November 30, 2015, Mt. Hawley responded with an e-mail
acknowledging receipt of RRM’s tender and stating that “Mt.
Hawley maintains its position as outlined in [its] attached
correspondence dated January 8, 2015, and January 9, 2015,”
i.e., that Mt. Hawley owed no duty to defend or indemnify any
party under any policy.
(Mt. Hawley Denial E-Mail, Joint Stip.
18
Ex. BB, ECF No. 22-36.)
On December 9, 2015, RRM sent Lighton a
letter on behalf of Allied denying coverage for the Tunkara
Action based on the Subcontractor Exception.
(Allied Action
Denial Letter, Joint Stip. Ex. LL, ECF No. 22-46.)
II.
Procedural History
These actions followed Allied and Mt. Hawley’s denials
of coverage.
On May 27, 2016, Lighton filed a complaint in New
York State Court (the “Lighton Complaint”) seeking declaratory
judgment that Allied and Mt. Hawley have a duty to defend and
indemnify it under the Allied Policy and the Mt. Hawley CGL
Policy.
(See Lighton Complaint, ECF No. 1-2, at 1-2.) 13
The
Lighton Complaint also asserts a “bad faith” claim against Mt.
Hawley.
(Id. at 5-6.)
Allied removed the Lighton Action to
this court on July 8, 2016, based on 28 U.S.C. §§ 1332 and 1446.
(See generally Notice of Removal, ECF No. 1.)
Separately, on September 23, 2016, Hibuild filed an
action in this court, assigned case number 16-CV-5302, against
Mt. Hawley and Atlantic Casualty Insurance Company (“ACIC”).
(See Complaint (the “Hibuild Complaint”), ECF/Hibuild No. 1.)
Hibuild voluntarily dismissed ACIC as a defendant, without
prejudice, by a notice of dismissal filed and so-ordered in
December 2016.
(See So-Ordered Notice of Dismissal, ECF/Hibuild
The complaint in the Lighton Action is dated May 13, 2016, but
indicates that it was filed on May 27, 2016. (Compare Lighton Complaint at 1
with Lighton Complaint at 6.)
13
19
No. 17.)
The Hibuild Complaint seeks declaratory judgment that
Mt. Hawley is required to defend and indemnify Hibuild, Lighton,
and DASNY in the Tunkara Action.
(Hibuild Complaint at 8.)
The
Hibuild Complaint also alleges that Mt. Hawley denied coverage
in bad faith, and on this basis seeks attorneys’ fees and
expenses.
(Id. ¶¶ 51-58.)
On December 14, 2016, Lighton filed a letter agreeing
to dismiss its “bad faith” claim.
(ECF No. 17.)
As noted
above, on February 2, 2017, Magistrate Judge Gold ordered the
Lighton Action and the Hibuild Action consolidated (see Minute
Entry, ECF No. 20), and the cases were consolidated the
following day.
(See February 3, 2017 Docket Notation.)
On May 19, 2017, the court granted the parties leave
to file cross-motions for summary judgment and set a briefing
schedule.
(See May 19, 2017 Minute Entry.)
The instant motions
for summary judgment were submitted on September 28, 2017.
(See
Allied Motion, ECF No. 23; Mt. Hawley Motion, ECF No. 24;
Lighton Motion, ECF No. 25; Hibuild Motion, ECF NO. 27.)
In connection with its motion for summary judgment,
Lighton served, and eventually filed, a Local Rule 56.1
statement that contains disputed material factual statements,
and contains no citations to any admissible evidence,
respectively in violation of Local Rules 56.1(a) and 56.1(d).
(See generally Lighton Initial 56.1 Statement, ECF No. 25-2.)
20
Both Allied and Mt. Hawley’s Local Rule 56.1 counter-statements
objected to Lighton’s statement on these bases.
(See Allied
Local Rule 56.1 Counter-statement, ECF No. 26-1; Mt. Hawley
Local Rule 56.1 Counter-statement to Lighton, ECF No. 28.)
Lighton also served and filed an Amended Local Rule
56.1 statement in connection with its reply brief.
Amended 56.1 Statement, ECF No. 49-1.)
(See Lighton
Allied objects to, and
Mt. Hawley seeks to strike, Lighton’s Amended Local Rule 56.1
statement, (see Allied Objection, ECF No. 50; Mt. Hawley Motion
to Strike, ECF No. 51), and on October 5, 2017, one week after
filing the Amended Local Rule 56.1 statement, Lighton moved to
amend its initial statement.
(Lighton Motion to Amend, ECF No.
53.)
Jurisdiction
The only asserted basis for federal jurisdiction in
the instant actions is diversity jurisdiction pursuant to 28
U.S.C. § 1332.
8.)
(See Notice of Removal ¶ 14; Hibuild Complaint ¶
Federal district courts have “jurisdiction of all civil
actions where the matter in controversy exceeds the sum or value
of $75,000” and is between “citizens of different States.”
U.S.C. § 1332(a)(1).
The court therefore will only have
28
diversity over each of these consolidated actions if there
exists complete diversity in each action, and if each action
satisfies the amount-in-controversy requirement.
21
I.
Complete Diversity
By statute, “a corporation shall be deemed to be a
citizen of every State and foreign state by which it has been
incorporated and of the State or foreign state where it has its
principal place of business.”
28 U.S.C. § 1332(c)(1).
Additionally, the citizenship of non-corporation business
entities “is derived from the citizenship of all members of the
entity.
In particular, limited liability companies . . . obtain
citizenship from each of their members.”
ICON MW, LLC v.
Hofmeister, 950 F. Supp. 2d 544, 546 (S.D.N.Y. 2013) (citing, in
relevant part, Carden v. Arkoma Assocs., 494 U.S. 185, 189
(1990) and Bayerische Landesbank, N.Y. Branch v. Aladdin Capital
Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012)).
Lighton is a New Jersey corporation with its principal
place of business in New Jersey, Allied is a New Hampshire
corporation with its principal place of business in New York,
and Mt. Hawley is a Delaware corporation with its principal
place of business in Illinois.
¶¶ 6-11.)
(Notice of Removal, ECF NO. 1,
There is therefore complete diversity between Lighton
and the defendants in the Lighton action.
Additionally, Hibuild
is a New Jersey LLC with a principal place of business in New
York, and all its members are New Jersey residents.
Complaint, ECF/Hibuild No. 1, ¶ 5.)
(Hibuild
As noted above, Mt. Hawley
is a Delaware corporation with a principal place of business in
22
Illinois, and ACIC is incorporated, and has its principal place
of business, in North Carolina.
(Id. ¶¶ 6-7.)
There is
therefore complete diversity between Hibuild and the defendants
in the Hibuild action.
II.
Amount in Controversy
Where a party seeks declaratory relief, as plaintiffs
do here, “the amount in controversy is measured by the value of
the object of the litigation.”
Correspondent Servs. Corp. v.
First Equities Corp. of Fla., 442 F.3d 767, 769 (2d Cir. 2006)
(quoting Hunt v. Washington State Apple Adver. Com’n, 432 U.S.
333, 347 (1977)).
Here, the value of the object of the
litigation depends on defendants’ coverage obligations: if
plaintiffs prevail, defendants will be required to defend, and
possibly indemnify, defendants in the Tunkara Action; if
defendants prevail, defendants will owe no defense or
indemnification duties.
See Am. Safety Cas. Ins. Co. v. 385
Onderdonk Ave., LLC, 124 F. Supp. 3d 237, 238-39, 242-43
(E.D.N.Y. 2015) (applying foregoing analysis in declaratory
judgment action brought by insurer seeking declaratory judgment
that it had no coverage obligations).
As noted above, Tunkara’s Notice of Claim asserts that
he seeks damages of $2,000,000 (Notice of Claim at 4), and
plaintiffs seek both defense and indemnification in the Tunkara
Action.
(Lighton Complaint at 2; Hibuild Complaint ¶ 4.)
23
Accordingly, in both the Lighton Action and the Hibuild Action,
there is a “reasonable probability that the claim is in excess
of the statutory jurisdictional amount.”
Scherer v. Equitable
Life Assurance Soc’y of U.S., 347 F.3d 394, 397 (2d Cir. 2003)
(quoting Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d
781, 784 (2d Cir. 1994)) (internal quotation marks omitted).
Thus, the amount in controversy requirement is satisfied in both
actions, and the court concludes that it has subject matter
jurisdiction over each pursuant to 28 U.S.C. § 1332.
Applicable Law and Legal Standards
I.
Rule 56
Federal Rule of Civil Procedure (“Rule”) 56 provides
that “[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed
R. Civ. P. 56(a).
The moving party has “the burden of showing that there
is no genuine issue of fact,” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 256 (1986), but “the mere existence of some
alleged factual dispute between the parties will not defeat an
otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.”
Id. at 247-48 (emphasis in original).
A fact is material if it
“might affect the outcome of the suit under the governing law,”
24
and a dispute is genuine “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Id. at 248 (citations omitted).
II.
Local Rule 56.1
Local Rule 56.1(a) requires that a party moving for
summary judgment “annex[] to [its] notice of motion a separate,
short and concise statement, in numbered paragraphs, of the
material facts as to which the moving party contends there is no
genuine issue to be tried.”
It further expressly warns that
“[f]ailure to submit such a statement may constitute grounds for
denial of the motion.”
Local Rule 56.1(a).
Local Rule 56.1(d)
requires that “[e]ach statement by the movant . . . be followed
by citation to evidence which would be admissible, set forth as
required by [Rule] 56(c).”
The Second Circuit has written that “[a] district
court has broad discretion to determine whether to overlook a
party's failure to comply with local court rules.”
Holtz v.
Rockefeller & Co., 258 F.3d 62, 73 (2d Cir. 2001) (citing Wight
v. Bankamerica Corp., 219 F.3d 79, 85 (2d Cir. 2000) and Somlyo
v. J. Lu–Rob Enters., 932 F.2d 1043, 1048 (2d Cir. 1991)).
III. Declaratory Judgment
“The Declaratory Judgment Act – not state declaratory
judgment law – provides the procedural mechanism for granting
declaratory relief in federal diversity cases.”
25
Am. Standard,
Inc. v. Oakfabco, Inc., 498 F. Supp. 2d 711, 715 (S.D.N.Y. 2007)
(citation omitted); accord Haagen-Dazs Shoppe Co. v. Born, 897
F. Supp. 122, 126 n.2 (S.D.N.Y. 1995) (collecting cases).
Under the Declaratory Judgment Act, 28 U.S.C. § 2201,
and subject to certain exceptions not applicable here,
any court of the United States, upon the filing
of an appropriate pleading, may declare the
rights and other legal relations of any
interested party seeking such declaration,
whether or not further relief is or could be
sought. Any such declaration shall have the force
and effect of a final judgment or decree and
shall be reviewable as such.
28 U.S.C. § 2201(a).
“Declaratory judgment is a form of relief, not a
substantive cause of action.”
Rapillo v. CitiMortgage, Inc.,
No. 15-CV-5976(KAM)(RML), 2018 WL 1175127, at *6 (E.D.N.Y. Mar.
5, 2018) (citation omitted); see also Nat’l Union Fire Ins. Co.
of Pittsburgh, Pa. v. Karp, 108 F.3d 17, 21 (2d Cir. 1997) (“The
DJA is procedural in nature, and merely offers an additional
remedy to litigants.” (emphasis in original)).
Therefore, “a
court may only enter a declaratory judgment in favor of a party
who has a substantive claim of right to . . . relief.”
In re
Joint E. & S. Dist. Asbestos Litig., 14 F.3d 726, 731 (2d Cir.
1993).
As the text of the Declaratory Judgment Act indicates,
the declaratory judgment remedy is discretionary even where a
26
party has a substantive claim of right to the relief he or she
seeks.
See In re Orion Pictures Corp., 4 F.3d 1095, 1100 (2d
Cir. 1993) (“A district court has broad discretion to decide
whether to render a declaratory judgment.” (citations omitted)).
“In the Second Circuit, in deciding whether declaratory judgment
is appropriate, the court must consider ‘(1) whether the
judgment will serve a useful purpose in clarifying or settling
the legal issues involved; and (2) whether a judgment would
finalize the controversy and offer relief from uncertainty.’”
Rapillo, 2018 WL 1175127, at *6 (quoting Duane Reade, Inc. v.
St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 389 (2d Cir.
2005)).
IV.
Choice of Substantive Law
In briefing and arguing the instant motions, the
parties have proceeded under the assumption that New York law
governs the instant disputes, and no party has suggested that
any other source of substantive law applies.
However, no party
has expressly identified a basis for applying New York law, for
instance by citing a choice of law provision in the relevant
insurance contracts.
As set forth below, the court concludes
that New York’s substantive law governs the instant disputes.
“A federal court sitting in diversity must apply the
choice of law rules of the forum state.”
Lazard Freres & Co. v.
Protective Life Ins. Co., 108 F.3d 1531, 1538-39 (2d Cir. 1997)
27
(citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–
97 (1941)).
New York is the forum state, and in contract cases,
New York courts apply a “center of gravity” or “grouping of
contracts” approach in determining which body of substantive law
governs.
Id. at 1539 (citation omitted).
“Under this approach, courts may consider a spectrum
of significant contacts, including the place of contracting, the
places of negotiation and performance, the location of the
subject matter, and the domicile or place of business of the
contracting parties.”
Id. (quoting Brink’s Ltd. v. South
African Airways, 93 F.3d 1022, 1030–31 (2d Cir. 1996)); accord
In re Allstate Ins. Co. and Stolarz, 613 N.E.2d 936, 940 (N.Y.
1993).
Additionally, “New York courts may also consider
public policy where the policies underlying conflicting laws in
a contract dispute are readily identifiable and reflect strong
governmental interests.”
Id. (quoting Brink’s, 93 F.3d at 1031)
(internal quotation marks omitted); accord Allstate and Stolarz,
613 N.E.2d at 939.
Notably, however, “[t]he traditional choice
of law factors, the places of contracting and performance, are
given the heaviest weight in this analysis.”
Id. (quoting
Brink’s, 93 F.3d at 1031) (internal quotation marks omitted);
accord Allstate and Stolarz, 613 N.E.2d at 939.
28
In the insurance law context, the New York Court of
Appeals has observed that “the jurisdiction with the most
significant relationship to the transaction and the parties will
generally be the jurisdiction which the parties understood was
to be the principal location of the insured risk unless with
respect to the particular issue, some other jurisdiction has a
more significant relationship.”
In re Liquidation of Midland
Ins. Co., 947 N.E.2d 1174, 1179 (N.Y. 2011) (internal quotation
marks and citation omitted).
Here, no party has suggested that any jurisdiction
other than New York has a more significant relationship to any
issue.
Additionally, it is undisputed that the alleged
occurrence with respect to which Allied and Hibuild seek defense
and indemnification occurred in New York.
Notably, under similar circumstances, the New York
Supreme Court, Appellate Division, has affirmed a trial court’s
determination that New York law applied.
Specifically, in Davis
& Partners, LLC v. QBE Insurance Corporation, 979 N.Y.S.2d 311
(N.Y. App. Div. 2014), the Appellate Division, First Department,
concluded that New York law applied to an insurance policy for
purposes of determining the insurer’s duty to defend and/or
indemnify where (i) the contract between the contractor and the
construction manager related to a New York project; (ii) that
contract was executed in New York, required contractor to carry
29
insurance, and provided that New York law governed; and (iii)
the “occurrence” under relevant policy and underlying action
occurred in New York.
979 N.Y.S.2d at 313.
Accordingly, the
court will apply New York’s substantive law.
V.
New York Insurance Law
A.
General Principles of Interpretation
“Under New York law, . . . ‘insurance policies are
interpreted according to general rules of contract
interpretation,’” Intelligent Digital Sys., LLC v. Beazley Ins.
Co., Inc., 716 F. App’x 1, 3 (2d Cir. 2017) (quoting Olin Corp.
v. Am. Home Assurance Co., 704 F.3d 89, 98 (2d Cir. 2012)), and
“should be read in light of common speech and the reasonable
expectations of a businessperson.”
Parks Real Estate Purchasing
Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d
Cir. 2006) (quoting Pepsico, Inc. v. Winterthur Int’l Am. Ins.
Co., 788 N.Y.S.2d 142, 144 (N.Y. App. Div. 2004)).
“The initial interpretation of a contract is a matter
of law for the courts to decide,” and “[u]nder New York law, an
insurance contract is interpreted to give effect to the intent
of the parties as expressed in the clear language of the
contract.”
Morgan Stanley Grp. Inc. v. New England Ins. Co.,
225 F.3d 270, 275 (2d Cir. 2000) (internal quotation marks and
citations omitted).
Further, “‘words and phrases should be
given their plain meaning,’ and the contract ‘should be
30
construed so as to give full meaning and effect to all of its
provisions.’”
LaSalle Bank Nat. Ass’n v. Nomura Asset Capital
Corp., 424 F.3d 195, 206 (2d Cir. 2005) (quoting Shaw Group,
Inc. v. Triplefine Int’l Corp., 322 F.3d 115, 121 (2d Cir.
2003)).
“If, however, the language in the insurance contract
is ambiguous and susceptible of two reasonable interpretations,
the parties may submit extrinsic evidence as an aid in
construction, and the resolution of the ambiguity is for the
trier of fact.”
State v. Home Indem. Co., 486 N.E.2d 827, 829
(N.Y. 1985) (citation omitted).
Further, “if the tendered
extrinsic evidence is itself conclusory and will not resolve the
equivocality of the language of the contract, the issue remains
a question of law for the court,” and “the ambiguity must be
resolved against the insurer who drafted the contract.”
(citations omitted).
Id.
The principle that contractual ambiguities
must be construed in favor of the insured applies with
particular force where the ambiguity occurs “in the language of
an exclusion provision.”
Vill. of Sylvan Beach, N.Y. v.
Travelers Indem. Co., 55 F.3d 114, 115 (2d Cir. 1995) (citations
omitted).
31
B.
Duty to Defend and Duty to Indemnify
1.
Duty to Defend
Under New York law, “[a]n insurer has a duty to defend
so long as there is any possibility of coverage under the
[relevant insurance] policy,”
Westpoint Int’l, Inc. v. Am.
Int’l S. Ins. Co., 899 N.Y.S.2d 8, 9 (N.Y. App. Div. 2010)
(citation omitted), and the duty to defend is “exceedingly
broad.”
Atl. Ave. Sixteen AD, Inc. v. Valley Forge Ins. Co., 56
N.Y.S.3d 207, 209 (N.Y. App. Div. 2017) (quoting Mack–Cali
Realty Corp. v. NGM Ins. Co., 990 N.Y.S.2d 253, 255 (N.Y. App.
Div. 2014)).
Generally, courts determine whether an insurer has a
duty to defend claims against its insured “by comparing the
allegations of [the] complaint [against the insured] with the
wording of the insurance contract.”
Int’l Bus. Mach. Corp. v.
Liberty Mut. Ins. Co., 363 F.3d 137, 144 (2d Cir. 2004) (citing,
in relevant part, Ruder & Finn Inc. v. Seaboard Sur. Co., 422
N.E.2d 518, 521 (N.Y. 1981)).
“The duty to defend remains even
though facts outside the four corners of the pleadings indicate
that the claim may be meritless or not covered.”
Euchner-USA,
Inc. v. Hartford Cas. Ins. Co., 754 F.3d 136, 140 (2d Cir. 2014)
(emphasis added) (internal quotation marks and citations
omitted).
32
In addition to the four corners of the complaint in an
underlying action, however, in determining whether an insurer is
obligated to defend its insured, “a court may look to judicial
admissions in the insured’s responsive pleadings in the
underlying tort action or other formal submissions in the
current or underlying litigation to confirm or clarify the
nature of the underlying claims.”
Northville Indus. Corp. v.
Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 679 N.E.2d 1044,
1049 (N.Y. 1997) (citing Technicon Elecs. Corp. v. American Home
Assur. Co., 542 N.E.2d 1048, 1051-52 (N.Y. 1989)); see also Burt
Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83, 97
(2d Cir. 2002) (“New York courts have, in appropriate cases,
considered extrinsic evidence where that evidence may
conclusively establish that an insurer faces no possible
liability.” (citation omitted)); Avondale Indus., Inc. v.
Travelers Indem. Co., 774 F. Supp. 1416, 1424 (S.D.N.Y. 1991)
(noting that courts may, “in exceptional circumstances, look
outside the four corners of the complaint to consider whether
extrinsic evidence establishes to a certainty that the insurer
faces no liability for indemnity” and collecting cases);
Fitzpatrick v. Am. Honda Motor Co., 575 N.E.2d 90, 92 (N.Y.
1991) (“[T]o say that the duty to defend is at least broad
enough to apply to actions in which the complaint alleges a
covered occurrence is a far cry from saying that the complaint
33
allegations are the sole criteria for measuring the scope of
that duty.” (emphasis in original)).
“[A]n insurer can be relieved of its duty to defend if
it establishes as a matter of law that there is no possible
factual or legal basis on which it might eventually be obligated
to indemnify its insured under any policy provision.”
E. Ramapo
Cent. Sch. Dist. v. New York Sch. Ins. Reciprocal, 54 N.Y.S.3d
413, 418 (N.Y. App. Div. 2017) (quoting Allstate Ins. Co. v.
Zuk, 574 N.E.2d 1035, 1037 (N.Y. 1991) and citing Cumberland
Farms, Inc. v. Tower Group, Inc., 28 N.Y.S.3d 119, 122 (N.Y.
App. Div. 2016)).
Further, where an insurer seeks to be relieved of its
duty to defend on the basis of a policy exclusion, it
bears the heavy burden of demonstrating that the
allegations of the complaint in the underlying
action 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.
E. Ramapo Cent. Sch. Dist., 54 N.Y.S.3d at 418 (quoting Frontier
Insulation Contractors, Inc. v. Merchants Mut. Ins. Co., 690
N.E.2d 866, 868-69 (N.Y. 1997)); see also Yangtze Realty, LLC v.
Sirius Am. Ins. Co., 934 N.Y.S.2d 480, 480-81 (N.Y. App. Div.
2011) (“The duty to defend is not triggered . . . when the only
interpretation of the allegations against the insured is that
34
the factual predicate for the claim falls wholly within a policy
exclusion” (internal quotation marks and citations omitted)).
An insurer seeking to deny coverage based on a
classification limitation must similarly demonstrate that the
limitation applies and is not susceptible to any interpretation
other than the interpretation the insurer offers.
See Pioneer
Tower Owners Ass’n v. State Farm Fire & Cas. Co., 908 N.E.2d
875, 877 (N.Y. 2009) (“[E]xclusions or exceptions from policy
coverage must be specific and clear in order to be enforced. . .
. [B]efore an insurance company is permitted to avoid policy
coverage, it must . . . establish[] that the exclusions or
exemptions apply in the particular case, and that they are
subject to no other reasonable interpretation.” (emphasis added)
(quoting Seaboard Sur. Co. v. Gillette Co., 476 N.E.2d 272, 275
(N.Y. 1984))); see also Northfield Ins. Co. v. Cibor Const.,
Inc., No. 13-CV-3131(NGG)(SMG), 2015 WL 5560871, at *5-*8
(E.D.N.Y. July 23, 2015) (analyzing classification limitation
under same standards as exclusions from coverage), report and
recommendation adopted, 2015 WL 5567067 (E.D.N.Y. Sept. 21,
2015).
2.
Duty to Indemnify
An insurer’s duty to indemnify (i.e., to pay out on
its policy) is narrower than its duty to defend.
See Frontier
Insulation, 690 N.E.2d at 870 (“[A]n unbroken line of cases
35
establishes that an insurer’s duty to defend is broader than its
duty to indemnify.” (citations omitted)).
“While the duty to
defend is measured against the possibility of a recovery, the
duty to pay is determined by the actual basis for the insured’s
liability to a third person.”
citations omitted).
Id. (internal quotation marks and
Thus, “an insurer may be contractually
bound to defend even though it may not ultimately be bound to
pay, either because its insured is not factually or legally
liable or because the occurrence is later proven to be outside
the policy’s coverage.”
Id. (quoting Fitzpatrick, 575 N.E.2d at
92 (N.Y. 1991)).
Discussion
I.
Lighton’s Local Rule 56.1 Statement
Lighton had ample notice of the requirements of Local
Rule 56.1, yet failed to submit a compliant Local Rule 56.1
statement.
The plaintiff and defendants, however, do not
dispute the existence and language of the DASNY-Lighton
agreements, the Lighton-Hibuild subcontract, and the insurance
policies, although the dispute their meaning.
Additionally,
because defendants have filed their own Local Rule 56.1
statements in support of their motions for summary judgment,
which address identical factual issues, defendants will not be
prejudiced by the court’s consideration of Lighton’s Amended
Local Rule 56.1 statement.
36
For these reasons, and in an exercise of its “broad
discretion to determine whether to overlook a party’s failure to
comply with local court rules,” Holtz, 258 F.3d at 73 (citations
omitted), the court will consider Lighton’s amended Local Rule
56.1 statement.
For the avoidance of doubt, although the court
considers Lighton’s Amended Local Rule 56.1 statement, the court
will not deem any facts asserted therein admitted by virtue of
defendants’ failure to file a response to Lighton’s late-filed
statement.
II.
Mt. Hawley’s Duty to Defend
Hibuild seeks summary judgment in its favor solely “on
the issue of Mt. Hawley’s duty to defend Hibuild in the Tunkara
Action” (Hibuild Mem. at 10), and expressly concedes that “the
issue of Mt. Hawley’s duty to indemnify Hibuild . . . is not yet
ripe.”
(Id. at 1 n.1.) 14
Hibuild asserts that it is entitled to
defense in the Tunkara Action because the action is covered by
the Mt. Hawley CGL Policy, (id. at 5-7), and because Mt. Hawley
cannot establish that any exclusion applies.
(Id. at 7-10.)
Lighton, for its part, seeks summary judgment that Mt. Hawley is
The Hibuild Complaint seeks declaratory judgment that Mt. Hawley is
required to defend and indemnify Hibuild, Lighton, and DASNY in the Tunkara
Action. (Hibuild Complaint at 8.) Hibuild’s instant motion for summary
judgment, however, does not seek summary judgment as to Mt. Hawley’s duty to
defend or indemnify Lighton or DASNY, although Lighton’s instant motion seeks
summary judgment that Mt. Hawley must defend and indemnify it. Thus, this
Memorandum and Order addresses whether Mt. Hawley owes Hibuild a duty to
defend and owes Lighton duties of defense and/or indemnification, but does
not address whether Mt. Hawley owes a similar duty or duties to DASNY.
14
37
obligated both to defend and indemnify it as an “additional
insured” under the Mt. Hawley CGL Policy and the Mt. Hawley
Excess Policy.
(Lighton Mem. at 25.)
Conversely, Mt. Hawley seeks summary judgment in its
favor on the grounds that (i) the Tunkara Action is outside the
scope of the Mt. Hawley CGL Policy and the Mt. Hawley Excess
Policy by operation of the Classification Limitation, and, in
the alternative, (ii) the Designated Ongoing Operations
Exclusion excludes the Tunkara Action from Mt. Hawley policies’
scope of coverage.
(Mt. Hawley Mem. at 9-15.)
Additionally,
Mt. Hawley asserts that Lighton cannot qualify as an additional
insured under the policies at issue.
A.
(Id. at 7 n.2, 15-16.)
Policy Language
Upon a review of the relevant Mt. Hawley-Hibuild
policy provisions, specifically the Classification Limitation
and the Designated Ongoing Operations Exclusion, in light of the
New York law that governs them and the record before the court,
the court concludes that both provisions are ambiguous as
applied here and are therefore construed against Mt. Hawley.
1.
The Classification Limitation
To reiterate the operative language, the Mt. Hawley
CGL Policy’s Classification Limitation, which the Mt. Hawley
Excess Policy incorporates by reference (Mt. Hawley Excess
Policy at MH000300), provides that
38
[t]his insurance applies only to “bodily injury,”
“property damage” and/or “personal and
advertising injury” resulting from the
Classification or Operations as per application:
[Hibuild’s] operations as a General Contractor
with incidental exterior work not to exceed 2
stories.
(Mt. Hawley CGL Policy at MH002299.)
Based on the Classification Limitation and Hibuild’s
representations to Mt. Hawley in its application paperwork, Mt.
Hawley contends that the Mt. Hawley CGL Policy “clearly provides
that any ‘exterior work’ must be incidental to Hibuild’s
interior work.”
(Mt. Hawley Opposition to Plaintiffs’ Motions
(“Mt. Hawley Opp.”), ECF No. 30, at 17.)
Mt. Hawley further
contends that because the James Hall renovation involved no
interior work, “none of the exterior work could have been
incidental.”
(Id.; see also Mt. Hawley Mem. at 11 (“Hibuild’s
exterior work was not incidental, as the entirety of the [James
Hall] project consisted of interior work.”)
Mt. Hawley’s argument rests on the proposition that in
evaluating whether any given “exterior work above two stories”
is “incidental,” the court should look to the specific project
for which the relevant work was performed, and not, as Hibuild
contends, to Hibuild’s overall operations.
(See Hibuild
Opposition to Mt. Hawley Motion, ECF No. 35, at 10-11 (“[T]he
Mt. Hawley Policy expressly covers . . . exterior work up to two
stories in height that is ‘incidental’ to Hibuild’s ‘operations
39
as a General Contractor.’” (emphasis and citations omitted).)
As the insurer seeking to deny coverage, Mt. Hawley must
demonstrate that its interpretation is correct, the
Classification Limitation is “subject to no other reasonable
interpretation,” Pioneer Tower, 908 N.E.2d at 877 (citation
omitted), and that Hibuild’s contention that the court should
look to Hibuild’s overall operations is not consistent with the
“reasonable expectations of a businessperson.”
See Parks Real
Estate, 472 F.3d at 42 (noting that insurance policies are “read
in light of . . . the reasonable expectations of a
businessperson.”)
Mt. Hawley, however, cites to no contractual
provision, evidence in the record, or applicable law
establishing that, in determining whether work is “incidental”
within the meaning of the Classification Limitation, the court
must look to the specific project in which that work arises,
instead of the insured’s overall operations.
Looking first to
the relevant contractual language, Mt. Hawley contends that
“incidental” should be accorded its plain and ordinary meaning,
which is “subordinate to something of greater importance.”
(Mt.
Hawley Mem. at 11 (citation omitted); Mt. Hawley Opp. at 18
(citation omitted).)
The court agrees with Mt. Hawley’s
interpretation of the word “incidental,” but this interpretation
sheds no light on whether Hibuild’s operations, or only its
40
specific projects are the “[]thing[s] of greater importance” to
which exterior work may be “subordinate” within the meaning of
the Classification Limitation.
Comparing the Classification Limitation with the
policy language from which Mt. Hawley draws its interpretation
of the term “incidental” puts into stark relief the lack of
clear direction in the Mt. Hawley CGL Policy’s Classification
Limitation.
In Mt. Hawley’s cited case, Lend Lease (US)
Construction LMB Inc. v. Zurich American Insurance Company, the
policy at issue was for a specific project and “insure[d]
against all risks of direct physical loss of or damage to,” in
relevant part, “temporary buildings or structures . . . all
incidental to the project.”
22 N.Y.S.3d 24, 27 (N.Y. App. Div.
2015) (emphasis added), aff’d, 71 N.E.3d 556 (N.Y. 2017).
Thus,
the Lend Lease policy unambiguously set forth a reference point
against which the “incidental” character of “temporary buildings
or structures” must be determined.
Here, however, the
Classification Limitation sets forth no analogous reference
point for “exterior work not to exceed two stories.”
Further, Hibuild’s proposed reading of the
Classification Limitation is consistent with principles of
contract interpretation.
The Second Circuit has noted that, in
interpreting written instruments, courts “often interpret a word
by the ‘company it keeps (the doctrine of noscitur a sociis).’”
41
Rothstein v. Am. Int’l Grp., Inc., 837 F.3d 195, 210–11 (2d Cir.
2016) (quoting Gustafson v. Alloyd Co., 513 U.S. 561, 575 (1995)
and citing WPP Luxembourg Gamma Three Sarl v. Spot Runner Inc.,
655 F.3d 1039, 1051, 1051 n.3 (9th Cir. 2011)); see also WPP
Luxembourg, 655 F.3d at 1051 n.3 (applying noscitur a sociis to
a contract).
Here, the word “incidental” keeps company with
Hibuild’s “operations,” but not “projects.”
Thus, Hibuild’s
proposed reading, unlike Mt. Hawley’s, relies on the words
actually used in the Classification Limitation and does not
require that the court look to concepts and terms that are
wholly absent from the Classification Limitation.
Moreover, Mt. Hawley’s extrinsic evidence and
remaining arguments do not provide a sufficient basis to
conclude that Hibuild’s reading of the Classification Limitation
is not reasonable.
In support of its own reading of the
Classification Limitation, Mt. Hawley relies on representations
by Hibuild in its insurance application materials.
(See Mt.
Hawley Reply, ECF No. 34, at 2 (“Mt. Hawley’s references to
Hibuild’s own prior representations [are] offered only to rebut
Lighton’s and Hibuild’s incorrect arguments that the language at
issue should be interpreted otherwise.”).
For instance, Mt.
Hawley asserts that Hibuild represented that it “is an interior
contractor that performed no exterior renovation, façade work,
or masonry,” and suggests that that Hibuild therefore “could not
42
have reasonably had any expectation of coverage” for the James
Hall Repairs.
(Mt. Hawley Mem. at 11.)
Even under Mt. Hawley’s reading of the Classification
Limitation, however, so long as a given instance of exterior
renovation, façade work, and/or masonry were to remain
incidental to an interior project, Hibuild would be covered.
Thus, Mt. Hawley’s own interpretation of the Classification
Limitation establishes that Hibuild could reasonably expect
coverage for at least certain exterior renovation, façade work,
and/or masonry.
Moreover, Hibuild’s representations regarding
the types of exterior work it performed in its overall
operations shed no light on whether the “incidental” nature of a
particular instance of exterior work should be determined with
reference to Hibuild’s overall operations, or the project on
which Hibuild performed the relevant work.
Mt. Hawley also asserts, albeit in discussing the
Designated Ongoing Operations Exclusion, that exterior work is
riskier and therefore commands higher premiums.
Mem. at 13-14.)
(Mt. Hawley
Once again, however, Mt. Hawley concedes that
certain “incidental” exterior work is covered.
(See Mt. Hawley
Opp. at 17 (asserting that, to be covered, “any ‘exterior work’
must be incidental to Hibuild’s interior work”).)
Therefore,
Mt. Hawley necessarily concedes that the premiums Mt. Hawley
accepted from Hibuild took into account the added risk from
43
incidental exterior work.
Additionally, both Mt. Hawley and
Hibuild’s proposed readings limit Mt. Hawley’s exposure to risk
and potential liability arising from purportedly higher-risk
exterior work, which Mt. Hawley suggests is the purpose of the
Classification Limitation.
(See Mt. Hawley Opp. at 17 n.5
(“[T]he [C]lassification [L]imitation was placed on the Mt.
Hawley policy in direct response to Hibuild’s representations in
its application.”).)
As the instant action demonstrates, Hibuild’s proposed
interpretation of the Classification Limitation may not limit
Mt. Hawley’s exposure as much as Mt. Hawley would prefer.
Hibuild’s proposed interpretation nevertheless unquestionably
accomplishes the overall purpose of the Classification
Limitation, and consequently, Mt. Hawley’s suggestions regarding
the purpose of the Classification Limitation do not suffice to
establish that Hibuild’s reading of the Classification
Limitation is not a “reasonable interpretation” of the relevant
contractual language, which is the standard Mt. Hawley must
meet.
Pioneer Tower, 908 N.E.2d at 877 (citation omitted).
Consequently, Mt. Hawley’s arguments regarding risks, premiums
and the purpose of the Classification Limitation do not
establish the unreasonableness of Hibuild’s position regarding
the reference point that the court should use to determine
whether particular exterior work is “incidental.”
44
Hibuild’s application materials, which the
Classification Limitation expressly references, do not clarify
whether the court should look to the particular project on which
Hibuild performed work or to Hibuild’s operations as a whole in
determining whether the particular “exterior work” in this case
was “incidental.”
Nor do Mt. Hawley’s arguments regarding the
purpose of the Classification Limitation or the relative risks
of interior and exterior work establish that Hibuild’s
interpretation of the Classification Limitation is incorrect.
Accordingly, the court concludes that the
Classification Limitation is ambiguous insofar as it does not
clearly establish what the court should reference in determining
whether a particular instance of exterior work is “incidental.”
As New York law requires, the court will resolve this ambiguity
against Mt. Hawley, “the insurer which drafted the contract.”
Home Indemnity, 486 N.E.2d at 829.
Thus, the court concludes
that the “incidental” nature of exterior work must be determined
with reference to Hibuild’s operations as a whole.
Under that
interpretation, Mt. Hawley has not established that the Mt.
Hawley CGL Policy and the Mt. Hawley Excess Policy do not cover
the Tunkara Action based on the Classification Limitation, as
the only evidence in the record regarding Hibuild’s overall
operations indicates that the overwhelming majority of Hibuild’s
operations are interior.
(See, e.g., Contractors Supplemental
45
Application, Joint Stip. Ex. P(1), ECF No. 22-16, at RSG-000017
(describing Hibuild’s operations as “[i]nterior retrofitting at
federal installations & commercial buildings”), RSG-000018
(representing that Hibuild does no work over two stories in
height from grade other than interior work), and RSG-000019
(indicating Hibuild expected no payroll or subcontracting costs
for any work involving “Exterior Restoration,” “Façade Work,” or
“Masonry” during the policy term).)
2.
The Designated Ongoing Operations Exclusion
The Designated Ongoing Operations Exclusion is set
forth in an endorsement, which provides that the Mt. Hawley CGL
Policy “does not apply to ‘bodily injury’ . . . arising out of
the ongoing operations described in the Schedule of th[e]
endorsement.”
(Mt. Hawley CGL Policy at MH002305.)
Ongoing
operations within the Designated Ongoing Operations Exclusion
are identified, in relevant part, in the schedule as “[e]xterior
work/projects above 2 stories.”
a.
(Id.)
“[A]rising out of”
“In the context of a policy exclusion, the phrase
arising out of is unambiguous, and is interpreted broadly to
mean ‘originating from, incident to, or having connection
with.’”
Country-Wide Ins. Co. v. Excelsior Ins. Co., 46
N.Y.S.3d 96, 98 (N.Y. App. Div. 2017) (quoting Scottsdale
46
Indemn. Co. v. Beckerman, 992 N.Y.S.2d 117, 121 (N.Y. App. Div.
2014)), leave to appeal denied, 89 N.E.3d 1258 (N.Y. 2017).
To determine whether an “arising out of” exclusion
applies, New York courts apply a “but for” test.
Id. (citing
Mount Vernon Fire Ins. Co. v. Creative Hous. Ltd., 668 N.E.2d
404, 405 (N.Y. 1996)).
Thus,
if the plaintiff in an underlying action or
proceeding alleges the existence of facts clearly
falling within such an exclusion, and none of the
causes of action that he or she asserts could
exist but for the existence of the excluded
activity or state of affairs, the insurer is
under no obligation to defend the action.
Scottsdale Indemnity, 992 N.Y.S.2d 117, 121 (N.Y. App. Div.
2014) (citing, inter alia, Mount Vernon Fire Insurance, 668
N.E.2d at 405-06).
To determine whether the Tunkara Action is excluded
from coverage under the the Designated Ongoing Operations
Exclusion, the court must determine whether the Tunkara Action
“could exist but for the existence of the excluded activity or
state of affairs,” id., namely, “[e]xterior work/projects above
2 stories.”
b.
“Exterior work/projects above 2 stories”
As an initial matter, the parties do not dispute that
the activity giving rise to the Tunkara Action was “exterior”
within the meaning of the Designated Ongoing Operations
Exclusion, as all work on James Hall was exterior.
47
Additionally, the court ascribes plain and ordinary meaning to
the terms “work” and “projects.”
See LaSalle Bank Nat. Ass’n,
424 F.3d at 206 (noting that, in interpreting insurance
contracts, “words and phrases should be given their plain
meaning” (citation omitted)).
Black’s Law Dictionary defines “work” as “[p]hysical
and mental exertion to attain an end, esp[ecially] as controlled
by and for the benefit of an employer; labor.”
Dictionary (10th Ed. 2014) at 1840.
Black’s Law
Webster’s Dictionary
defines “work” similarly: it is “activity in which one exerts
strength or faculties to do or perform . . . sustained physical
or mental effort valued as it overcomes obstacles and achieves
an objective or result,” and/or “the labor, task, or duty that
affords one his accustomed means of livelihood.”
Webster’s
Third New International Dictionary of the English Language,
Unabridged (2002) (“Webster’s Unabridged”) at 2634.
In
contrast, Webster’s defines a “project,” as relevant here, as “a
planned undertaking,” particularly one “devised to effect the .
. . improvement of a particular area of land.”
Webster’s
Unabridged 1813.
Based on these definitions, the court concludes that
“work” refers to specific action(s) by individual persons aimed
at completing a task or tasks.
“Project” has a broader meaning,
as it refers to a larger planned undertaking that is, as
48
applicable here, comprised of various coordinated instances of
work with a common, overarching objective.
Applying these plain meanings, the court concludes
that the Tunkara Action arises out of an exterior “project”
involving a structure above two stories, because the Tunkara
Action “originat[es] from, [is] incident to, or ha[s] connection
with” the five-story James Hall Renovation.
Country-Wide Ins.
Co., 46 N.Y.S.3d at 98 (citation omitted); see also Scottsdale
Indemnity, 992 N.Y.S.2d at 121 (noting that courts look to
whether the causes of action in underlying litigation “could
exist but for the existence of the excluded activity or state of
affairs” in determining whether an action “arises from” an
exclusion).
The court cannot conclude, however, that the Tunkara
Action arises out of exterior “work” above two stories.
As
discussed above, the Tunkara Action complaint and the Bill of
Particulars are wholly silent as to the story or stories of
James Hall on which Tunkara was performing work at any time
relevant to his alleged fall that gave rise to his action, and
no other information before the court sheds light on the matter.
The Tunkara Complaint and Bill of Particulars are also wholly
silent as to what work, if any, by Tunkara could be relevant to
Tunkara’s alleged fall.
Therefore, there is no basis in the
49
record to conclude that any “work” above two stories was a “but
for” cause of Tunkara’s alleged fall.
As an illustrative example, the record before the
court leaves open the possibility that Tunkara’s alleged
accident could have arisen from Tunkara climbing a ladder to
hang a sign on the higher portions of ground-level scaffolding.
Under this set of circumstances, Tunkara’s alleged accident
would be wholly disconnected from any work above two stories by
Tunkara or any other person, and would therefore not “arise out
of” exterior work above two stories.
The court concludes that
Mt. Hawley, which has the burden of establishing that the
Tunkara Action falls within the Designated Ongoing Operations
Exclusion, has not established that the Tunkara Action arises
out of “work” above two stories.
Critically, the terms “work” and “projects” as they
appear in the Designated Ongoing Operations Exclusion are
separated by a virgule, also referred to as a forward slash, and
the virgule’s meaning is dispositive of whether Tunkara’s
alleged injury falls within the Designated Ongoing Operations
Exclusion.
If the virgule means “or,” or “and/or,” then the
Designated Ongoing Operations Exclusion applies where bodily
injury arises out of an exterior “project” above two stories
regardless of whether the bodily arises from exterior “work.”
If, however, the virgule means “and,” then bodily injury must
50
arise from both an exterior “project” and exterior “work,” in
each case above two stories.
Here, no party has expressly stated how it believes
the virgule should be interpreted.
The court notes that Mt.
Hawley argues that the precise floor on which Tunkara was
located at the time of his accident is “immaterial because the
project was a five-story exterior restoration” (Mt. Hawley Opp.
at 8), thus reading the virgule as “or” or “and/or.”
Nothing in the Mt. Hawley CGL Policy clearly supports,
much less compels, Mt. Hawley’s interpretation, or any other
reading of the virgule.
Further, the limited authority that
exists regarding the meaning of a virgule does not establish a
clear meaning.
For instance, in Elcor Health Services, Inc. v.
Novello, the New York Court of Appeals considered a challenge to
the Department of Health’s interpretation of the phrase “has
this potential/is improving,” as it appeared in a New York
regulation.
See 794 N.E.2d 14, 15-16 (N.Y. 2003).
The
Department of Health asserted that “‘actual improvement’ by a
patient” was a prerequisite for certain reimbursements.
15.
Id. at
The Department of Health thus interpreted the virgule to
mean “and.”
The appellant, a health care provider seeking
reimbursement, see id. at 16, asserted that “the Department’s
use of the virgule . . . in the regulation – ‘has this
51
potential/is improving’ – means ‘or.’”
Id. at 18.
The Court of
Appeals disagreed, and noted that a virgule is susceptible to
multiple interpretations: “[t]hat the Department’s
interpretation might not be the most natural reading of the
regulation, or that the regulation could be interpreted in
another way, does not make the interpretation irrational.”
Id.
Additionally, the opinion of the New York Supreme
Court, Appellate Division in Elcor contains a thorough
discussion of the “role played by the forward slash or virgule
in the phrase ‘patient has this potential/is improving.’”
Elcor
Health Servs. Inc. v. Novello, 744 N.Y.S.2d 71, 73-74 (N.Y. App.
2002), aff’d, 794 N.E.2d 14 (N.Y. 2003).
Notably, the Appellate
Division observed that the 1986 edition of Webster’s Third New
International Dictionary (Unabridged) defines “virgule” as “a
symbol used to denote, inter alia, “or” or “and or.”
(citation omitted). 15
Id. at 73
The Appellate Division concluded that
“[e]ven defined in this way, the virgule allows for usage as
‘and’, resulting in no contradiction when both alternatives
apply.”
Id.
A more recent publication of Webster’s Unabridged Third New
International Dictionary of the English Language, Unabridged, cited above in
the court’s discussion of the interpretation of “work” and “project,”
contains a substantially identical definition. See Webster’s Unabridged
2138, 622.
15
52
The Appellate Division noted that still another
dictionary provides a “more comprehensive[]” definition of
“virgule,” specifically “a short oblique stroke (/) between two
words indicating that whichever is appropriate may be chosen to
complete the sense of the text in which they occur.”
Id.
(citing Random House Dictionary of the English Language
(Unabridged) (2d ed. 1993) at 2125).
In light of this
definition, the Appellate Division considered the relevant
regulation as a whole (as opposed to only the phrase at issue),
as well as the overall regulatory scheme, and concluded that the
Department’s interpretation of the regulation, i.e., as an
“and,” “ha[d] a rational basis.”
Id. at 73-74.
Further, a Second Circuit partial concurrence notes
that, according to a different version of Webster’s from that
cited in Elcor (specifically, the Third Edition of Webster’s New
World Dictionary, published in 1986), a virgule is used between
two words to show that either meaning is applicable.
Matusick
v. Erie Cty. Water Auth., 757 F.3d 31, 72 n.5 (2d Cir. 2014)
(Raggi, J. concurring in part and dissenting in part).
Matusick, however, did not involve a contract, and the reference
to a virgule arose in discussion of the phrasing of certain
arguments in the litigation.
Specifically, the concurring
opinion observed that in argument to the jury before the
district court, and in briefing to the Second Circuit,
53
plaintiff-appellee’s counsel had conflated the status of the
plaintiff-appellee’s relationship with his significant other,
which was a “critical fact supporting [his] constitutional claim
of intimate association.”
Id. at 72 and 72 n.5.
The definition
of “virgule” set forth in the Matusick concurrence is thus of
limited usefulness here.
In addition, the New York Supreme Court, Appellate
Division, Fourth Department, relying in part on various lower
court decisions, has concluded that checks drawn to two payees
with their names separated by a virgule are payable in the
alternative, thereby construing a virgule as an “or.”
See L.B.
Smith, Inc. v. Bankers Tr. Co. of W. N. Y., 439 N.Y.S.2d 543,
544–45 (N.Y. App. Div. 1981) (collecting cases), aff’d 434
N.E.2d 261 (N.Y. 1982).
The Appellate Division, First
Department, however, has concluded that where a plaintiff
drafted a check and used “what might be interpreted as a virgule
in addition to the word ‘and’ between payees,” the check was
ambiguous on its face, payable jointly, and required both
payees’ endorsements. C.H. Sanders Const. Co. v. Bankers Tr.
Co., 506 N.Y.S.2d 58, 59 (N.Y. App. Div. 1986).
In sum, all authority on point suggests that the
virgule, as it appears in the Designated Ongoing Operations
Exclusion, is ambiguous and susceptible to interpretation as
meaning “or,” “and,” or “and/or.”
54
Further, nothing in the
record suggests that interpreting the virgule to mean “and”
would not conform to the “reasonable expectations of a
businessperson.”
omitted).
Parks Real Estate, 472 F.3d at 42 (citation
Mt. Hawley notes that the Designated Ongoing
Operations Exclusion reflects “the balance of risks and benefits
the parties achieved” in negotiating coverage (Mt. Hawley Mem.
at 14), and that Mt. Hawley sought to limit its exposure to
risks associated with certain exterior work (see id. at 14-15),
but construing the virgule as an “and” would still effect a
reduction in exposure.
As previously noted, longstanding case law holds that
ambiguities must be construed against the insurer.
Certainly
Mt. Hawley, as an insurer, would now prefer that the policy be
read more narrowly, specifically by reading the virgule to mean
“or,” and may have intended the virgule to mean “or.”
Based on
the record before the court, however, the court concludes that
the virgule is ambiguous, and particularly because the virgule
arises in an exclusion, New York law requires that it be
construed against Mt. Hawley.
See Home Indemnity, 486 N.E.2d at
829 (“[T]he ambiguity must be resolved against the insurer which
drafted the contract.” (citation omitted)); Sylvan Beach, 55
F.3d at 115 (“[I]f the policy language is ambiguous,
particularly the language of an exclusion provision, the
ambiguity must be interpreted in favor of the insured.”
55
(citation omitted)).
Based on the foregoing, the court
construes the virgule to mean “and.”
Thus, to fall within the
Designated Ongoing Operations Exclusion, bodily injury must
arise out of both exterior work and an exterior project, in each
case above two stories.
Accordingly, the court concludes that Mt. Hawley has
not established that the claims asserted in the Tunkara Action
fall within the Designated Ongoing Operations Exclusion.
As set
forth above, the claims asserted in the Tunkara Action certainly
arise out of an exterior project above two stories, but the
court cannot conclude that it arises from exterior work above
two stories.
B.
Application to Hibuild’s Motion
Because the court must construe the ambiguities in the
Classification Limitation and the Designated Ongoing Operations
Exclusion against Mt. Hawley, the court concludes that a
“possibility of coverage” exists under the Mt. Hawley CGL and
Mt. Hawley Excess Policies,
Westpoint International, 899
N.Y.S.2d at 9, as Mt. Hawley has not established that the claims
in the Tunkara Action fall outside the policies’ coverage, or
are excluded from coverage, based on the Classification
Limitation or the Designated Ongoing Operation Exclusion,
respectively.
“An insurer has a duty to defend so long as there
is any possibility of coverage under the [relevant insurance]
56
policy,” id. (citation omitted), and Mt. Hawley therefore owes
Hibuild a duty to defend the Tunkara Action.
Consequently, as
to Hibuild’s claim for a declaration that Mt. Hawley owes it a
duty of defense in the Tunkara Action, Hibuild’s motion for
summary judgment is granted, and Mt. Hawley’s motion for summary
judgment is denied.
C.
Application to Lighton’s Motion
As noted above, Lighton has also moved for summary
judgment that Mt. Hawley must defend and indemnify it based on
Lighton’s contention that it is an “additional insured” under
the Mt. Hawley Policy.
(Lighton Mem. at 25.)
Mt. Hawley
asserts that Lighton is not an additional insured, but does not
explain the basis for this contention. (See Mt. Hawley Mem. at 7
n.2, 15-16.)
The Mt. Hawley CGL Policy includes an additional
insured endorsement (the “Additional Insured Endorsement”),
which, subject to certain exclusions not applicable here,
includes
any person or organization for whom [Hibuild]
[is] performing operations when [Hibuild] and
such person or organization have agreed in
writing in a contract or agreement that such
person or organization be added as an additional
insured on your policy.
57
(Mt. Hawley CGL Policy, Joint Stip. Ex. O, ECF No. 22-15, at
MH002311.) 16
New York courts have interpreted substantially similar
provisions as requiring “contractual privity between the insured
and each organization seeking coverage as an additional insured
under the relevant policy.”
Muss Dev., LLC v. Nationwide Ins.
Co., No. 13-CV-4848(RJD)(MDG), 2015 WL 6160240, at *6 (E.D.N.Y.
Oct. 20, 2015) (emphasis omitted) (citing AB Green Gansevoort,
LLC v. Peter Scalamandre & Sons, Inc., N.Y.S.2d 3, 4-5 (N.Y.
App. Div. 2013) and Zoological Soc. of Buffalo, Inc. v.
Carvedrock, LLC, No. 10–CV–35(RJA), 2014 WL 3748545, at *7
(W.D.N.Y. July 29, 2014)).
There is no freestanding
requirement, however, that an insurer expressly agree to add, or
be given notice of the addition of, a specific entity as an
additional insured absent contractual language imposing such a
requirement or requirements.
Cf. AB Green Gansevoort, 961
N.Y.S.2d at 4-5 (noting that plain language of additional
insured endorsement determines its scope).
Allied’s memorandum of law points out that Mt. Hawley at one point
asserted that Lighton was not an additional insured “on the basis that it did
not provide a copy of a contract or agreement requiring to name Lighton as an
additional insured.” (Allied Mem. at 9 n.2 (citing Joint Stip Ex. V, ECF No.
22-30, at MH000065 and Joint Stip. Ex. W, ECF No. 22-31, at MH000093.)
However, nothing in the Additional Insured Endorsement requires that a copy
of an agreement to add a party as an additional insured be provided to Mt.
Hawley as a prerequisite for additional insured status. Instead, the
Additional Insured Endorsement requires only that the agreement exist and be
in force.
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58
The Mt. Hawley CGL Policy further clarifies the extent
of coverage for an additional insured as follows:
Such person or organization is an additional
insured only with respect to “bodily injury,”
“property damage” or “personal and advertising
injury caused, in whole or in part, by:
1. [Hibuild’s] acts or omissions; or
2. The acts or omissions of those acting on
[Hibuild’s] behalf;
in the performance of [Hibuild’s] ongoing
operations for the additional insured.
(Mt. Hawley CGL Policy at MH002311.)
The Mt. Hawley Excess Policy provides that “[t]he word
‘insured’ means any person or organization qualifying as an
insured person under the terms of the underlying insurance,”
i.e. the Mt. Hawley CGL Policy.
(Mt. Hawley Excess Policy,
Joint Stip. Ex. Q, ECF No. 22-25, at MH000300; see also Mt.
Hawley Excess Policy at MH000299 (identifying underlying
insurance).)
It further provides that, in relevant part,
“[s]ubject to the other provisions of this policy, [Mt. Hawley]
will pay on behalf of the insured the insured’s ultimate net
loss if such loss results from an occurrence insured by the
underlying insurance.”
(Mt. Hawley Excess Policy at MH 000300.)
Thus, if a party is an additional insured under the Mt. Hawley
CGL Policy, it will also have insurance under the Mt. Hawley
Excess Policy.
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Here, Mt. Hawley concedes that “[i]t is undisputed
that the December 21, 2012 Lighton-Hibuild ‘Standard Form of
Agreement Between Contractor and Subcontractor’ requires Hibuild
to procure, inter alia, liability coverage with limits of at
least $2 million and to make Lighton an additional insured on
Hibuild’s commercial liability insurance policy.”
(Mt. Hawley
Local Rule 56.1 Counter Statement to Lighton, ECF No. 28, ¶ 5(a)
(citation omitted); see also Subcontracting Agreement, Joint
Stip. Ex. H, ECF No. 22-8 § 13.1 (requiring, in relevant part,
that Hibuild obtain insurance that names Lighton as an
additional insured).)
Accordingly, Lighton is an additional insured under
the Mt. Hawley CGL Policy and the Mt. Hawley Excess Policy by
operation of the Additional Insured Endorsement, and Mt. Hawley
owes Lighton a duty to defend the Tunkara Action.
See Muss
Development, 2015 WL 6160240, at *5-7 (finding in favor of party
claiming additional insured status under substantially similar
contractual provision where contractual requirements for
additional insured status were satisfied).
Consequently, as to
Lighton’s claim for a declaration that Mt. Hawley owes it a duty
of defense in the Tunkara Action, Lighton’s motion for summary
judgment is granted, and Mt. Hawley’s motion for summary
judgment is denied.
60
III. Allied’s Duty to Defend
Allied’s argument that it has no duty to defend or
indemnify any party rests entirely on its contention that
coverage under the Mt. Hawley policies is lacking, and therefore
the Subcontractor Exclusion of the Allied-Lighton policy is
triggered. 17
4-6.)
(Allied Mem. at 7-11; Allied Reply, ECF No. 36, at
Notably, Allied concedes that the Mt. Hawley policies, if
applicable, satisfy the coverage limitations requirements set
forth in the Subcontractor Exclusion.
(Allied Mem. at 9 (“[T]he
[Mt. Hawley] policies had the required limits.” (citing Allied
Rule 56.1 Statement, ECF No. 23-2, ¶¶ 16, 18)).)
Further, Lighton’s assertion that Allied is obligated
to defend it is based on Lighton’s contention that Mt. Hawley is
obligated to defend the Tunkara Action.
(See Lighton Mem. at
23-25; Lighton Reply, ECF No. 49, at 12-13 (asserting that Mt.
Hawley’s denial was wrongful, and Allied is therefore obligated
to defend)).
Thus, summary judgment as to Allied turns on
whether Mt. Hawley has a duty to defend Hibuild.
As set forth above, the court has concluded that Mt.
Hawley owes Hibuild a duty to defend because Mt. Hawley has not
established that the claims asserted in the Tunkara Action fall
Allied has reserved its right to deny coverage should the court
determine that Lighton is not additional insured under the Mt. Hawley CGL and
Excess Policies, (Allied Mem. at 9 n.2), but the court has concluded that
Lighton is an additional insured.
17
61
outside the scope of coverage.
Accordingly, Allied cannot
establish that the claims asserted in the Tunkara Action fall
outside the scope of the Allied Policy, and Allied owes Lighton
a duty to defend the Tunkara Action.
Therefore, as to Lighton’s
claim for a declaration that Allied owes it a duty of defense in
the Tunkara Action, Lighton’s motion for summary judgment is
granted, and Allied’s motion for summary judgment is denied.
V.
Indemnification
As noted above, Hibuild does not seek summary judgment
regarding Mt. Hawley’s duty to indemnify, and concedes that the
issue is not ripe for adjudication.
(Hibuild Mem. at 1 n.1.)
All other parties in these consolidated actions (i.e., Lighton,
Allied, and Mt. Hawley), however, have moved for summary
judgment as to indemnification.
No party, however, has
established that it is entitled to summary judgment on the issue
of indemnification.
As the parties made clear on the record when the court
held oral argument on the instant motions, the Tunkara Action
has not yet resulted in a determination that either plaintiff
here is liable to Tunkara.
At this time, there is no liability
for which defendants could indemnify plaintiffs Lighton or
Hibuild.
Additionally, the record is unclear as to the story of
James Hall on which Tunkara was working at the time of his
alleged injuries, and as to the existence and nature of any
62
other exterior work that may be connected to Tunkara’s alleged
accident.
This lack of clarity resulted, in part, in the
court’s finding that defendants must defend plaintiffs as set
forth herein.
This lack of clarity also prevents any party from
establishing that a duty to indemnify does or does not exist.
Accordingly, no party has established that undisputed material
facts entitle it to judgment as a matter of law on the issue of
indemnification, and the motions for summary judgment by
Lighton, Allied, and Mt. Hawley as to indemnification must be
denied.
Further, the Second Circuit has concluded that
“[w]here . . . ‘another suit is pending in a state court
presenting the same issues, not governed by federal law, between
the same parties,’ it is entirely appropriate for a district
court to dismiss a declaratory judgment action.”
Westport Ins.
Corp. v. Hamilton Wharton Grp. Inc., 483 F. App’x 599, 604 (2d
Cir. 2012) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 282
(1995)).
For dismissal of the federal declaratory judgment
action to be appropriate in the foregoing circumstances, there
need not be a complete identity of issues between the federal
action and the underlying state action, and it is enough that
there be “numerous unresolved issues in common.”
See id.
(“[T]he declaratory judgment action and the State Actions have
numerous unresolved issues in common. . . .
63
As a result, the
district court did not abuse its discretion in dismissing as
premature the indemnification portion of [the federal]
declaratory judgment action.”)
Here, the issues presented by Lighton and Hibuild’s
indemnification claims largely overlap with the issues presented
in the Tunkara Action.
At a minimum, the Tunkara Action will
resolve the issue of plaintiffs’ liability to Tunkara.
It may
also resolve the issue of the precise story of James Hall on
which Tunkara was located all times relevant to his alleged
accident, and whether any other “work” was a “but for” cause of
Tunkara’s alleged accident, or whether that work took place
“above two stories.”
Because the pending Tunkara Action may resolve the
foregoing issues, and in resolving the issues may find that
neither Lighton nor Hibuild is liable to Tunkara, the court
dismisses without prejudice and as premature the indemnification
portions of these consolidated declaratory judgment actions.
See Westport Insurance, 483 F. App’x at 604 (concluding that
district court did not abuse discretion in dismissing federal
declaratory judgment action with “numerous unresolved issues in
common” with underlying state action); U.S. Underwriters Ins.
Co. v. Kum Gang, Inc., 443 F. Supp. 2d 348, 354-55 (E.D.N.Y.
2006) (declining to exercise jurisdiction over indemnification
claim where “a determination of the insurers’ respective
64
liability exposure” would be “theoretical” and “might be made
moot by a finding of non-liability in the state court action”);
Fed. Ins. Co. v. Garner, No. 15-CV-184(DAB), 2016 WL 3554929, at
*7 (S.D.N.Y. June 20, 2016) (“The declaratory judgment action
regarding the duty to indemnify . . . has many unresolved issues
in common with the Underlying Actions . . . .
Accordingly, the
Court dismisses the indemnification portion of the declaratory
judgment action as premature.” (citations omitted)).
Conclusion
For the reasons set forth above, the court orders as
follows:
(1)
Lighton’s motion for leave to file an amended Local
Rule 56.1 statement is GRANTED;
(2)
Allied’s objection to Lighton’s amended Local Rule
56.1 statement is OVERRULED, and Mt. Hawley’s motion
to strike the amended Local Rule 56.1 statement is
DENIED;
(3)
Hibuild’s motion for partial summary judgment is
GRANTED in its entirety, as it seeks summary
judgment only on the issue of Mt. Hawley’s duty to
defend it in the Tunkara Action;
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(4)
Lighton’s motion for summary judgment on the issue
of Mt. Hawley and Allied’s respective duties to
defend it in the Tunkara Action is GRANTED, and
Lighton’s motion for summary judgment on the issue
of indemnification is DENIED;
(5)
Allied’s motion for summary judgment is DENIED in
its entirety;
(6)
Mt. Hawley’s motion for summary judgment is DENIED
in its entirety; and
(7)
Hibuild’s indemnification claim against Mt. Hawley
and Lighton’s indemnification claims against Allied
and Mt. Hawley are DISMISSED without prejudice as
premature.
The dismissal of the indemnification claims by Hibuild
and Lighton is without prejudice to plaintiffs’ ability commence
a new action seeking indemnification at the appropriate time.
The Clerk of Court is respectfully directed to enter judgment in
favor of Hibuild that Mt. Hawley is obligated to defend it, and
in favor of Lighton that Mt. Hawley and Allied are obligated to
defend it, in each case in the underlying State Court action,
i.e., the Tunkara Action, and in any other proceeding seeking to
impose liability on Lighton and/or Hibuild as a result of
Tunkara’s alleged fall from a ladder on August 16, 2014.
The
Clerk of Court’s judgment shall further dismiss Hibuild and
66
Lighton’s indemnification claims without prejudice and,
following entry of judgment, the Clerk of Court is respectfully
directed to close these consolidated cases.
SO ORDERED.
Dated: Brooklyn, New York
September 28, 2018
________
/s/
____________
KIYO A. MATSUMOTO
United States District Judge
Eastern District of New York
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