James River Insurance Company et al v. Indian Harbor Insurance Comapny

Filing 37

OPINION AND ORDER: For the foregoing reasons, Plaintiffs' motion for summary judgment is DENIED. Defendant's motion for summary judgment is GRANTED in part and DENIED in part. Defendant's motion for oral argument is DENIED as moot. The Clerk of Court is directed to close the motion at Docket Numbers 27, 28, and 34. SO ORDERED. (Signed by Judge J. Paul Oetken on 10/31/2019) (jca)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JAMES RIVER INSURANCE
COMPANY and CERTIFIED SAFETY,
INC.,
Plaintiffs,

18-CV-767 (JPO)
OPINION AND ORDER

-vINDIAN HARBOR INSURANCE
COMPANY,
Defendant.

J. PAUL OETKEN, District Judge:
This is an insurance dispute arising out of a fire at a Texas oil refinery that resulted in
four personal injury lawsuits. In this suit, Plaintiffs James River Insurance Company (an insurer)
and Certified Safety, Inc. (the insured) assert that Defendant Indian Harbor Insurance Company
(another insurer) improperly denied insurance coverage for the fire and the resulting lawsuits.
The parties have filed cross-motions for summary judgment. For the reasons that follow,
summary judgment is granted in part and denied in part.
I.

Background
The following facts are taken from the parties’ statements of undisputed material facts.

(See Dkt. No. 27-29; Dkt. No. 30-37 (“SOF”).)
On January 11, 2016, a fire at a Texas petroleum refinery operated by Marathon
Petroleum resulted in injuries, spawning four personal injury lawsuits (the Texas lawsuits).
(SOF ¶¶ 15–16.) At the time, Marathon had retained Plaintiff Certified Safety, Inc., a labor
staffing company that provides safety attendant workers at its customers’ facilities. (SOF ¶¶ 1,
23.) Certified had been hired to perform “hole watch, fire watch, safety, project support, and
general labor services” at the refinery. (SOF ¶ 24.)

1

At the time of the accident, Certified had insurance policies with two different insurers:
Plaintiff James River Insurance Company and Defendant Indian Harbor Insurance Company.
(SOF ¶¶ 2, 9, 12.) Certified’s insurance policy with Indian Harbor contained, as relevant here,
two coverage provisions. The first, Coverage A, provides that Indian Harbor “will pay on behalf
of [Certified] for PROFESSIONAL LOSS which [Certified] becomes legally obligated to pay
because of a CLAIM resulting from an act, error, or omission in PROFESSIONAL SERVICES.”
(SOF ¶ 4.) The term “professional services” is defined to mean “[a]ll professional services
rendered in the performance of consulting, training, safety services, and all related services.”
(SOF ¶ 6.)
The second coverage provision, Coverage B, provides that Indian Harbor “will pay on
behalf of [Certified] for POLLUTION LOSS which [Certified] becomes legally obligated to pay
as a result of a POLLUTION CONDITION at a JOB SITE, provided that . . . the POLLUTION
CONDITION results from CONTRACTING SERVICES.” (SOF ¶ 5.) The term “pollution
condition” is defined to include “the discharge, dispersal, release, seepage, migration or escape
of POLLUTANTS into or upon land, or structures thereupon.” (SOF ¶ 6.) The term
“contracting services” is defined to mean “[a]ll contracting services rendered in the performance
of industrial construction, turnaround and maintenance services.” (Id.)
On April 5, 2016, Certified notified its insurance agent, Assurance Agency, of one of the
Texas lawsuits and instructed Assurance to “convey the . . . lawsuit to [Certified’s] GL [general
liability] and umbrella carrier ASAP.” (SOF ¶ 33.) Assurance immediately forwarded notice of
the lawsuit to James River, which accepted the defense of Certified in connection with the Texas
lawsuits on April 8, 2016. (SOF ¶ 34.) Assurance did not, however, immediately notify Indian
Harbor of the litigation. (SOF ¶ 65.) Assurance eventually relayed notice of the lawsuits to

2

Indian Harbor on May 18, 2017. (Id.) Indian Harbor denied coverage on June 14, 2017. (SOF
¶ 66.)
Plaintiffs Certified and James River have filed suit against Indian Harbor. (Dkt. No. 1
(“Compl.”).) Plaintiffs seek a declaratory judgment that Indian Harbor is required, under
Certified’s insurance policy, to defend and indemnify Certified for the Texas lawsuits. (Compl.
¶¶ 25–34.) Plaintiffs also allege breach of contract. (Compl. ¶¶ 35–39.) James River separately
seeks recovery of costs incurred in its defense of Certified in the Texas lawsuits. (Compl. ¶¶ 40–
46.) The parties have filed cross-motions for summary judgment. 1
II.

Legal Standard
Under Federal Rule of Civil Procedure 56(a), a court shall grant a motion for 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). A fact is material if it
“might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). And an issue is genuine “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Id.
III.

Discussion
When there are cross-motions for summary judgment, “each party’s motion must be

examined on its own merits, and in each case all reasonable inferences must be drawn against the
party whose motion is under consideration.” Morales v. Quintel Entm’t, Inc., 249 F.3d 115, 121
(2d Cir. 2001). For the reasons that follow, Plaintiffs’ motion for summary judgment is denied

1

Indian Harbor has also moved for oral argument on the cross-motions for summary
judgment. (Dkt. No. 34.) Because the Court disposes of both motions in this Opinion and Order,
the motion for oral argument is denied as moot.

3

in its entirety, whereas Defendant Indian Harbor’s motion for summary judgment is granted in
part and denied in part. 2
A.

Notice

An initial issue is whether Certified’s notice to Indian Harbor was timely under New
York law. 3 “Timely notice is a condition precedent to insurance coverage under New York law,
and the failure to provide such notice relieves the insurer of its coverage obligation, regardless of
prejudice.” Minasian v. IDS Prop. Cas. Ins. Co., 676 F. App’x 29, 31 (2d Cir. 2017) (summary
order) (citations omitted). In this case, neither Certified nor its insurance broker, Assurance,
provided notice of the refinery fire or the Texas lawsuits to Indian Harbor until May 18, 2017
(SOF ¶ 65) — which, as Plaintiffs acknowledge, “would be ‘late’” (Dkt. No. 27-30 at 14). In
response, however, Plaintiffs argue that Certified provided notice to Assurance on April 5, 2016,
and that such notice constituted timely notice to Indian Harbor because Assurance was acting as
Indian Harbor’s agent. See, e.g., Cambridge Realty Co. v. St. Paul Fire & Marine Ins. Co., No.
8-CV-7745, 2010 WL 2399558, at *5 (S.D.N.Y. June 14, 2010) (“‘Notice to the broker will
constitute . . . notice [to the insurer carrier] if it is established that the broker was acting as the

2

This Court has subject matter jurisdiction under 28 U.S.C. § 1332(a)(1). The amount in
controversy exceeds $75,000; and Plaintiffs are citizens of Ohio, Virginia, and Texas, while
Defendant is a citizen of Delaware and Connecticut. (Compl. ¶¶ 5, 8, 11, 12.)
3

Plaintiffs argue that Texas law, and not New York law, governs the issue of timely
notice. The insurance policy’s choice-of-law clause, however, provides that “[a]ll matters
arising hereunder including questions or disputes related to the validity, interpretation,
performance and enforcement of this Policy will be determined in accordance with the law and
practice of the State of New York (notwithstanding New York’s conflicts of law rules).” (Dkt.
No. 27-2 at 27.) Plaintiffs’ claims sound in contract; thus, the choice-of-law clause governs the
issues of notice and agency. See Klock v. Lehman Bros. Kuhn Loeb Inc., 584 F. Supp. 210, 215
(S.D.N.Y. 1984) (“[I]t has been held in New York that a contractual choice of law provision
governs . . . a cause of action sounding in contract.”); cf. Fin. One Pub. Co. v. Lehman Bros.
Special Fin., Inc., 414 F.3d 325, 335 (2d Cir. 2005) (noting that New York courts are
“reluctan[t] . . . to construe contractual choice-of-law clauses broadly to encompass extracontractual causes of action”).

4

carrier’s agent’ under actual or apparent authority.” (quoting Bennion v. Allstate Ins. Co., 727
N.Y.S.2d 222, 224 (N.Y. App. Div. 4th Dep’t 2001))).
The issue, then, is whether Assurance was acting as Indian Harbor’s agent — an issue
that turns on the existence of “words or conduct of the principal [indicating] that the principal
has consented to the agent’s performance of a particular act.” Minskoff v. Am. Exp. Travel
Related Servs. Co., 98 F.3d 703, 708 (2d Cir. 1996). Relevant indicia of agency include the
authority to renew the policies of insured parties on behalf of the insurer, to accept premiums on
behalf of the insurer, and to accept loss notices on behalf of the insurer. See Green Door Realty
Corp. v. TIG Ins. Co., 329 F.3d 282, 289–90 (2d Cir. 2003). The existence of such authority is
“normally a question of fact” that is “inappropriate for resolution on a motion for summary
judgment.” Id. (quoting Minskoff, 98 F.3d at 708).
This case is no exception. The parties dispute, for example, whether Assurance prepared
claim notice documents on behalf of Indian Harbor and whether Indian Harbor accepted notice
of claims received by Assurance in other cases. (See Dkt. No. 29 at 12–14; Dkt. No. 31 at 9–10.)
Given the conflicting evidence of an agency relationship, summary judgment for either side on
the issue of notice is unwarranted.
B.

Coverage

Next is the issue of coverage. Under New York law, 4 Plaintiffs face an “initial burden”
to establish coverage under the insurance policy with Indian Harbor. Consol. Edison Co. of N.Y.
v. Allstate Ins. Co., 774 N.E.2d 687, 690 (N.Y. 2002). “[A]n insurance contract is interpreted to
give effect to the intent of the parties as expressed in the clear language of the contract.” Parks

4

Neither party disputes that New York law governs the interpretation of the insurance
policy. (Dkt. No. 28-1 at 18–19; Dkt. No. 29 at 21–22.)

5

Real Estate Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir. 2006)
(quoting Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir. 2000)).
“When the provisions are unambiguous and understandable, courts are to enforce them as
written.” Id.
The Indian Harbor policy provides, as applicable here, coverage for professional services
liability (Coverage A) and contractor’s pollution liability (Coverage B). (SOF ¶ 3.) Factual
uncertainty about the precise nature of the services provided by Certified bars summary
judgment for either side on the applicability of Coverage A. But the undisputed facts indicate
that Coverage B lacks application to Certified’s claims. Thus, summary judgment on the
applicability of Coverage B is granted to Indian Harbor.
1.

Professional liability

Coverage A of the Indian Harbor policy provides coverage for “a CLAIM resulting from
an act, error or omission in PROFESSIONAL SERVICES” (SOF ¶ 4), where “professional
services” is defined as “[a]ll professional services rendered in the performance of consulting,
training, safety services, and all related services” (SOF ¶ 6). Under the contract, then, insurance
coverage exists only if the services provided by Certified were “professional” in nature. 5

5

Plaintiffs read the policy differently. They argue that the policy bifurcates the definition
of “professional services” to encompass either (1) “[a]ll professional services rendered in the
performance of consulting, training, safety services” or (2) “all related services.” (Dkt. No. 32 at
8.) Thus, Plaintiffs argue, “professional services” include all services that bear some relationship
to “consulting, training and safety services,” irrespective of whether they are professional in
nature. (Id.)
This badly misreads the policy. First, “all related services” is a generic term that is best
read to attach to the list “consulting, training, [and] safety services,” which means that any
covered “related” service must still be “professional” in nature. Second, even if — as Plaintiffs
insist — “all related services” were a free-floating term, any covered service would still have to
be “related” to a “professional service[] rendered in performance of consulting, training, [or]
safety service[],” which means that a “related service” must still be “professional” in nature.

6

The insurance policy does not define the term “professional.” “In the absence of
guidance from the policy language, courts ask whether a body of law or an established custom or
usage provides a definition.” Beazley Ins. Co. v. ACE Am. Ins. Co., 880 F.3d 64, 69 (2d Cir.
2018). And, indeed, “professional” carries a well-established meaning under New York law:
“[T]he question of whether one is engaged in a professional service depends on whether those
individuals ‘acted with the special acumen and training of professionals when they engaged in
the acts . . . .” Id. (alterations in original) (quoting David Lerner Assocs., Inc. v. Phila. Indem.
Ins. Co., 934 F. Supp. 2d 533, 541 (E.D.N.Y. 2013)). A “professional” service demands
something beyond “normal powers of supervision and observation.” Reliance Ins. Co. v. Nat’l
Union Fire Ins. Co., 691 N.Y.S.2d 458, 460 (N.Y. App. Div. 1st Dep’t). To make this
determination, a reviewing court examines “the nature of the conduct under scrutiny rather than
the title or position of those involved.” Reliance, 691 N.Y.S.2d at 460 (quoting Camp Dresser &
McKee, Inc. v. Home Ins. Co., 568 N.E.2d 631, 634 (Mass. App. Ct. 1991)).
Here, factual uncertainty about the precise nature of the services rendered by Certified
and its employees bars summary judgment for either side. It is undisputed that Certified’s safety
attendant employees were providing “hole watch” and “fire watch” services at the refinery.
(Dkt. No. 29-1 at ¶ 71.) But the scope of their responsibilities is in dispute. Indian Harbor avers
that the employees were merely “tasked with monitoring the ingress and egress of personnel . . .
and to watch for sparks.” (Dkt. No. 29-1 at ¶ 73.) Plaintiffs, on the other hand, submit that the
employees were specially trained to use fire suppression equipment (id.) and to spot “potential

Plaintiffs argue that this definition does no work by “effectively equat[ing] ‘professional
services’ with ‘professional services.’” (Dkt. No. 32 at 9.) Not so. The policy limits the
definition of “professional services” to only those professional services “rendered in the
performance of” consulting services, training services, safety services, or all related services.
Thus, the presumption against superfluity has no application.

7

fire hazards” (Dkt. No. 29-1 at ¶ 1). Further, while it is undisputed that Certified’s employees
are required to complete a “two-day training course that consists of administrative training,
safety attendant training, and hands-on and agility training” (Dkt. No. 29-1 at ¶ 80), the record
provides no further detail about the nature of that training.
On this murky factual record, a reasonable jury might conclude that Certified’s
employees were acting “with the special acumen and training of professionals.” Beazley, 880
F.3d at 69. But a reasonable jury could also conclude that that the employees were merely
employing “normal powers of supervision and observation.” Reliance, 691 N.Y.S.2d at 460.
Thus, neither side has met its burden of establishing an entitlement to judgment as a matter of
law. Summary judgment for both sides on this issue is denied. 6
2.

Pollution liability

Coverage B of the Indian Harbor policy provides that Indian Harbor “will pay on behalf
of [Certified] for POLLUTION LOSS which [Certified] becomes legally obligated to pay as a
result of a POLLUTION CONDITION at a JOB SITE, provided that . . . the POLUTION
CONDITION results from CONTRACTING SERVICES.” (SOF ¶ 5.) The term “pollution
condition” is defined to mean “the discharge, dispersal, release, seepage, migration or escape of
POLLUTANTS into or upon land, or structures thereupon.” (SOF ¶ 6.) The term “contracting
services” is defined to mean “[a]ll contracting services rendered in the performance of industrial
construction, turnaround and maintenance services.” (Id.)

6

Plaintiffs separately argue that Indian Harbor waived it ability to deny coverage under
Coverage A because it never notified Certified of the grounds for denial. (Dkt. No. 29 at 18–19.)
This argument finds no support in the factual record. Indian Harbor’s initial denial of coverage
asserted that, “to the extent that any damages are awarded that do not arise from
PROFESSIONAL LOSS and PROFESSIONAL SERVICES as defined above, coverage is not
afforded.” (Dkt. No. 27-18 at 4.) That statement provided sufficient notice of Indian Harbor’s
intent to disclaim coverage.

8

For Plaintiffs to prevail, then, they must show that the “pollution condition” — that is, the
refinery fire and the resulting smoke, soot, and vapor 7 — was somehow caused by Certified’s
“contracting services.” They have not made this showing. Plaintiffs assert only that Certified’s
use of an inadequate fire alarm was a “substantial contributing factor to exposing the injured to
the spread of the smoke, soot and vapors from the fire.” (Dkt. No. 29 at 24 (internal quotation
marks omitted); accord Dkt. No. 32 at 12.) But the plain language of the insurance policy
requires that Certified’s services cause the “pollution condition” itself. And Plaintiffs make no
showing that Certified played a role in causing the initial fire or the resultant spread of smoke,
soot, and vapor. (See Dkt. No. 29 at 24; Dkt. No. 32 at 12.)
On the undisputed facts, then, Indian Harbor is entitled to judgment as a matter of law
that Coverage B does not apply to Certified’s claims. Summary judgment on this issue is
granted to Indian Harbor. 8
IV.

Conclusion
For the foregoing reasons, Plaintiffs’ motion for summary judgment is DENIED.

Defendant’s motion for summary judgment is GRANTED in part and DENIED in part.
Defendant’s motion for oral argument is DENIED as moot.

7

Because summary judgment is granted to Indian Harbor on the issue of causation, the
Court need not reach whether the refinery fire involved losses resulting from a “pollution
condition.” (See Dkt. No. 28-1 at 28–30; Dkt. No. 29 at 23–25; Dkt. No. 31 at 11–13.)
8

Because Plaintiffs’ motion for summary judgment is denied on the issue of coverage,
Plaintiffs are also denied summary judgment on the issue of James River’s entitlement to
reimbursement from Indian Harbor. (Dkt. No. 27-30 at 25–29.)

9

The Clerk of Court is directed to close the motion at Docket Numbers 27, 28, and 34.
SO ORDERED.
Dated: October 31, 2019
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

10