Philadelphia Indemnity Insurance Company v. Central Terminal Restoration Corporation et al

Filing 47

DECISION AND ORDER granting 32 Motion for Summary Judgment; granting 33 Motion for Summary Judgment; granting 34 Motion for Summary Judgment; denying 35 Motion for Summary Judgment. The clerk of the court is instructed to enter judgment in favor of defendants and to close case. Signed by Honorable Michael A. Telesca. (JMC)-CLERK TO FOLLOW UP-

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
________________________________________
PHILADELPHIA INDEMNITY INSURANCE
COMPANY,
Plaintiff,

16-cv-280 T
DECISION
AND ORDER

v.
CENTRAL TERMINAL RESTORATION
CORPORATION, WILLIAM SHEEHAN, MARCY
A. SHEEHAN, and MICHAEL A. SERRANO,
Defendants.
________________________________________
INTRODUCTION
Plaintiff

Philadelphia

Indemnity

Insurance

Company

(“plaintiff” or “PIIC”) seeks a declaratory judgment regarding its
duty to defend and indemnify defendant Central Terminal Restoration
Corporation (“CTRC”) in lawsuits commenced by defendants William
and Marcy A. Sheehan (“the Sheehans”) and Michael A. Serrano
(“Mr. Serrano”).

Specifically, PIIC asks the Court to determine

that its obligation to defend and indemnify CTRC exists only under
a liquor liability coverage in CTRC’s primary insurance policy, and
not under the commercial general liability coverage part of the
primary policy or under an excess policy.
Currently pending before the Court are four motions for
summary judgment, all of which were filed on November 16, 2016:
Mr. Serrano’s motion for summary judgment (Docket No. 32); the
Sheehans’ motion for summary judgment (Docket No. 33); CTRC’s
motion for summary judgment (Docket No. 34); and plaintiff’s motion
for summary judgment (Docket No. 35).

For the reasons set forth

below, the three motions for summary judgment filed by defendants

are granted and plaintiff’s motion for summary judgment is denied.
Judgment shall be entered in favor of defendants and the case is
closed.
BACKGROUND
The following facts are taken from the respective statements
of fact, affidavits, and exhibits submitted by plaintiff and
defendants.
CTRC is a not-for-profit corporation formed for the purpose of
stabilizing and finding a reuse for the Central Terminal Railway
Station located in Buffalo, New York.

CTRC held a Dyngus Day fund-

raising event on April 1, 2013, at which alcohol was served and for
which it obtained a temporary liquor license. The Dyngus Day fundraising event ultimately resulted in the filing of two lawsuits
against CTRC, one by Mr. Serrano (the “Serrano Lawsuit”) and one by
the Sheehans (the “Sheehan Lawsuit”). Both the Serrano Lawsuit and
the

Sheehan

Lawsuit

allege

that

Thomas

A.

Gilray,

Jr.

(“Mr. Gilray”) was served alcohol at the Dyngus Day fund-raising
event despite being visibly intoxicated or impaired by alcohol and
that Mr. Gilray subsequently injured Mr. Serrano and Mr. Sheehan
while operating an automobile.
PIIC issued policy number PHPK99321 (the “Primary Policy”) to
CTRC for the policy period March 20, 2013 to March 20, 2015.

The

Primary Policy contains a commercial general liability (“CGL”)
coverage part with a $2,000,000 limit for each occurrence and an
aggregate limit of $4,000,000.

The Primary Policy includes both a

fund-raising events endorsement, and a liquor liability coverage
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part with a $1,000,000 “common cause” limit and a $1,000,000
aggregate limit.

PIIC also issued policy number PHUB415091 (the

“Excess Policy”) to CTRC for the policy period March 20, 2013 to
March 20, 2014.

The Excess Policy has a limit of $1,000,000 for

each occurrence and a $1,000,000 aggregate limit.
Following filing of the Serrano and Sheehan Lawsuits, CTRC
provided timely notice of the claims to PIIC, and PIIC has been
providing CTRC with a defense to both lawsuits since 2013.

On

January 20, 2016, PIIC sent a letter to Michael Appelbaum, the
attorney representing CTRC in connection with the Serrano and
Sheehan Lawsuits, seeking to “explain the position of [PIIC}” with
respect to CTRC’s coverage.

The January 20, 2016 letter states

that PIIC is providing coverage only under the liquor liability
coverage part of the Primary Policy, and not under the CGL coverage
part or under the Excess Policy.

PIIC subsequently commenced the

instant action, seeking a declaration that its obligation to defend
and indemnify CTRC exists only under the liquor liability coverage
part to the Primary Policy.
DISCUSSION
I.

Standard of Review

Pursuant

to

Rule

56(a)

of

the

Federal

Rules

of

Civil

Procedure, the Court will grant summary judgment if the moving
party demonstrates that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of
law. When considering a motion for summary judgment, all genuinely
disputed facts must be resolved in favor of the party against whom
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summary judgment is sought. See Tolan v. Cotton, 134 S.Ct. 1861,
1863 (2014).

If, after considering the evidence in the light most

favorable to the nonmoving party, the court finds that no rational
jury could find in favor of that party, a grant of summary judgment
is appropriate.

See Scott v. Harris, 550 U.S. 372, 380 (2007),

citing Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475
U.S. 574, 586-587 (1986).
II.

The Competing Motions for Summary Judgment

As noted above, there are four motions for summary judgment
currently pending before the Court.

Plaintiff has moved for

summary judgment, arguing that no coverage exists under either the
CGL coverage part of the Primary Policy or under the Excess Policy
because the Sheehan and Serrano Lawsuits allege intentional acts on
the part of CTRC.

Mr. Serrano, the Sheehans, and CTRC have each

separately moved for summary judgment, arguing that coverage exists
under the plain language of both the CGL coverage part of the
Primary Policy and under the Excess Policy.

Because the arguments

set forth by Mr. Serrano and the Sheehans are virtually identical,
the Court considers them as a whole.
III. The Primary Policy Provides Coverage for Alleged Injuries
Resulting from an Occurrence
Under New York law, which the parties agree governs this case,
“[t]he initial interpretation of a contract is a matter of law for
the courts to decide.”

Int’l Bus. Machines Corp. v. Liberty Mut.

Ins. Co., 363 F.3d 137, 144 (2d Cir. 2004) (quotation omitted).
With respect to insurance contracts, “an insurer’s duty to defend

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claims made against its policyholder is ordinarily ascertained by
comparing the allegations of a complaint with the wording of the
insurance contract.”

Id.

Moreover, “[a]ny ambiguity as to the

insurer’s duty to defend is resolved in favor of the insured.” Id.
In this case, the CGL coverage part of the Primary Policy
provides coverage for “bodily injury” caused by an “occurrence.”
An “occurrence” is defined as including “an accident, including
continuous or repeated exposure to substantially the same general
harmful conditions.”

Docket No. 39-2 at 46.

PIIC argues that it

is entitled to judgment in its favor because the Sheehan and
Serrano Lawsuits involve claims against CTRC for violation of the
Dram Shop Act, New York General Obligations Law § 11-101, and
violation of the Dram Shop Act is not an “occurrence.”

Rather,

plaintiff argues, violation of the Dram Shop Act is intentional
conduct, and therefore cannot be considered an accident.
Plaintiff’s argument was expressly rejected by the Appellate
Division, Second Department, in Markevics v. Liberty Mut. Ins. Co.,
278 A.D.2d 285 (2d Dep’t 2000).

In Markevics, plaintiff sought a

declaration that the defendant insurance company was obligated to
defend and indemnify its insured in connection with a lawsuit
involving the furnishing of alcohol to an individual who later
caused an automobile accident.

As in this case, the insurance

company contended that the policy at issue did not provide coverage
for the lawsuit because the claims therein “[arose] as a result of
[the insured’s] alleged ‘non-accidental’ action of serving alcohol
to the driver of the car in which the plaintiff was injured.”
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Id.

at 289(Santucci, J., dissenting).

The Appellate Division rejected

that argument, holding that it was “beyond question that a claim
was made against [the insured] for damages because of bodily injury
caused by an occurrence.”

Id. at 287.

The Court agrees with the holding in Markevics.

It is well-

established under New York law that “[in] deciding whether a loss
is the result of an accident, it must be determined, from the point
of view of the insured, whether the loss was unexpected, unusual
and unforeseen.”

Allegany Co-op. Ins. Co. v. Kohorst, 254 A.D.2d

744, 744(4th Dep’t 1998). Moreover, “[a]ccidental results can flow
from intentional acts.

The damage in question may be unintended

even though the original act or acts leading to the damage were
intentional.”

Id.

So, for example, the court in Kohorst found

that injuries resulting from the deliberate setting of a fire were
still the result of an “occurrence.”

Id.

Here, no one has argued, and nothing in the record would
support the conclusion, that CTRC intended the alleged injuries to
Mssrs. Sheehan and Serrano.

Instead, they were the result of a

series of unforseen automobile accidents.

Under well-established

New York law, PIIC’s argument that the Sheehan and Serrano Lawsuits
do not involve claims for bodily injuries caused by an occurrence
must fail.
A.

The Fund-raising Endorsement Establishes Coverage

In connection with the Primary Policy, CTRC purchased a
specific

“Fund

Raising

Event

Endorsement”

(the

Endorsement”) that modifies the coverage therein.
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“Fund-raising
In particular,

the Fund-raising Endorsement provides that coverage under the CGL
coverage part of the Primary Policy is modified to include all
“bodily injury” arising out of certain fund-raising events.
Docket No. 39-2 at 73.

See

The Dyngus Day fund-raising event held on

April 1, 2013, is specifically listed as a covered fund-raising
event in the Fund-raising Endorsment.

Id.

Under New York law, when an endorsement uses the phrase
“arising out,” courts interpret this language to mean “originating
from, incident to, or having connection with.”

Regal Const. Corp.

v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34,
38(2010) (quotation omitted); see also Liberty Mut. Fire Ins. Co.
v. E.E. Cruz & Co., 475 F. Supp. 2d 400, 409 (S.D.N.Y. 2007) (“In
the insurance context, courts in New York have deemed the words
‘arising

out

of’

to

be

broad,

general,

comprehensive

terms

ordinarily understood to mean originating from, incident to, or
having connection with the subject of the exclusion.”) (quotation
omitted).

To establish coverage, all that is required is “some

causal relationship between the injury and the risk for which
coverage is provided.”

Id. (quotation omitted).

Here, the Sheehan and Serrano Lawsuits indisputably involve
claims of bodily injury arising out of the Dyngus Day fund-raising
event. The plain language of the Fund-raising Endorsement therefore
establishes coverage for these claims.
B.

The Liquor Liability Exclusion does not Apply

The CGL coverage part of the Primary Policy contains an
exclusion for “any bodily injury resulting from (1) Causing or
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contributing to the intoxication of any person; (2) The furnishing
of alcoholic beverages to a person under the legal drinking age or
under the influence of alcohol; or (3) Any statute, ordinance or
regulation relating to sale, gift, distribution or use of alcoholic
beverages.”

See Docket No. 39-2 at 34.

However, the Primary

Policy

states

liability]

also

applies

only

if

that

you

“[t]his

are

in

[liquor

the

business

of

exclusion

manufacturing,

distributing, selling, serving or furnishing alcoholic beverages.”
Id.
The liquor liability exclusion contained in the Primary Policy
does not apply to CTRC by its own terms, because CTRC is not in the
business

of

manufacturing,

alcoholic beverages.

selling,

serving,

or

furnishing

New York law supports this conclusion.

In

interpreting a similar liquor liability exclusion, the Appellate
Division, Second Department explained that it was “not intended to
apply to casual, nonrecurring situations involving the incidental
consumption of alcohol.”

Staten Island Molesi Soc. Club, Inc. v.

Nautilus Ins. Co., 39 A.D.3d 843, 844 (2d Dep’t 2007); see also
Schenectady

Cty.

(3d Dep’t 1975).

v.

Travelers

Ins.

Co.,

48

A.D.2d

299,

301

Plaintiff concedes this point, stating in its

response to defendants’ motion for summary judgment that “it
appears that defendants are correct, the Liquor Liability exclusion
does not apply to CTRC because it is not in the ‘business’ of
selling alcohol.”

Docket No. 42-4 at 10.

Defendants have also argued in the alternative that the liquor
liability exclusion does not apply because plaintiff failed to
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timely disclaim coverage thereunder.

In light of plaintiff’s

acknowledgment that the liquor liability exclusion does not apply
in this matter, the Court need not reach this issue.
In light of the foregoing discussion, the Court holds that
defendants have demonstrated their entitlement to judgment as a
matter of law that the claims set forth in the Serrano and Sheehan
Lawsuits are covered under the CGL coverage part of the Primary
Policy.

Pursuant

to

the

plain

language

of

the

Fund-raising

Endorsement, claims for bodily injury arising out of the Dyngus Day
fund-raising event are covered by the CGL coverage part of the
Primary Policy.

Plaintiff concedes that the liquor liability

exclusion does not apply to CTRC.

Moreover, plaintiff’s argument

that no coverage exists because a violation of the Dram Shop Act is
an intentional act is foreclosed by well-established New York law.
IV.

There is Coverage under the Excess Policy

Like the CGL coverage part of the Primary Policy, the Excess
Policy

covers

bodily

injuries

resulting

from

an

occurrence.

Plaintiff also contends that no coverage exists under the Excess
Policy

because

“occurrence.”

it

applies

only

where

there

has

been

an

As discussed in detail above, the Court rejects

plaintiff’s argument that a violation of the Dram Shop Act cannot
result in an occurrence, as defined in both the Primary Policy and
the Excess Policy.

As a result, defendants are also entitled to

judgment in their favor with respect to the issue of coverage under
the Excess Policy.

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CONCLUSION
For the reasons set forth above, the Court grants defendants’
motions for summary judgment (Docket Nos. 32, 33, 34) and denies
plaintiff’s motion for summary judgment(Docket No. 35).

The Clerk

of the Court is instructed to enter judgment in favor of defendants
and to close the case.
ALL OF THE ABOVE IS SO ORDERED.
S/ Michael A. Telesca
MICHAEL A. TELESCA
United States District Judge
DATED:

Rochester, New York
May 5, 2017

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