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U.S. UNDERWRITERS INSURANCE COMPANY v. FALCON CONSTRUCTION

August 27, 2003

UNITED STATES UNDERWRITERS INSURANCE COMPANY, PLAINTIFF(S), -AGAINST- FALCON CONSTRUCTION CORP., ET AL., DEFENDANT(S)


The opinion of the court was delivered by: Laura Taylor Swain, District Judge

MEMORANDUM OPINION AND ORDER

This action arises out of a state court dispute among the Defendants. Ana Flores brought an action in the Supreme Court, Bronx County against the New York City Housing Authority ("NYCHA") for personal injuries caused by a fall in the vestibule of a NYCHA apartment building that had been renovated by Falcon Construction Corporation ("Falcon"). NYCHA then filed a third-party complaint against Falcon. Plaintiff U.S. Underwriters Insurance Company ("U.S. Underwriters"), the liability insurer for Falcon and NYCHA in connection with the renovation in question, then commenced this action, seeking a declaration that it has no duty to defend or indemnify NYCHA or Falcon with respect to the Flores state court action. U.S. Underwriters now moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.*fn1

The Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1332 and 2201. For the following reasons, Plaintiff's motion is denied.

BACKGROUND

The following material facts are undisputed unless characterized otherwise. [ Page 2]

Defendant Falcon contracted with NYCHA to provide, inter alia, new entrances with electromagnetic locks and the removal and replacement of flooring material at a housing development known as the Patterson Houses in the Bronx, New York. (Rai Aff. ¶ 4.) In connection with the contract, Falcon and NYCHA obtained general commercial liability insurance and owners and contractors protection insurance; Plaintiff issued both policies. (Id. ¶ 6.) The general liability insurance policy, identified as CL 3033659 (the "GCL policy"), named NYCHA as an additional insured; NYCHA was the named insured on the owners and contractors policy identified as CL 3036360 (the "OCP policy"). (Myrtetus Aff. ¶ 3; Hazard Aff. ¶ 3.) The GCL policy provided that

Any person(s) or organization(s) (hereinafter called `Additional Insured') with whom you agree in a written construction contract to name as an insured is an insured with respect to liability arising out of your ongoing operations for the Additional Insured on the project specified in the construction contract, including acts or omissions of the Additional Insured in connection with the general supervision of `your work.'
(GCL Policy, Ex. C to Verveniotis Decl., no pagination.) The GCL policy also contained various exclusions; those at issue are listed in relevant part below:

Contractual Liability

Bodily injury or `property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages . . . [t]hat the insured would have in the absence of the contract or agreement; or Assumed [(sic)] in a contract or agreement that is an `insured contract'. . . .
Independent Contractors Exclusion
It is agreed that this policy shall not apply to `Bodily Injury,' `Personal Injury' or `Property Damage' arising out of operations performed for any insured in connection with his general supervision of such operations.
(Myrtetus Aff. ¶¶ 16, 23 and evidence cited therein.) The GCL policy further provided that coverage under the policy is limited to the classification codes listed in the policy; those codes are "Carpentry-Interior" and "Plumbing Residential." See GCL Policy. No definitions of those codes have been provided. [ Page 3]

Both the GCL and the OCP policies contain, with immaterial variations, the following "Duties in The Event of Occurrence, Claim, or Suit" provision:

a. You must see to it that we are notified as soon as practicable of an `occurrence' which may result in a claim. To the extent possible, notice should include
(1) How, when and where the "occurrence" took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) The nature and location of any injury or damage arising out of the `occurrence[.]'
b. If a claim is made or `suit' is brought against any insured, you must
(1) Immediately record the specifics of the claim or "suit" and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or "suit" as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or `suit[.]'
See GCL Policy Coverage Form § IV.2, Ex. A to Myrtetus Aff., at 8-9; OCP Policy Coverage Form § IV.4, Ex. C to Verveniotis Suppl. Decl., at 5 (of numbered coverage section).

Both the GCL and the OCP policies provide that Plaintiff has the duty to defend the insured against any suit seeking damages covered by the policy. See GCL Coverage Form § I.1, Ex. A to Myrtetus Aff., at 1; OCP Policy Coverage Form § I.1, Ex. C to Verveniotis Suppl. Decl., at 1 (of numbered coverage section).

On February 9, 2000, defendant Ana Flores filed a notice of claim with NYCHA, alleging that she had tripped and fallen in the vestibule of 314 East 143rd Street in the Bronx, part of the Patterson Houses, on January 9, 2000. See Notice of Claim, Ex. A to Statement of Undisputed Facts and Exhibits ("Stat. Undisp. Facts"). On or about April 13, 2000, Flores filed suit against NYCHA in state court in connection with the January 9th incident. See Summons and Compl., Ex. A to Mitchell Decl. [ Page 4]

On February 11, 2000, NYCHA retained the firm of Robert J. Trobe, C.P.P., to investigate Ms. Flores' fall. (Trobe Aff., attached to Mitchell Decl., ¶ 2.) The firm issued a report in April 2000 indicating that none of the NYCHA employees interviewed at the site of the accident could identify the contractor that had worked on the vestibule. (Id. ¶¶ 3, 8.) By May 2000, the Trobe firm had determined which contract covered repair of the site, and requested a copy of the files and insurance policies for the contract. (Id. ¶¶ 5-6.) The contract had been closed, and a search of the Long Island Record Retention Facility was necessary to find the relevant file. (Id. ¶ 8; Beinerman Aff., attached to Mitchell Decl., ¶ 4.) Trobe received information identifying Falcon as the relevant contractor on or about January 16, 2001. The files on the contract did not reference the U.S. Underwriter policies at issue, but instead policies issued by a different carrier. (Trobe Aff. ¶ 7.) Trobe informed NYCHA that Falcon was the relevant contractor by February 5, 2001. (Id.)

By letter dated February 26, 2001, counsel for NYCHA in the Flores action provided Falcon with a copy of Flores' Notice of Claim and Summons and Complaint, and requested that Falcon forward those documents to its insurance carrier so that the carrier could assume NYCHA's defense. (Mitchell Decl. ¶ 8 and evidence cited therein.) On or about February 27, 2001, NYCHA filed a third-party complaint against Falcon in the Flores action. See Ex. B to Verveniotis Decl.

Falcon forwarded NYCHA's February 26th letter and the Flores Notice of Claim and Summons and Complaint to a U.S. Underwriters broker, who in turn faxed the documents to Plaintiff on March 9, 2001. (Rai Aff. ΒΆ 10 and evidence cited therein.) The subject heading of the cover page of the fax from the agent to Plaintiff ...


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