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EMPLOYERS INSURANCE CO. OF WAUSAU v. GENERAL STAR NAT'L INS

July 9, 2004.

EMPLOYERS INSURANCE COMPANY OF WAUSAU, Plaintiff,
v.
GENERAL STAR NATIONAL INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: DENISE COTE, District Judge

OPINION AND ORDER

This insurance coverage dispute arises out of a personal injury lawsuit pending in the New York Supreme Court, Abidin Kandic v. 75 West Ltd., et al., Index Number 112833/02 (the "Underlying Action"). Discovery having been completed in this federal diversity action on February 27, 2004, plaintiff Employers Insurance Company of Wausau ("Wausau") now moves for an order pursuant to Rule 56(a), Fed.R. Civ. P., declaring that (1) defendant General Star National Insurance Company ("General Star") has a duty to defend and indemnify 75 West, Ltd., 75 West Construction Corp. ("75 West Construction"), and Leonard Wilf (collectively, the "75 West Entities") for the Underlying Action; (2) declaring that General Star's coverage of the 75 West Entities is primary and that the insurance coverage provided by Wausau to the 75 West Entities is excess over General Star's coverage; and (3) awarding damages in the amount of $27,727.16 to Wausau for legal fees and costs incurred in its defense of the 75 West Entities in the Underlying Action for the period from August 6, 2002 to March 17, 2004. For the reasons stated below, the motion is granted in part.

  Background

  The following facts are undisputed. In or about June 2002, Abidin Kandic ("Kandic") commenced the Underlying Action against the 75 West Entities in New York State court, alleging that he sustained "bodily injury" as a result of a June 15, 1999 fall down a staircase at 110 Washington Street in New York (the "Job Site"). At the time of the accident, Kandic was employed by R&J Construction Corp. ("R&J"), a subcontractor hired by 75 West Construction to perform carpentry work at the Job Site. According to the terms of the subcontract agreement pursuant to which R&J was performing work at the Job Site ("the Subcontract"), R&J agreed to provide workers' compensation, employers' liability, and comprehensive general liability insurance, and to name the "Owner/Contractor" as an additional insured. The "Owner/Contractor" is a defined term in the Subcontract and refers to 75 West Construction.*fn1 The Subcontract provided, in relevant part:
Prior to the start of the Subcontractor's Work, the Subcontractor shall procure for the Subcontractor's Work and maintain in force Worker's Compensation Insurance, Employer's Liability Insurance, Comprehensive General Liability Insurance and all insurance required of the Owner/Contractor and the Contract Documents, attached hereto, . . .
The Owner/Contractor shall be named as an additional insured on each of these policies except for Worker's Compensation.
The General Star Policy
  Pursuant to the Subcontract, R&J obtained the necessary insurance coverage for itself and 75 West Construction from General Star (the "General Star Policy"). The General Star Policy, which ran from January 1, 1999 to January 1, 2000, provides in pertinent part:
We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies. We will have the right and duty to defend the insured against any `suit' seeking those damages even if the allegations of the `suit' are groundless, false or fraudulent.
(Emphasis supplied.) Under the policy, "bodily injury" is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time."
  The General Star Policy defines who is an insured under the policy in a clause entitled "Additional Insured — Blanket Form." The clause provides that the policy will cover:
any person or organization whom you have agreed, by written contract prior to an `occurrence' or offense, to include as additional insured, but only for liability arising out of your premises and operations and not for liability arising out of the sole negligence of the aforementioned person or organization.
(Emphasis supplied.) General Star does not dispute that, pursuant to the Subcontract, 75 West Construction is an additional insured under its policy. The General Star Policy contains an "other insurance" clause that reads as follows:
a. Primary Insurance
This insurance is primary except when b. below applies.*fn2 If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share [pro rata] with that other insurance. . . .
(Emphasis supplied.)

  The Wausau Policy

  For the period during which Kandic's injuries were sustained, 75 West Construction was also insured by Wausau (the "Wausau Policy").*fn3 The Wausau Policy's "other insurance" clause provides that it is "excess" over:
Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.
When this insurance is excess, we will have no duty . . . to defend the insured against any `suit' if any other insurer has a duty to defend the insured against that `suit.' If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.
(Emphasis supplied.)

  On or about June 28, 2002, Wausau received notice from 75 West Construction of the Underlying Action. By letter dated the same day, Wausau accepted its defense for the Underlying Action.*fn4 On August 1, on behalf of 75 West Construction, Wausau tendered the defense and indemnification for the Underlying Action to General Star. General Star received Wausau's tender letter on August 6. In a facsimile dated August 9, General Star represented that "[b]ased on the limited information we have been provided to date, we will handle this matter under a complete reservation of rights." On September 11, General Star sent Wausau a facsimile stating that the "investigation is ongoing and consideration to [the] prior tender is still being evaluated." Wausau did not receive any further communication from General Star regarding the tender.

  By letter dated April 7, 2003, Wausau again requested that General Star provide 75 West Construction with a defense and indemnification for the Underlying Action. Wausau repeated its request in a letter dated July 29. According to Wausau, despite these requests, General Star "has failed and refused to defend and indemnify" 75 West Construction for the claims alleged in the Underlying Action.

  Wausau has been providing the 75 West Entities, including 75 West Construction, with a defense in the Underlying Action since June 28, 2002. Wausau asserts that it has incurred $27,727.16 in "necessary and reasonable" legal fees and costs between August 6, 2002, the date General Star received Wausau's first tender letter, to March 17, 2004. Wausau seeks to be reimbursed for this amount by General Star. It also seeks declaratory judgments that General Star has a duty to defend and indemnify 75 West Construction for the Underlying Action, and that General Star's coverage of 75 West Construction is primary and that the insurance coverage provided by Wausau is excess over General Star's coverage.

  Discussion

  Summary judgment may not be granted unless the submissions of the parties taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the Court must view all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for ...


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