The opinion of the court was delivered by: Hurley, Senior District Judge
MEMORANDUM OF DECISION AND ORDER
This diversity case involves an insurance coverage dispute. Plaintiff Star Insurance Company ("Star" or "Plaintiff") commenced this action seeking a declaratory judgment that it has no obligation to provide coverage to defendant Hazardous Elimination Corp. ("HEC" or "Defendant") under a workers' compensation and employers' liability policy with respect to an action entitled Matejkowski v. Hilton ( Supreme Court of the State of New York, Kings County Index No. 02-16881). HEC filed an answer to the complaint asserting counterclaims for a declaration of coverage and an award of damages, including costs and attorney's fees for the instant action. Presently before the Court is HEC's motion for summary judgment denying the declaratory relief sought by Star in its complaint, granting the declaratory relief requested in HEC's first counterclaim and granting HEC judgment on liability on its second and third counterclaims. For the reasons set forth below, the motion is GRANTED.
The following facts are taken from the parties' submission and are undisputed, unless noted otherwise.
Effective March 1, 2000, Star issued an insurance policy to HEC which provided HEC with insurance coverage for both Workers' Compensation and Employers' Liability for bodily injury (the "Policy"). The Employers' Liability portion of the Policy provides, in part
This employers' liability insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured employee's employment by you. . . .
We will pay all sums you legally must pay as damages because of bodily injury to your employees, provided the bodily injury is covered by this Employers' Liability Insurance.
The damages we will pay, where recovery is permitted by law, include damages:
1. For which you are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third party as a result of injury to your employee; . . .
This insurance does not cover:
1. Liability Assumed Under Contract
This exclusion does not apply to a warranty that your work will be done in a workmanlike manner. (Ex. A to HEC's Rule 56.1 Statement.)
While the Policy was in effect, on March 18, 2000, an HEC employee, Jan Matejkowski was allegedly injured while working for HEC performing asbestos removal at a Hilton Hotel in Manhattan pursuant to a contract between HEC and Hilton. Mr. Matejkowski filed a workers' compensation claim against HEC which HEC referred to Gallagher Bassett of New York, Inc. ("Gallagher"), Star's third party administrator. (HEC Rule 56.1 Statement ¶¶ 2-3.)
Mr. Matejkowski also commenced an action against Hilton Hotels Corp. ("Hilton") and R.C. Dolner Inc. ( the general contractor at the work site) in the New York Supreme Court, Kings County, Index No. 16881-02 (the "Matejkowski Action"). He sought to recover damages for alleged bodily injuries and consequential damages arising out of Hilton's non-delegable duties to provide workplace safety devices to him pursuant to §240 of the New York Labor Law and the regulations promulgated thereunder. (Id. at ¶¶ 5-6.)
Hilton, in turn, served and filed a third party action against HEC, asserting four causes of action. The first cause of action sought judgment over against HEC, alleging that Mr. Matejkowski's were the result of HEC's negligence. The second cause of action alleged that, pursuant to the contract dated November 2, 1998 between HEC and Hilton, HEC was obligated to indemnify, defend and hold it harmless for any and all claims arising out of the work performed in connection therewith. The third cause of action alleged that pursuant to the contract HEC had agreed to obtain comprehensive liability insurance coverage naming Hilton as an additional insured against personal injury claims and thus it was entitled to defense and indemnification from HEC. The fourth and final cause of action sought common law indemnification. (Ex. E to HEC Rule 56.1 Statement.)
In or about late October 2002, HEC received a letter from counsel for Hilton advising it to "instruct your insurance company or legal representative to contact the undersigned forthwith in order to avoid the necessity of our seeking a default judgment against [HEC]." Alberto Sandoval, an HEC employee, faxed the letter to Star's third party administrator, Gallagher, on November 1, 2002. (HEC Rule 56.1 Statement ¶¶ 13-14.) Several weeks later, Gallagher faxed a letter, dated November 22, 2002, to the law firm of Gainey & McKenna. The fax cover sheet states "Attached defense assignment per our telephone conversation of November 22, 2002." The letter itself states that Gallagher is the third party claims administrator for Meadowbrook Insurance Group*fn1 and the HEC is an insured of the Group. It goes to describe how Matejkowski was injured, is collecting workers' compensation benefits and had commenced an action against Hilton, who in turn brought a third party action against HEC. The letter then recites:
Hilton Hotels alleges that the contract with HEC agreed to provide Hilton a defense and indemnification. HEC also agreed to name Hilton Hotels as an additional insured on their insurance policy. Gallagher Bassett is handling the Workers' Compensation claim for HEC. The insurance carrier for general liability has not been identified. We question if the injury qualifies as a "severe" injury triggering the employers' liability coverage under section 1B of the Workers' Compensation policy.
Please note that the 3rd Party Plaintiff has made a motion for default against HEC. Kenneth Platzer, who is handling the defense of Hilton Hotels, has agreed to withdraw the motion as soon as he receives contact from your office.
Please contact Attorney Platzer and advise that your office will be handling the defense of the Workers' Compensation Employers' Liability allegations of the suit.
We will forward additional information to you as it is received. Please keep our office informed of all developments. . . . (Ex. H to HEC Rule 56.1 Statement.) HEC was not copied on the letter.
Gainey & McKenna then filed an answer on behalf of HEC to the third party complaint, including defenses and a counterclaim. (HEC Rule 56.1 Statement ¶ 22.) By letter dated January 2, 2003 from Gainey & McKenna to Meadowbrook, the law firm sent Meadowbrook its "First Report" and "correspondence to HEC requesting all contracts and other documents relating to the incident." The firm requested that Meadowbrook "forward the original of that letter to the appropriate person at HEC and have that person contact us." The letter addressed to HEC referenced the allegation in the third party complaint that there was a contract between Hilton and HEC requiring HEC to indemnify and defend Hilton and requested a copy of the contract. It did not inform HEC that Star was reserving its rights or limiting insurance coverage in response to Hilton's claims. (Ex. J to HEC Rule 56.1 Statement.)
By letter dated March 26, 2003, Gainey & McKenna wrote to Gallagher*fn2 reporting on the status of the Matejkowski Action. The letter advises Gallagher that R.C. Dolner Inc. had been dismissed from the action pursuant to stipulation. More importantly, it states that a copy of the contract between HEC and Hilton had been obtained and that "there are indemnification and insurance provisions in the contract between Hilton Hotel and the insured that are important to the defense of this matter and the claim by Hilton Hotel for a defense and indemnification." Continuing,
The Contract requires HEC to maintain insurance of various types, including a commercial general liability policy in the amount of $10,000,000. The policy must include coverage for contractual liability assumed under the contract in question. The policy must also name Hilton Hotel and all related entities as additional insureds. Finally, the contract requires an endorsement stating that HEC's policy will be primary for HEC and for Hilton Hotels for all claims. Thus, the contract indicates that Hilton Hotels was to be named as an additional insured on HEC's policy and should have insurance coverage for a claim of this nature. We need to discuss this issue with you further and determine whether Hilton Hotel was added to the HEC policy as an additional insured. We must also determine whether the other insurance requirements in the contract were met.
The contract also includes indemnification provisions. In particular, Article 20 of the contract is entitled Indemnification and Section 20.1 contains the important indemnification provision. The insured agrees to 'defend, indemnify and hold harmless Hilton Hotel from and against every claim, demand or cause of action . . . for personal injury or death arising out of or in anyway incidental to or in connection with the performance of the work hereunder." The contract further provides that the indemnification provision applies "regardless of whether or not the claim is caused in whole or in part by a party indemnified herein." . . .
As in all construction cases involving provisions of this type, the indemnification provision must be examined closely as relates to the facts of the case in order to determine the indemnification obligations. Hilton Hotel has not pressed us for a defense and indemnification to date. We would like to discuss this issue with you to address further actions to be taken relating to the indemnification provision in the contract.
(Ex. M to HEC's Rule 56.1 Statement.)
By letter dated August 11, 2003 addressed to Gallagher*fn3 , Gainey & McKenna wrote to report on the status of the Matejkowski Action. First, the letter addressed certain inquiries that had been raised by Gallagher. The inquiries included a request for a copy of the contract between HEC and Hilton, which according to the letter was included therewith. Also, in response to the queries whether HEC met all the insurance requirements listed in the contract with Hilton and whether Hilton has demanded that HEC assume their defense, the letter provides "We need additional information concerning whether the insured met the insurance requirements in the contract. This issue is addressed below . . . . Yes. Hilton has demanded that HEC defend and indemnify Hilton Hotels in this matter. This issue is also discussed below." With respect to insurance and indemnification issues, the letter reads in part:
As noted above, the contract indicates that the insured will defend, indemnify and hold harmless Hilton Hotels Corporation for claims arising from the performance of the work under the contract. . . . Please advise us whether you will agree to defend and indemnify Hilton Hotel ...