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Philadelphia Indemnity Insurance Company v. the City of New York and the Department of Education of the City of New York

March 24, 2011

PHILADELPHIA INDEMNITY INSURANCE COMPANY,
PLAINTIFF,
v.
THE CITY OF NEW YORK AND THE DEPARTMENT OF EDUCATION OF THE CITY OF NEW YORK,
DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.:

MEMORANDUM OPINION & ORDER

This action presents an insurance coverage dispute. Plaintiff Philadelphia Indemnity Insurance Company ("PIIC") issued a liability policy to Mosholu Montefiore Community Center ("Moshulu"). A student attending a New York City public school was injured at Moshulu while allegedly participating in a vocational training program. The student later sued, inter alia, Defendants City of New York and the Department of Education ("DOE"). Defendants tendered their defense to PIIC, claiming that they were "additional insureds" under the policy PIIC issued to Moshulu.

In its Complaint, PIIC seeks a declaratory judgment that "[Defendants] are not entitled to Insured status, and thus Philadelphia has no duty to defend or indemnify [Defendants]." (Cmplt. ¶ 1) PIIC also seeks reimbursement for its expenses in defending the City and DOE in the related personal injury action since the date it revoked coverage. Defendants have filed a counterclaim seeking a declaration that PIIC has a duty to defend and indemnify Defendants in the personal injury action.

The parties have filed cross-motions for summary judgment. For the reasons stated below, Plaintiff's motion for summary judgment as to coverage will be granted. Defendants' motion for summary judgment will be denied, except as to Plaintiff's claim for reimbursement of its expenses in defending the City and DOE in the personal injury action. As to Plaintiff's reimbursement claim, Defendants' summary judgment motion will be granted.

BACKGROUND

PIIC issued a commercial general liability insurance policy to Mosholu, located at 3450 DeKalb Avenue in the Bronx, for the period of May 1, 2008 to May 1, 2009. (Pltf. R. 56.1 Stmt. ¶ 1)*fn1 The named insureds on the policy are: Mosholu-Montefiore Community Center, Inc.; Child Development Center of Mosholu-Montefiore Community Center Inc.; and The Boys & Girls Club of Mosholu-Montefiore Community Center, Inc. (Pltf. R. 56.1 Stmt. ¶ 1; Biernoff Decl., Ex. 1 (Policy) at PHIL 00005, PHIL 00014) Endorsements to the policy list, among others, the following additional insureds:

Administration for Children's Services

Office of Day Care Contracts 150 Williams St Fl 9 New York, NY 10038-2603

New York City Dept of Youth & Community Development 156 William St New York, NY 10038-2609

The City of New York & The NYC Department of Youth and Community Development 156 William St New York, NY 10038-2609 (Pltf R. 56.1 Stmt. 21; Biernoff Decl., Ex 1 (Policy) at PHIL 00011, PHIL 00013, PHIL 00193, 00196) The New York City Department of Education is not listed either as a named insured or as an additional insured. (Pltf. R. 56.1 Stmt. ¶ 17; Biernoff Decl., Ex. 1 (Policy))

In May 2008, Cecily Diaz -- a special education student at Public School 754, located at 470 Jackson Avenue in the Bronx -- was enrolled in a vocational training/internship program under the auspices ofthe City of New York and DOE. (Pltf. R. 56.1 Stmt. ¶¶ 2, 3) In connection with this program, Diaz was assigned to work at Mosholu.*fn2 (Id. ¶ 4) On May 30, 2008, while Diaz was working at Mosholu, hot water spilled on her face, chest, and body, causing serious injuries. (Id. ¶ 5)

On July 24, 2008, Diaz filed a Notice of Claim with the New York City Office of Comptroller alleging that the City and DOE had failed to properly supervise her while she was participating in the vocational training program at Mosholu, and seeking compensation for her injuries. (Id. ¶ 7; Def. R. 56.1 Resp. ¶ 6; Bradley Decl., Ex. 3 (Notice of Claim)) Diaz later brought suit against Defendants in Supreme Court of the State of New York, Bronx County. (Biernoff Decl., Ex. 3 (Diaz Summons and Complaint))

On August 4, 2008, the City Comptroller sent a letter to Mosholu stating that it would withhold $1 million under its contract with Mosholu unless Mosholu's insurer, PIIC, provided "written assurance" that it would "defend and indemnify" the "City of New York" with respect to Diaz's claim. (Pltf. R. 56.1 Stmt. ¶ 8; Bradley Decl., Ex. 4 (Aug. 4, 2008 City Comptroller Ltr. to Mosholu)) Defendants sent a letter directly to PIIC on August 28, 2008, requesting that it defend Defendants in the Diaz lawsuit. In its letter to PIIC, the City represented that "Citywide Central Insurance Program/Mosholu Montefiore Head Start Program" was the named insured, and that "The City of New York & The New York City Department of Education (DOE) [were] . . . additional named insured[s]." (Id. ¶ 9; Biernoff Decl., Ex. 4 (Aug. 28, 2008 City Law Dept. Ltr. to PIIC))

PIIC initially responded to the City's demand in an August 8, 2008 email stating: "[w]e are currently investigating this matter, however it is clear that the claimant, Cecily Diaz was under the insured's supervision at the time of this loss. Therefore we will agree[] to indemnify and defend the NYC Board of Education in the [Diaz] matter." (Biernoff Decl., Ex. 5 at 2) In a September 16, 2008 letter to the City, PIIC gave "formal notice of acceptance of the tender of defense and ...


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