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Admiral Insurance Company v. Joy Contractors

June 12, 2012

ADMIRAL INSURANCE COMPANY, RESPONDENT-APPELLANT,
v.
JOY CONTRACTORS, INC., ET AL., RESPONDENTS, NEW YORK CRANE & EQUIPMENT COMPANY, APPELLANT-RESPONDENT.



The opinion of the court was delivered by: Read, J.:

This opinion is uncorrected and subject to revision before publication in the New York Reports.

A tower crane operated by defendant Joy Contractors, Inc., collapsed on March 15, 2008 during construction of a luxury high-rise condominium at 303 East 51st Street in Manhattan, killing seven people and injuring dozens, damaging several buildings and destroying one. A tower crane is a type of lifting device which utilizes a vertical mast or tower topped by a horizontal structure that is either fixed (a jib) or moveable up and down (a boom) in an elevated position (see 29 CFR 1926.1401). For the period from June 21, 2007 through June 21, 2008, Joy carried a comprehensive general liability (CGL) policy with defendant Lincoln General Insurance Company, with coverage up to $1 million per occurrence and an aggregate limit of $2 million; and a follow-form excess policy with plaintiff Admiral Insurance Company, with limits of $9 million for each loss event and in the aggregate, for a deposit premium of $22,000.

Admiral, which received notice of the crane accident on March 17, 2008, notified Joy of several coverage issues in a reservation-of-rights letter dated March 27, 2008, and requested more information. On April 25, 2008, Admiral sent similar reservation-of-rights letters to Reliance Construction Ltd. d/b/a RCG Group Ltd., the general contractor on the project; the tower crane's lessor, New York Crane & Equipment Company, Inc.; and the building's owners/developers.

In its March 27th letter to Joy, Admiral "denie[d] any present obligation" to indemnify Joy because no claims had yet been made or lawsuits brought, and the CGL policy had not been exhausted. Notably, Admiral reserved its right to deny coverage on the ground the accident occurred during "residential construction activities," which are excluded under a provision in the excess policy stating that

"[t]his insurance does not apply to liability, injury or damage of any kind, including costs or expenses, arising out of, resulting from, caused or contributed to by any past, present or future 'residential construction activities' performed by or on behalf of any 'insured' or others.

"For the purposes of this endorsement, 'residential construction activities' means any work or operations related to the construction of single-family dwellings, multi-family dwellings, multi-family dwellings, condominiums, townhomes, townhouses, cooperatives and/or apartments."

Admiral further warned that there might be no coverage "based on . . . inaccuracies . . . identified in [Joy's] underwriting submission, which could render [the excess policy] void and/or be a breach of conditions precedent to coverage." In particular, Admiral claimed that Joy had represented that it specialized in drywall installation, did not carry out exterior work and performed no work at a level above two stories in height from grade other than drywall interior work, whereas "[b]ased on the information that [Admiral had] to date," Joy was actually the structural concrete contractor, performing work on the building's entire exterior with the tower crane.

On May 30, 2008, after further investigation, Admiral sent letters to Joy, Reliance, New York Crane and the owners/developers to deny coverage for claims arising out of the accident, based in part upon the residential construction activities exclusion. On June 8, 2008, Admiral brought this lawsuit against these same entities, all of which claim coverage under the excess policy as "additional insureds" within the meaning of the CGL policy, and Lincoln, asserting numerous causes of action and seeking a declaration of no coverage. Admiral and defendants subsequently filed various motions and cross motions, which Supreme Court disposed of in a decision filed on June 25, 2009.

Supreme Court denied Admiral's motion for summary judgment on its cause of action pursuant to the exclusion in the excess policy for residential construction activities, but also denied defendants' motions to dismiss that cause of action. The judge observed that although it was "undisputed" that a "condominium tower" was being constructed, there was conflicting evidence as to whether the "building was intended to be strictly residential" or was "mixed-use"; therefore, "there remain[ed] material questions of fact" on this subject, which had not yet been explored in examinations before trial.

Next, the judge dismissed against Reliance and the owners/developers (having granted Admiral summary judgment declaring that New York Crane did not qualify as an additional insured) those causes of action related to Admiral's assertion that Joy made false statements in its underwriting submission. Relying on Lufthansa Cargo, AG v New York Mar. & Gen. Ins. Co.

(40 AD3d 444 [1st Dept 2007]) and BMW Fin. Servs. v Hassan (273 AD2d 428 [2nd Dept 2000]), lv denied 95 NY2d 767 [2000]), Supreme Court opined that "[w]hatever the outcome is as to Joy," with respect to these causes of action,

"any additional insured is provided with the full benefits of . . . coverage. Should it be determined at some later date that Reliance and/or the owners are additional insureds under the excess policy, any of Joy's alleged misrepresentations would have no effect on their coverage" (internal citations omitted).

As relevant to this appeal, Supreme Court also dismissed Admiral's cause of action asserting that the LLC exclusion in the CGL policy precluded coverage of those owners/developers (all but one of them) that are limited liability companies; as previously touched on, decided that New York Crane was not an "additional insured" under endorsements in the CGL; held that former section 3420 (d) (2) of the Insurance Law, requiring timely written disclaimer of liability or denial of coverage, was not a defense to Admiral's lawsuit; denied motions and cross motions to dismiss Admiral's cause of action seeking a declaration of no coverage on the ground the injuries sustained in the accident did not arise from Joy's acts or omissions; denied motions and cross motions to dismiss Admiral's cause of action seeking a declaration of no coverage as to Joy for claims by its employees in light of the CGL policy's employer's liability exclusion; and denied motions and cross motions to dismiss Admiral's cause of action seeking a declaration of no coverage for bodily injury or property damage arising out of the rendering or failure to render professional services in light of the professional services exclusions in the CGL and excess policies.

In a decision and order entered on February 17, 2011, the Appellate Division modified by declaring that the residential construction activities exclusion was inapplicable, and otherwise affirmed (81 AD3d 521 [1st Dept 2011]). In the court's opinion, "[t]he evidence overwhelmingly indicate[d] that, at the time of the accident, the building was intended to be a mixed-use structure, not a purely residential one" (id. at 522). In particular, "[t]his evidence include[d] references to 'storefronts' in various documents, correspondence in which the New York City Department of Buildings ...


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