FSLM Associates LLC and First Avenue Builders, LLC, Plaintiffs,
Arch Insurance Group, Arch Specialty Insurance Company and Illinois Union Insurance Company, Defendants. Index No. 104753/10
Joan A. Madden, J.
In this action for declaratory relief as to insurance coverage, plaintiffs FSLM Associates LLC ("FSLM") and First Avenue Builders, LLC ("First Avenue") move for an order pursuant to CPLR 3212, granting summary judgment against defendants Arch Insurance Group and Arch Specialty Insurance Company (collectively "Arch"). Defendant Arch Specialty Insurance Company, incorrectly s/h/a Arch Insurance Group and Arch Specialty Insurance Company, oppose the motion and cross-move for summary judgment.
The following facts are not disputed unless otherwise noted. Plaintiff FSLM was the developer of a condominium building located at 40 West 116th Street, New York, New York. Plaintiff First Avenue was the general contractor for the project. Arch issued a commercial general liability insurance policy GAP001061700 to plaintiffs as named insureds, effective from October 10, 2005 through August 31, 2008. The Arch policy had a general aggregate limit of $2 million and a per occurrence limit of $1 million. Defendant Illinois Union Insurance Company ("Illinois Union") issued an excess insurance policy, number G219904A001 to plaintiffs.
Plaintiffs allege that on or about May 22, 2008, a section of the exterior facade of the building collapsed, resulting in property damage. An investigation on behalf of Arch indicated that the damage to the building was $129, 342.71. Plaintiffs submitted a claim to Arch and on or about July 14, 2008, Arch sent plaintiffs a letter advising that the claim was barred as it arose "out of [the] exterior insulation and finish system." On or about June 4, 2008, Illinois Union issued a declination letter stating that the claim was "not likely to reach our layer of coverage."
On April 13, 2010, plaintiff commenced this action asserting a first cause of action for a judgment declaring that "the property damage and losses caused by the wall collapse are covered losses under the Arch and Illinois Union Policies, " and a second cause of action for breach of contract seeking $2 million in damages. Defendant Arch answered asserting 22 separate affirmative defenses.
Plaintiffs are now moving for summary judgment against Arch, asserting that no issue of fact exists as to the cause of the collapse and that they are entitled to a "determination" that the resulting damage is covered under the Arch policy. In support of the motion, plaintiffs contend that "the collapse of the wall was caused by a failure of the masonry parging used to level and waterproof the concrete masonry walls" (Kenney affidavit, ¶ 3). Plaintiffs assert that the "concrete masonry parging [was] not part of an exterior insulation and finish system ... [but] was used to level and provide additional waterproofing" (id., ¶ 4). Plaintiffs also assert the exterior insulation and finishing system (EIFS) that was applied was a Parex product consisting of "polystyrene insulation board; woven glass mesh; adhesive; basecoat; [and] finish coat" and the collapse was "due to a cohesive failure of a coating applied to the masonry substrate to which the [Parex EIFS product] was adhesively attached" (id.,
¶¶ 6-7). This conclusion is based upon the report of their expert dated January 2, 2009 (id., ¶¶ 2, 3, 5). Accordingly, plaintiffs seek coverage of their claim from Arch.
In opposition, Arch contends that its policy includes an exclusion from coverage for any loss related to an EIFS (Schunk affidavit, ¶¶ 10-11) . Arch asserts that the collapse of a portion of the exterior wall of the building was due to the material used in leveling and/or filling the exterior masonry wall of the building (Moses affidavit, ¶¶ 8, 16). Arch explains that the material used is a product known as Parex 121, which is a polymer-modified cementitious material. Arch points to the report of plaintiff's expert which identifies the cause of the accident as "application error or material defect [of the Parex 121]" (id., ¶ 10-11, 13). Arch argues that since Parex 121 was used to level and waterproof the building's exterior wall as part of the preparation for installing the EIFS, the failure of Parex 121 falls within the scope of the policy exclusion for "preparation" for an EIFS (id., ¶¶ 20-22; Schunk affidavit, ¶ 12.
A party seeking summary judgment must make a prima, facie case showing that it is entitled to judgment as a matter of law by proffering sufficient evidence to demonstrate the absence of any material issue of fact (Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 ). If the movant fails to make this showing, the motion must be denied (id) . Once the movant meets its burden, then the opposing party must produce evidentiary proof in admissible form sufficient to raise a triable issue of material fact (Zuckerman v City of New York, 49 N.Y.2d 557, 562 ). In deciding the motion, the court must draw all reasonable inferences in favor of the nonmoving party and deny summary judgment if there is any doubt as to the existence of a material issue of fact (Branham v Loews Orpheum Cinemas, Inc., 8 N.Y.3d 931, 932 ; Dauman Displays v Masturzo, 168 A.D.2d 204, 205 [1st Dept 1990], lv dismissed 77 N.Y.2d 939 ).
An insurance policy is a contract and, where provisions of a policy are "clear and unambiguous", they should be "given their plain and ordinary meaning" (United States Fid. & Guar. Co. v Annunziata, 67 N.Y.2d 229, 232 ). Additionally, an ambiguity in an insurance policy will be construed in favor of the insured, particularly when the ambiguity is in an exclusionary clause (Cragg v Allstate Indemn. Corp., 17 N.Y.3d 118, 122 ). However, while ambiguities are construed against the insurer, the court should not disregard the plain meaning of the policy to create an ambiguity, since this improperly rewrites the parties' agreement [United States Fid., 67 N.Y.2d at 232; Catucci v Greenwich Ins. Co., 37 A.D.3d 513, 514 [2nd Dept 2007]). Generally, the insurer has the burden of showing that coverage does not exist or that an exclusion applies [County of Columbia v Continental Ins. Co., 83 N.Y.2d 618, 627 ; Seaboard Sur. Co. v Gillette Co., 64 N.Y.2d 304, 311 ).
Here, the issue presented involves the interpretation and applicability of the policy endorsement entitled "Exterior
Insulation and Finish System Exclusion, " which states in its entirety as follows:
This insurance does not apply to and we will not have the duty to investigate or defend any suit brought against you, or pay any costs or expenses of such investigation and defense for liability, claims, damage or loss arising out of:
1. "bodily injury, " "property damage, " or "personal and advertising injury" caused directly or indirectly, in whole or in part, by the design, manufacture, construction, fabrication, preparation, installation, application, maintenance or repair, including remodeling, service, correction, or replacement, of an "exterior insulation and finish system, " or any part thereof, any substantially similar system or any part thereof, including the application or use of conditioners, primers, accessories, ...