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LLC v. Lincoln General Insurance Co.

Supreme Court, New York, County

December 5, 2013

EAST 51 STREET DEVELOPMENT COMPANY, LLC and ILLINOIS UNION INSURANCE COMPANY, Plaintiffs,
v.
LINCOLN GENERAL INSURANCE COMPANY, AXIS SURPLUS INSURANCE COMPANY, INTERSTATE FIRE AND CASUALTY COMPANY and EVEREST NATIONAL INSURANCE COMPANY, Defendants. Index No. 150063/2010

Unpublished Opinion

MEMORANDUM DECISION

HON. CAROL R. EDMEAD, J.S.C.

In this insurance declaratory judgment action, defendant Lincoln General Insurance Company ("Lincoln General") moves pursuant to CPLR §§ 3025(b) and 3211(a) to dismiss a new cross-claim asserted against it by co-defendant Interstate Fire and Casualty Company ("Interstate").

Factual Background

This action arises from the March 15, 2008 tragic crane collapse accident during the construction of a high-rise building in Manhattan, which caused seven fatalities, serious injuries to many individuals, and multi-million dollars in property damage. Numerous personal injury and property damage lawsuits were brought against plaintiff East 51st Street ("East 51st Street"), the owner of the property on which the accident occurred, Reliance Construction Ltd. ("RCG"), the construction manager on the project, and Joy Contractors, Inc. ("Joy"), the superstructure subcontractor.

In 2010, East 51st Street and Illinois Union Insurance Company commenced this action against Lincoln General, Interstate, AXIS Surplus Insurance Company ("AXIS") and Everest National Insurance Company (collectively, "plaintiffs") alleging, inter alia, that such defendants have a duty to defend the claims against East 51st Street based on the insurance policies they issued. As against Interstate and Lincoln General, plaintiffs seek a declaration as to the duty to defend and indemnify, and asserted causes of action to recover defense costs already expended in the defense of East 51st Street.

Thereafter, in May 2010, Interstate filed an Answer and counterclaim for a declaration that it owed no defense costs or indemnity to plaintiffs due to East 51st Street's breach of Interstate's Policy's cooperation condition precedent to coverage, that Interstate's policy limits have been exhausted due to payments it already made, and that in the alternative, its policy was excess to any other policy issued to East 51st Street.

On June 1, 2010, Lincoln General answered the complaint, and cross-claimed against Interstate, inter alia, for a declaration that Interstate, as a primary and/or co-primary insurer of East 51st Street, was obligated to provide primary coverage to East 51st Street, and that Interstate is required to defend and indemnify East 51st Street for the underlying claims. According to Lincoln General, Interstate did not answer Lincoln General's cross-claim.

By Order of Appellate Division dated February 5, 2013, it was determined that "the insurance policies issued by AXIS and Interstate to Reliance and the policy issued by Lincoln General to Joy were primary to the policy issued by Illinois Union to East 51st Street. AXIS, Interstate and Lincoln General therefore are obligated to reimburse Illinois Union for defense costs." However, the Appellate Division also held that Interstate's "policy was exhausted upon its July 2009 settlement with Reliance of the declaratory judgment action commenced in federal court

Thereafter, by Order dated October 3, 2013, this Court granted Lincoln General leave to amend its cross-claim against Interstate, and on October 4, 2013, Lincoln General filed its Answer and amended cross-claim against Interstate alleging that Interstate, as a co-primary insurer of East 51st Street, is obligated to reimburse Illinois Union for defense costs from the date of the accident until the date it exhausted its policy, and that Interstate is obligated to contribute to the payment of East 51 st Street's defense costs incurred from the date of the accident until Interstate's policy was exhausted.

On October 22, 2013, Interstate filed its Answer to Lincoln General's amended cross-claim and asserted new cross claims, including a cross-claim, for the first time, against Lincoln General alleging that Lincoln General is obligated to provide defense and indemnification to East 51st Street, and demanding reimbursement and/or contribution from Lincoln General.

In support of dismissal of Interstate's new cross-claim, Lincoln General argues that Interstate failed to obtain Lincoln General's consent or seek leave of Court to file such a cross-claim as required under CPLR 3025(b). To add such a cross-claim for the first time at this stage of the proceedings will significantly prejudice the substantial right of Lincoln General to oppose the filing of such an untimely claim for reimbursement or contribution against Lincoln General. Therefore, Interstate's filing of such cross-claim is a nullity, and subject to dismissal pursuant to CPLR 3211(a).

In opposition, Interstate contends that this Court's October 3, 2013 order granted Lincoln General permission to amend its Answer to assert new claims against Interstate, and directed

Interstate to serve a responsive pleading to such new claims within 30 days. Thus, a new responsive pleading was authorized. Further, CPLR 3011 authorizes that an Answer to be served to a cross-claim where a responsive pleading has been directed. CPLR 3019(d) directs that a cross-claim shall be considered as if it were a complaint, and pursuant to CPLR 3019(b), a cross-claim may include "any cause of action" by a defendant against another defendant. And, under CPLR 601(a), a defendant setting forth a cross-claim may join as many claims as it may have against an ...


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