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Arch Ins. Co. v. Harleysville Worcester Ins. Co.

United States District Court, S.D. New York

October 28, 2014

ARCH INSURANCE COMPANY, Plaintiff,
v.
HARLEYSVILLE WORCESTER INSURANCE COMPANY and ILLINOIS UNION INSURANCE COMPANY, Defendants. HARLEYSVILLE WORCESTER INSURANCE COMPANY, Third-Party Plaintiff,
v.
ERIE AND MAINTENANCE, INC., Third-Party Defendant

Page 577

For Defendant Harleysville Worcester Insurance Company: Lance J. Kalik, Tracey K. Wishert, Riker Danzig Scherer Hyland & Perretti, LLP, Morristown, NJ.

For Third-Party Defendant Erie Painting Management: Richard Scott Atwater, Gross Shuman Brizdle & Gilfillan, P.C., Buffalo, NY.

Page 578

OPINION & ORDER

DENISE COTE, United States District Judge.

This motion arises out of an insurance dispute. Plaintiff Arch Insurance Company (" Arch" ) initially sought indemnification from Illinois Union Insurance Company (" Illinois Union" ) and Harleysville Worcester Insurance Company (" Harleysville" ) for payments Arch made to settle a claim for personal injuries brought by Enio Antonio Rodrigues (" Rodrigues" ), an employee of Erie & Maintenance, Inc. (" Erie" ). Rodrigues sustained injuries when he fell from a trailer while performing work under a contract between Erie and the New York State Thruway Authority (" Authority" ) (" Rodrigues Incident" ).

This Opinion addresses a motion brought by Erie to dismiss claims Harleysville has brought against Erie. Harleysville has filed a counterclaim naming Arch and Erie, seeking a declaration that it was not required to defend or indemnify the Authority in connection to the Rodrigues incident or a separate incident involving another Erie employee, Dimitrios Dovas (" Dovas" ) (" Dovas Incident" ). Harleysville also seeks a declaration that it is entitled to reimbursement for money spent settling these claims. Harleysville has also filed, and later amended, a third-party complaint against Erie seeking a declaratory judgment relating to both incidents. Erie has moved to dismiss Harleysville's amended third-party complaint and amended counterclaim. For the following reasons, the motion is denied.

BACKGROUND

Harleysville asserts the following in its amended counterclaim and amended third party complaint. Erie contracted with the Authority to perform painting work. Among other things, Erie's contract with the Authority required Erie to defend and indemnify the Authority for any accident or injuries arising out of work performed. See New York State Thruway Authority v. Erie and Maintenance, Inc., No. 27722/11 (Sup.Ct. June 17, 2013). At the time of the Dovas and Rodrigues Incidents, the Authority was insured by Arch under a New York Owners and Contractors Protective

Page 579

Liability Policy (the " Arch OCPL Policy" ). The Arch OCPL Policy was procured for the Authority's benefit by Erie pursuant to a requirement in Erie's contract with the Authority.

The second relevant policy in place at the time of the Rodrigues and Dovas Incidents is a Commercial General Liability policy issued by Illinois Union to Erie (" Illinois Union CGL Policy" ). The policy period associated with that policy ran from September 1, 2009 through September 1, 2010. The Illinois Union CGL Policy provides for two million dollars of general liability insurance to Erie. The Illinois Union CGL Policy contains an " auto" exclusion provision.

The third relevant policy in place at the time of the Rodrigues and Dovas Incidents was a Commercial Automobile Policy issued by Harleysville to Erie (" Harleysville Policy" ). The policy covered the period from September 1, 2008 through September 1, 2010. Erie was also required to name the Authority as an additional insured on both of its liability policies.

The Rodrigues Incident

On November 18, 2009, Rodrigues was working for Erie painting bridges along a New York highway when he fell off of a trailer. Following the incident, Rodrigues sued the Authority in the New York Court of Claims seeking damages for his injuries. On April 22, 2011, Harleysville agreed to defend Erie in the Rodrigues action under a full reservation of rights. Harleysville also notified Erie that the allegations of the Rodrigues claim did not appear to trigger the Harleysville Policy because Rodrigues's injuries did not result from the use or operation of an automobile as an automobile. In July 2013, Harleysville and Arch entered into a Funding and Reservation of Rights Agreement pursuant to which Arch paid $500,000 and Harleysville paid $250,000 to settle the Rodrigues claim.

The Dovas Incident

On September 18, 2008, Dovas was performing bridge painting work for Erie. When Dovas observed a hole in the tube of the equipment he was using for the work, he attempted to repair the tube. While he was attempting to repair the tube, he fell from the top of the vacuum truck where the equipment was attached and was injured.

Dovas filed an action against the State of New York and the Authority seeking damages on December 8, 2008. Harleysville agreed to defend Erie under a full reservation of rights by letter of August 31, 2012. In July 2013, Arch, Harleysville, and Illinois Union entered into a Funding and Reservation of Rights Agreement pursuant to which Arch agreed to pay $375,000, Harleysville paid $187,500, and Illinois Union paid $187,500 to Dovas.

PROCEDURAL HISTORY

On November 30, 2012, Harleysville commenced a declaratory judgment action against Erie in the Eastern District of New York. Harleysville sought a declaration that the Harleysville Policy does not provide coverage to Erie for either the Rodrigues or the Dovas claims (" EDNY Action" ).

Arch filed this lawsuit on October 18, 2013 in the Southern District of New York (" SDNY Action" ), and amended the complaint on November 19, seeking contribution from Illinois Union and Harleysville for payments relating to the Rodrigues Incident. Harleysville responded to the amended complaint on January 27, 2014, and brought a third-party complaint against Erie, a crossclaim against Illinois Union, and a counterclaim against Arch. All of the Harleysville claims seek a declaration

Page 580

that its policies do not provide coverage for either the Rodrigues or Dovas Incidents, and that it is entitled to reimbursement for payments made towards the settlement of these claims. Illinois Union filed a crossclaim against Harleysville on February 28, seeking a declaration that it ...


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