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The Netherlands Insurance Co. v. United Specialty Insurance Co.

United States District Court, S.D. New York

August 30, 2017

THE NETHERLANDS INSURANCE COMPANY and ARTHUR LANGE, INC., Plaintiffs,
v.
United SPECIALTY INSURANCE COMPANY, Defendant.

          Attorneys for Plaintiffs JAFFE & ASHER LLP By: Marshall T. Potashner, Esq. David R. Shyer, Esq.

          Attorneys for Defendant TRAUB LIEBERMAN STRAUS & SHREWSBURY LLP Seven Skyline Drive By: Craig L. Rokuson, Esq. Meryl R. Lieberman, Esq.

          OPINION

          SWEET, D.J.

         Plaintiffs The Netherlands Insurance Company ("Netherlands") and Arthur Lange, Inc. ("Lange") (collectively, the "Plaintiffs"} have moved pursuant to Rule 56 of the Federal Rules of Civil Procedure for partial summary judgment declaring that the defendant United Specialty Insurance Company ("United" or the "Defendant") owes Lange a duty to defend and indemnify in the action Donizete Jose Defreitas v. Penta Painting & Decorating Corp., Arthur Lange, Inc., and Nikmar Contracting, Inc. (the "Underlying Action") and that Netherlands' policy has an applicable excess "Other Insurance" provision. The Defendant has cross-moved for summary judgment pursuant to Rule 56 seeking a declaration that it owes no coverage for the Underlying Action. Based upon the facts and conclusions set forth below, the motion of the Plaintiffs is denied and the motion of the Defendant is granted.

         I. Prior Proceedings

         The complaint in the instant action was filed on September 22, 2016. The motion for partial summary judgment was submitted April 18, 2017, the cross-motion for summary judgment was submitted May 2, 2017, and both motions were heard and marked fully submitted on May 31, 2017.

         II. The Facts

         The facts have been set forth in the Plaintiffs' Local Civil Rule 5 6.1 Statement ("Pl.'s 56.1 Stmt.") and the Defendant's Response to Plaintiffs' Statement of Undisputed Material Facts and Counterstatement ("Def.'s 56.1 Stmt."). They are not in dispute except as noted below.

         On or about September 5, 2013, the Underlying Action was commenced in the Supreme Court of the State of New York, County of Bronx. See Declaration of Michael Ince, executed April 6, 2017 ("Ince Decl.") I 3. In the Underlying Action, Donizete Jose Defreitas ("Defreitas") seeks to recover damages for injuries he allegedly sustained on June 17, 2013, while he was in the course of his employment with Energy Paving, Inc. ("Energy") on a construction project at the premises located at 4 North Lake Road, Armonk, New York (the "Project"). Id. ¶ 4. Defreitas, in his Verified Complaint in the Underlying Action, alleges that he was injured in the course of his work on the Project when a wooden plank/elevated platform on which he was working collapsed, causing him to fall to the ground (the "Accident"). See Ince Decl. Id., Ex. 1. He also alleges that at the time of the Accident, Lange was the general contractor for the Project and retained Energy as subcontractor pursuant to written contract. Id. Defreitas asserts claims against Lange for negligence and violation of N.Y. Labor Law §§ 200, 240, and 241. Id. ¶ 8; Ex. 1. On December 8, 2016, the Underlying Action was transferred to the Supreme Court of the State of New York, County of Westchester, where it was assigned Index No. 68525/16. See Ince Decl., Ex. 2.

         United denies any inference that the complaint in the Underlying Action identifies Energy as Defreitas' employer. Def.'s 56.1 Stmt. ¶¶ 2-5. United also denies that Lange is alleged to be both the general contractor and construction manager, and states that Defreitas alleges that all defendants to the Underlying Action retained Energy. Id. ¶ 4 (citing to Ince Decl., Ex. 1 ¶¶ 20, 32, 36, 52}.

         On or about December 13, 2012, Lange and Energy entered into a written agreement concerning work to be performed on the Project (the "Subcontract"). See Declaration of David R. Shyer, executed April 14, 2017 ("Shyer Decl."), Ex. 10. The Subcontract identifies Lange as "General Contractor" and Energy as "Subcontractor." Id. Pursuant to the Subcontract, Energy agreed to perform "masonry walls, walkways and patios" work for the Project. Id. The Subcontract provides, in part, as follows concerning Energy's insurance procurement obligations for the Project:

4. Subcontractor shall maintain, or cause to be maintained, in full force and effect during the term of this Agreement, at its expense, Workers' Compensation Insurance, public liability insurance covering personal injury and property damage, and other insurance with minimum coverages as listed below. Such policies are to be in the broad form available on usual commercial terms and shall be written by insurers of recognized financial standing satisfactory to General Contractor. Except for Workers' Compensation, General Contractor shall be named as an additional insured on all such policies with the understanding that any obligations imposed upon the insured Subcontractor (including, without limitation, the liability to pay premiums} shall be the sole obligations of Subcontractor and not those of General Contractor. Notwithstanding anything to the contrary in this Agreement, Subcontractor irrevocably waives all claims against General Contractor for all losses, damages, claims or expenses resulting from risks commercially insurable under the insurance described in this Section 4. The provisions of insurance by Subcontractor shall not in any way limit Subcontractor's liability under this Agreement.
* * *
Comprehensive General Liability, including Bodily injury, property damage and broad form contractual liability
$2, 000, 000 aggregate
$1, 000, 000 each occurrence
* * *
Each policy of insurance shall contain clauses to the effect that (i) such insurance shall be primary without right of contribution of any other insurance carried by or on behalf of General Contractor with respect to its interests, (ii) it shall not be cancelled, including without limitation, for nonpayment of premium, or materially changed or not renewed without thirty (30) days prior written notice to General Contractor, (iii) no act or omission of Subcontractor shall affect or limit the obligation of the insurance company to pay General Contractor the amount of any loss sustained and (iv) policies cannot contain residential work exclusion.

Id.

         United issued Commercial General Liability ("CGL") policy, No. USA 4000300, with a policy period from September 2, 2013 to September 2, 2014, which it issued to Energy as Named Insured (the "United Policy"). Id., Ex. 11. The United Policy has "Each Occurrence" limits of $1 million. Id. The United Policy provides claims-made and reported coverage, and only applies to claims "first made against the insured, and reported to [United], " during the policy period. Id., Ex. 11 at p. United 0364. The claim at issue in the Underlying Action was made and reported to United during the policy period of the United Policy. See Ince Decl., Exs. 1, 5. The United Policy's insuring agreement provides, in part, as follows:

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages.
However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
* * *
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; and
(2) The "bodily injury" and "property damage" arises out of "specifically covered operations"; and
(3) The "bodily injury" or "property damage" did not first occur before the Retroactive Date, if any, shown in the Declarations or after the end of the "Policy Term".

Id., Ex. 11 at p. United 0364. The United Policy defines "specifically covered operations" as follows:

"Specifically covered operations" means only work or operations, and such premises owned, leased, maintained or operated by the insured incidental or necessary to such work or operations that are specifically described and listed on the Specifically Covered Operations Endorsement (form CGL 1810) attached to this policy.

         The United Policy includes a Specifically Covered Operations Endorsement that provides as follows:

SCHEDULE
The following work and operations are included within the definition of "specifically covered operations":
Driveway and sidewalk paving
Coverage for classifications, operations or premises not shown above can only be covered if agreed to, in writing, by us as evidenced by endorsement to this policy.

Id. Ex. 11 at p. United 0348. The United Policy includes an endorsement, entitled "Additional Insured - Owners, Lessees Or Contractors - Automatic Status When Required In Construction Agreement With You." This endorsement provides, in relevant part, as follows:

A. Section II - Who Is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.
Such person or organization is an additional insured only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured.

Id. Ex. 11 at p. United 0361. The United Policy defines the term "you", in part, as "the Named Insured shown in the Declarations." Id., Ex. 11 at p. United 0364. The full text of the provision is: "Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy." See Def.'s 56.1 Stmt, at p. 9.

         The United Policy includes an endorsement entitled "Exclusion - Workers Compensation" (the "Workers Compensation Exclusion"). See Shyer Decl., Ex. 11 at p. United 0385. The Workers Compensation Exclusion provides, in part, as follows:

This insurance does not apply to any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any other similar law.
This exclusion also applies to any obligation of the insured under the workers' compensation statutes of any state arising out of the failure of the insured to exact from a contractor (or subcontractor if the insured is a contractor) a certificate from the workers' compensation board showing that the contractor (or subcontractor) has complied with the applicable workers' compensation insurance requirements.

Id., Ex. 11 at p. United 0385. The United Policy includes a Separation of Insureds provision that provides, in part, as follows:

Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:
* * *
b. Separately to each insured against whom "claim" is made or "suit" is ...

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