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One Reason Road, LLC v. Seneca Insurance Co., Inc.

Supreme Court of New York, Second Department

July 25, 2018

One Reason Road, LLC, respondent,
v.
Seneca Insurance Company, Inc., appellant, et al., defendants.

          Tese & Milner LLP, New York, NY (Michael M. Milner of counsel), for appellant.

          Andrea G. Sawyers, Melville, NY (Scott W. Driver of counsel), for respondent.

          LEONARD B. AUSTIN, J.P., SHERI S. ROMAN, ROBERT J. MILLER, FRANCESCA E. CONNOLLY, JJ.

          DECISION & ORDER

         In an action, inter alia, for declaratory relief, the defendant Seneca Insurance Company, Inc., appeals from an order of the Supreme Court, Queens County (Frederick D.R. Sampson, J.), entered December 1, 2015. The order granted the plaintiff's motion for summary judgment declaring that the defendant Seneca Insurance Company, Inc., is obligated to defend and indemnify the plaintiff in the underlying action.

         ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Queens County, for the entry of a judgment, inter alia, declaring that the defendant Seneca Insurance Company, Inc., is obligated to defend and indemnify the plaintiff in the underlying action.

         The plaintiff (hereinafter the landlord) was the owner of certain real property located in Queens County (hereinafter the subject property) that included a building that was used as a commercial warehouse. The landlord leased a portion of the subject property to the defendant Eshipper USA Corporation (hereinafter Eshipper). Under the terms of the lease, Eshipper was obligated to obtain certain insurance coverage for the landlord. Eshipper obtained a commercial general liability policy (hereinafter the subject policy) from the defendant Seneca Insurance Company, Inc. (hereinafter Seneca), which named the landlord as an additional insured.

         During the course of Eshipper's tenancy, the defendant Sanjay Bharsakal was allegedly injured while he was walking on the subject property. Bharsakal alleged that the accident occurred when he slipped and fell on snow and ice while he was walking toward a door to the warehouse after parking his truck in a parking lot located on the subject property.

         Bharsakal commenced a personal injury action (hereinafter the underlying action) against the landlord and others. The landlord, in turn, commenced this action against, among others, Seneca. The landlord alleged that it was named as an additional insured on the subject policy. The landlord sought, inter alia, a declaration that Seneca was obligated to defend and indemnify it in the underlying action.

         After joinder of issue, the landlord moved for summary judgment declaring that Seneca is obligated to defend and indemnify it in the underlying action. Seneca opposed the landlord's motion, arguing, among other things, that the additional insured provision of the subject policy was not triggered because the alleged accident did not occur on the portion of the subject property that had been leased to Eshipper. In an order entered December 1, 2015, the Supreme Court granted the landlord's motion. Seneca appeals, and we affirm.

         "A duty to defend is triggered by the allegations contained in the underlying complaint" (BP A.C. Corp. v One Beacon Ins. Group, 8 N.Y.3d 708, 714; see Cumberland Farms, Inc. v Tower Group, Inc., 137 A.D.3d 1068, 1070). "[A]n insurer's duty to defend its insured arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy" (Fitzpatrick v American Honda Motor Co., 78 N.Y.2d 61, 65; see BP A.C. Corp. v One Beacon Ins. Group, 8 N.Y.3d at 714). "If the allegations of the complaint are even potentially within the language of the insurance policy, there is a duty to defend" (Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 N.Y.2d 435, 443).

         It is immaterial that "the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions" (Seaboard Sur. Co. v Gillette Co., 64 N.Y.2d 304, 310). "If any of the claims against the insured arguably arise from covered events, the insurer is required to defend the entire action" (Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 N.Y.2d 169, 175). The duty remains "even though facts outside the four corners of [the] pleadings indicate that the claim may be meritless or not covered" (Fitzpatrick v American Honda Motor Co., 78 N.Y.2d at 63; see Automobile Ins. Co. of Hartford v Cook, 7 N.Y.3d 131, 137).

         "[A]n insurer's duty to defend is exceedingly broad" (Colon v Aetna Life & Cas. Ins. Co., 66 N.Y.2d 6, 8; see Continental Cas. Co. v Rapid-American Corp., 80 N.Y.2d 640, 648). When a policy represents that it will provide the insured with a defense, the Court of Appeals has said that such a policy "actually constitutes litigation insurance' in addition to liability coverage" (Automobile Ins. Co. of Hartford v Cook, 7 N.Y.3d at 137; see Seaboard Sur. Co. v Gillette Co., 64 N.Y.2d at 310; International Paper Co. v Continental Cas. Co., 35 N.Y.2d 322, 326-327). Accordingly, "an insurer may be contractually bound to defend even though it may not ultimately be bound to pay, either because its insured is not factually or legally liable or because the occurrence is later proven to be outside the policy's coverage" (Fitzpatrick v American Honda Motor Co., 78 N.Y.2d at 65; see BP A.C. Corp. v One Beacon Ins. Group, 8 N.Y.3d at 714; Automobile Ins. Co. of Hartford v Cook, 7 N.Y.3d at 137; Seaboard Sur. Co. v Gillette Co., 64 N.Y.2d at 310).

         "[A]n insurance company's duty to defend is broader than its duty to indemnify" (Automobile Ins. Co. of Hartford v Cook, 7 N.Y.3d at 137). As a general matter, an insurance company will have a duty to indemnify an insured party when the underlying occurrence falls within the scope of coverage afforded by the particular insurance policy at issue (see e.g. Greenwich Ins. Co. v City of New York, 139 A.D.3d 615, 616; Stout v 1 E. 66th St. Corp., 90 A.D.3d 898, 903; Lehrer McGovern Bovis v Halsey Constr. Corp., 254 A.D.2d 335, 335-336). Accordingly, even where a duty to defend has been established, there may still be a triable issue of fact as to whether the underlying occurrence was actually within the scope of coverage afforded by the particular policy at issue (see Greenwich Ins. Co. v City of New York, 139 A.D.3d at 616). "The scope of coverage under a general liability insurance policy is defined largely, if not exclusively, by the express grant of coverage contained in the policy" (1-15 New Appleman New York Insurance Law § 15.04[1][a]; see generally Worth Constr. Co., Inc. v Admiral Ins. Co., 10 N.Y.3d 411, 415; Automobile Ins. Co. of Hartford v Cook, 7 N.Y.3d at 137-138).

         Here, the subject policy named the landlord as an additional insured, "but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [Eshipper]." The Court of Appeals has stated that "the phrase arising out of'... requires only that there be some causal relationship between the injury and the risk for which coverage is provided" (Maroney v New York Cent. Mut. Fire Ins. Co., 5 ...


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