United States District Court, S.D. New York
plaintiff: Timothy Erin Delahunt Kenney Shelton Liptak &
defendant AST Engineering Corp.: Robert S. Cosgrove Durkin
& Durkin, LLC
defendant Sea Breeze General Construction, Inc.: Craig L.
Rokuson Traub Liberman Straus & Shrewsberry LLP
defendant J.V.C. Group N.Y. Corp.: Jerry Anthony Cuomo
Landman Corsi Ballaine & Ford P.C.
OPINION AND ORDER
COTE, UNITED STATES DISTRICT JUDGE
Insurance Company (“RLI”) issued a claims-based
professional liability insurance policy
(“Policy”) to AST Engineering Corporation
(“AST”) in March 2013 and has defended AST in two
New York State lawsuits, the first of which named AST in
October 2013. In September 2016, RLI issued a reservation of
rights notifying AST that it may disclaim coverage. On
February 23, 2019, RLI filed this action, seeking a
declaration that it has no duty to defend AST. Both parties
now move for summary judgment. For the reasons that follow,
AST's motion for summary judgment is granted and RLI is
estopped from disclaiming coverage.
action arises from work AST performed in connection with a
residential construction project at 133 Third Avenue in
Manhattan (the “Project”). As part of its work on
the Project's foundation and superstructure, J.V.C. Group
N.Y. Corp. (“JVC”), a subcontractor on the
Project, requested that AST create a design drawing for a
one-sided form for use in pouring a concrete wall. AST
provided those drawings to JVC on October 28, 2012.
December 5, 2012, concrete poured at the Project pressed
against an adjoining building, bowing and cracking its
exterior wall. As a result of damage, the owner of the
adjoining building, Coral Crystal LLC (“Coral
Crystal”), filed on December 10, 2012 a lawsuit in New
York State Supreme Court (the “Coral Crystal
Action”) against McArthur Morgan LLC (“McArthur
Morgan”), the owner of the Project. On March 7, 2013,
Coral Crystal added JVC and the Project's general
contractor, Sea Breeze General Construction, Inc. (“Sea
Breeze”), as defendants.
weeks later, on March 21, 2013, AST applied to RLI for a
claims-based professional liability insurance policy.
Although it had been in business since 2009, AST had not
carried professional liability insurance prior to that date.
In its application, AST identified its five largest projects
as New York-based projects. It further stated that it had no
“knowledge of any incident, act, error, or omission
involving professional services that could reasonably be
expected to be the basis of a claim” against it.
issued the Policy to AST for the period March 22, 2013 to
March 22, 2014. The Policy states that it “applies to
Claim(s) arising from Professional Services rendered
worldwide.” It provides a maximum of $1 million
insurance per claim arising from a “Wrongful Act”
committed by AST's architects and engineers subsequent to
the “Retroactive Date.” The Policy identifies the
“Retroactive Date” as March 22, 2013.
Policy states, in pertinent part:
This insurance applies to a Claim for a Wrongful Act to which
this insurance applies, only if
. . .
(ii) Such Wrongful Act was committed subsequent to the
Retroactive Date(s) stated in Item 6. of the Declarations;
(iii) None of the Insured's directors, officers,
principals, partners or insurance managers knew or could have
reasonably expected that such Wrongful Act might give rise to
a Claim, either prior to the inception date of this Policy,
or the inception date of an earlier Policy, where this Policy
is issued by the Insurer as a continuous renewal or
replacement of such earlier policy, issued by the Insurer.
Policy defines “Wrongful Act” as “a
negligent act, error, or omission, in the performance of
a New Jersey professional engineering corporation with its
principal place of business in New Jersey. The Policy lists
AST's business address in Matawan, New Jersey and
provides that “[n]otice to any Insureds may be given to
[AST]” at that address. RLI delivered the Policy to AST
at its New Jersey address and assessed a New Jersey surcharge
of $36.00. At all times since the Policy was first issued to
AST, RLI billed its premiums to AST in New Jersey and AST
mailed payment of its premiums to RLI from its address in New
October 10, 2013, JVC filed a third-party complaint against
AST for common-law indemnification and contribution, breach
of contract, and professional malpractice in connection with
the engineering services it provided on the Project. The
third-party complaint alleges, in relevant part:
6. That [Coral Crystal's] complaint for damage arises
from construction at 133 Third Avenue, New York, New York,
property adjacent to [Coral Crystal's] property located