Opinion
No. 02377/09.
2012-01-12
VIRGINIA SURETY COMPANY, INC. a/s/o Bovis Lend Lease LMB, Inc., Plaintiffs, v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA and Fujitec America, Inc., Defendants.
JOAN A. MADDEN, J.
Plaintiff Virginia Surety Company, Inc. a/s/o Bovis Lend Lease LMB (“Virginia Surety”) moves for an order granting summary judgment in its favor and awarding it damages in the amount of 50% of the $703,000 paid out by Virginia Surety on behalf of Bovis Lend Lease LMB, Inc. (“Bovis”) and 50% of defense costs incurred in defending claims brought against Bovis. Defendant Fujitec America, Inc. (“Fujitec”) opposes the motion, and defendant Travelers Property Casualty Company of America (“Travelers”) cross moves for an order granting Travelers partial summary judgment on the ground that Virginia Surety is not entitled to contribution for its own defense costs and that Travelers did not breach any duty to defend Bovis.
Background
This dispute arises out of an elevator accident that occurred on December 1, 2005, during work on a construction project at 9 West 31st Street, New York, NY. Bovis was the construction manager on the project. The claimants in the underlying personal injury action were passengers in the elevator at the time of the accident. With one exception, the claimants were employees of one of the subcontractors on the project, GM Crocetti Flooring (“Crocetti”).
Under Crocetti's contract with Bovis (“the Crocetti/Bovis Contract”), Crocetti was required to procure a “Commercial General Liability Insurance policy with a combined single limit for bodily injury, personal injury and property damage of at least $5,000,000 per occurrence and aggregate ... naming [Bovis] as an additional insured ....the Policy [is to be] primary as respects coverage afforded the additional insureds [i.e. Bovis] “In accordance with this requirement, Crocetti obtained such insurance from Virginia Surety that named Bovis as an additional insured. Under the policy, Bovis qualified for an additional insured for liability “arising out of your work' [i.e. Crocetti's work] ...”
The construction elevator at issue was furnished, installed and maintained by Fujitec pursuant to a contract with Bovis (“the Bovis–Fujitec Contract”). Like the Bovis–Crocetti Contract, the Bovis–Fujitec Contract obligated Fujitec to procure a Commercial General Liability Insurance policy with a combined single limit for bodily injury, personal injury and property damage of at least $5,000,000 and named Bovis as an additional insured under such policy. In accordance with such obligation, Fujitec obtained a general liability insurance policy from Travelers which provided coverage to Bovis as an additional insured for liability “caused by your [i.e. Fujitec's] work.”
Under Article of 11.1 of their respective contracts with Bovis, Crocetti and Fujitec each agreed:
[t]o the fullest extent permitted by law ... to defend, indemnify and hold [Bovis] harmless ... from any claim, cost, expense, or liability (including attorneys' fees, and including costs and attorneys' fees incurred in enforcing this indemnity attributable to bodily injury ... caused by or arising out of, resulting from, or occurring in connection with performance of the Work by contractor, its subcontractors, suppliers of any tier, or their agents, servants, or employees, whether or not caused in part by the active or passive negligence or other fault of a party indemnified hereunder, provided, however Contractor's duty hereunder shall not arise if such injury, sickness, disease, death, damage, or destruction is caused by the sole negligence of a party indemnified hereunder....
Additionally, under Article of 11.2 of their respective contracts, Crocetti and Fujitec each agreed:
Should Owner or any other person or entity assert a claim or institute a suit, action, or proceeding against Construction Manager (i.e.Bovis) involving the manner or sufficiency of the performance of the Work, Contractor shall upon the request of the Construction Manager promptly assume the defense of such claim, suit, action, or proceeding, at Contractor's expense. To the fullest extent permitted by law, Contractor shall indemnify and hold harmless Construction Manager and Owner ... from and against any liability, loss, damage or expense (including attorneys' fees incurred in enforcing this indemnity) arising out of or related to such claim, suit, action or proceeding.
After the initiation of the underlying claims against Bovis and the other defendants, Bovis' general liability carrier, Zurich American Insurance Company (“Zurich”) tendered the defense and indemnity of its insured to Virginia Surety and Crocetti's excess carrier, RSUI Indemnity Co. (“RSUI”). Virginia Surety agreed, without reservation, to accept Zurich's tender of the defense and indemnity of Bovis with respect to the claims by Crocetti employees.
By letter dated March 23, 2007 to Zurich, Travelers agreed to defend and indemnify Bovis under a reservation of rights as to Bovis' sole negligence, independent acts and omissions of Bovis, and noted that Bovis is only an additional insured for acts caused by Fujitec's “work” for Bovis.In 2008 and 2009, Virginia Surety settled five underlying claims/actions by certain Crocetti employees for a total of $703,000,
However, Virginia Surety refused to defend and indemnify Bovis with respect to a claim by Nelly Rodriguez (“Rodriguez”), an individual who was not a Crocetti employee. Bovis and Zurich subsequently brought an action against Virginia Surety and RSUI seeking a determination of the rights and obligations of the parties under the insurance policy issued by Virginia Surety. By decision, order and judgment dated October 22, 2008, the court held that Virginia Surety was obligated to defend Bovis including with respect to the claims by Rodriguez, and to provide Bovis with counsel of its own choosing.
Subsequently, Virginia Surety sought to have Travelers indemnify it for half of the settlement amounts and half of its defense and legal costs. When Travelers refused, Virginia Surety commenced this action.
Specifically, Virginia Surety submits evidence that it settled the following five underlying claims/actions by Crocetti employees: Daniel Carpluk, September 2, 2008, $65,000; William Alter, September 8, 2008, $103,000; Thomas Garrett, July 21, 2008, $250,000; Curtis Edwards, July 21, 2008, $225,000; Giberto Rosario, July 10, 2009, $60,000).
The parties conducted discovery and Virginia Surety now moves for summary judgment, arguing that based on the defense and indemnity provisions in the Fujitec/Bovis Contract and Travelers' acceptance of Zurich's tender, Fujitec and Travelers owe and continue to owe a duty to defend and indemnify Bovis with respect to the claims of Crocetti employees and Rodriguez. In addition, Virginia Surety argues that under circumstances, like the instant one, where insurance policies provide coverage against the same risk, two or more primary insurers will be held to be coinsurers. See Continental Cas. v. Rapid–Am, 80 N.Y.2d 640 (1993). Furthermore, Virginia Surety asserts that the injuries and claims stemming from the elevator accident have a connection to Fujitec's installation and maintenance of the elevator at issue either under a negligence theory or based on the doctrine of res ipsa loquitur.
Alternatively, Virginia Surety asserts that even if there were factual issues as to whether Travelers owes a duty to indemnify, at minimum, based on an insurer's broad duty to defend, Virginia Surety is entitled to partial summary judgment against Travelers on the issue of defense costs.
Fujitec opposes the motion, asserting that, the record raises triable issues of fact as to whether the accident was caused by Bovis' sole negligence in overloading the elevator and adding protective material reducing the elevator's capacity, and absent a determination of negligence, it is premature to grant summary judgment. Fujitec also argues that to the extent the indemnification provisions contemplate full indemnification to Bovis for its own negligence, such provisions would be void and unenforceable under General Obligations Law § 5–322.1.Travelers separately cross moves for partial summary judgment, arguing that Virginia Surety is not entitled to recover half of its defense costs from it as a matter of law. Specifically, Travelers asserts that Virginia Surety would only be entitled to recover for attorneys' fees incurred by the law firm of Newman Fitch Altheim Myers (“Newman Fitch”) which represented Bovis in the underlying tort actions and not those incurred by the law firm of Shay & McGuire (“S & M”), which it asserts represented Virginia Surety, rather than Bovis, in connection with the underlying actions. Travelers argues that it has no obligation to contribute to Virginia Surety's legal fees and that its only obligation, which it has satisfied, was to contribute to Newman Fitch's fees for representing Bovis in the underlying actions. In support of its position, Travelers notes that in a related declaratory judgment action brought by Bovis against Virginia Surety and its excess insurer (hereinafter “the Bovis action”) the court held that Bovis had a right to retain Newman Fitch as its defense counsel in the underlying personal injury actions.
Moreover, Travelers argues that Travelers is not obligated to pay fees incurred when S & M settled the five personal injury actions, asserting that in settling the actions, S & M represented Virginia Surety and not Bovis and that, in any event, S & M could not represent Bovis as it had a conflict of interest based on its defense of Virginia Surety in the Bovis action.
Travelers also argues that Bovis does not qualify as an additional insured under Travelers' policy endorsement entitled, Blanket Additional Insured (Contractors) which provides, in part, that “[Bovis] does not qualify as an additional insured with respect to the independent acts and omissions of [Bovis]. [Bovis] is only an additional insured with respect to liability caused by [Fujitec's] work for [Bovis].” Based on this endorsement, Travelers argues that the record does not show that the elevator accident was caused by Fujitec's work but, rather, demonstrates that the accident was the sole result of Bovis' negligence.
In reply and in opposition to Travelers' cross motion, Virginia Surety argues that under the endorsement requiring that the accident be caused by Fujitec's work, additional coverage is afforded to Bovis if it is shown that Fujitec bears some responsibility for the accident. Virginia Surety then argues that the record is sufficient to show that Fujitec is at least partially at fault based on its exclusive control of the elevator pursuant to its elevator maintenance contract with Bovis, and its failure to properly maintain the elevator, including providing the proper back-up and breaking systems.
As for the defense costs, Virginia Surety argues that contrary to Traveler's argument although Newman Fitch represented Bovis in the underlying tort actions, such representation need not be exclusive, and that S & W appeared and represented Bovis' interests during the mediation and settlement of five underlying Crocetti actions, and therefore Travelers should pay its share for these costs. Moreover, Virginia Surety maintains that it informed Travelers of the mediation and settlement conferences, and although invited it to participate and Travelers declined to do so.
Discussion
Under the coinsurance doctrine, “where insurance policies provide coverage for the same interest and against the same risk, concurrent coverage exists and two or more primary insurers will be held to be coinsurers” National Union Fire Ins. Co. of Pittsburgh, P.A. v. Hartford Ins. Co. of the Midwest, 248 A.D.2d 78, 84 (1st Dept 1998). “Where two or more insurers bind themselves to the same risk and one pays the whole loss, the paying insurer has a right of action against his coinsurers for a ratable portion of the amount paid.” Id., at 85. In this case, Travelers does not deny that Virginia Surety and Travelers are co-insurers and, in fact, the record shows Travelers has sought reimbursement from Virginia Surety for half of Newman Fitch's fees, and has received most of the amounts sought.
Travelers argues that Virginia Surety has not paid its portion of the fees incurred by Newman Fitch. However, in reply, Virginia Surety states that its third party administrator has issued a check in the amount of $33,431.89 representing its 50% share of such fees, and the only dispute remaining as to these fees is a disputed amount of $854.
Instead, at issue is whether Bovis qualifies as an additional insured under the policy Travelers issued to Fujitec so as to trigger Traveler's obligations as a co-insurer. Specifically, Travelers asserts that Virginia Surety has not established that Fujitec's work “caused” the elevator accident, as required by the relevant policy endorsement, and/or that the accident was the sole result of Bovis' negligence.
To the extent Travelers argues that it is not required to pay defense costs on the ground that Bovis is not an additional insured under the policy, this argument is without merit. “An insurer's duty to defend its insured is exceedingly broad” Regal Constr. Corp. v. National Union Fire Ins. Co., 15 NY3d 34, 37 (2010)(internal citations and quotation marks omitted). Thus, an insurer “will be called upon to provide a defense whenever the allegations of the complaint suggest ... a reasonable possibility of coverage” Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137 (2006). “If [a] complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend.” Id . Moreover, “[t]his standard applies to additional insureds and named insureds.” Regal Constr. Corp. v. National Union Fire Ins. Co., 15 NY3d at 37 (internal citations omitted). Under this standard, Travelers would be required to pay defense costs under the policy.
Next, Travelers' argument that it should not be required to pay defense costs incurred by S & W in connection with the mediation and settlement underlying claims of five Crocetti employees as S & W represents Virginia Surety and not Bovis is unavailing. In reaching this conclusion, the court notes that the mediation and settlement was done on behalf of Bovis and that Travelers was given an opportunity to participate but declined to do so. Furthermore, as Virginia Surety argues, there is no basis for finding that Newman Fitch has the exclusive right to represent Bovis. Moreover, as Virginia Surety agreed, without reservation, to defend and indemnify Bovis with respect to the Crocetti employees, no conflict of interest existed precluding S & W from representing Bovis' interests in the mediation and settlement of claims relating to the five Crocetti employees. Notably, however, to the extent Virginia Surety is seeking to recovery defense costs related to S & W's representation of it in connection with coverage issues, such as those incurred in defending the Bovis action, Travelers is not responsible for those costs.
Accordingly, Virginia Surety is entitled to one-half the defense costs incurred during the mediation and settlement of the underlying claims of the five Crocetti employees.
As certain invoices are redacted, the court cannot determinate the amount of defense costs attributable to mediation and settlement of the five underlying Crocetti actions as opposed to coverage or other issues.
The remaining issues concern Virginia Surety's entitlement to half of the amounts it paid to settle the claims on behalf of the five Crocetti employees. Notably, “[t]he duty to indemnify is ... distinctly different from the [duty to defend].” Servidone Const. Corp. v. Security Ins. Co. of Hartford, 64 N.Y.2d 419, 424 (1985). Specifically, while “the duty to defend is measured against the allegations of the pleadings, the duty to pay is determined by the actual basis for the insured's liability to a third person.” Id.; see also, BP Air Conditioning Corp. v. One Beacon Insurance Group, 33 AD3d 116, 124 (1st Dept 2006), modified on other grounds, 8 NY3d 708 (2007)(holding that “a duty to defend an additional insured is not contingent on there having been an adjudication of liability giving rise to a duty to indemnify the additional insured”).
In this connection, the court notes that as a subrogee of Bovis, Virginia Surety's rights against any third-party are derivative and limited to the rights the insured, i.e. Bovis, would have against such third party. Federal Ins. Co. v. Andersen & Co., 75 N.Y.2d 366, 372 (1990).
Here, as noted above, in order for Bovis to recover under the endorsement in Traveler's policy with Fujitec it must be shown that Fujitec's work “caused” the elevator accident, and that the accident was not result of the independent acts and omissions of Bovis. “An insurance contract is to be interpreted by the same general rules that govern the construction of any written contract and enforced in accordance with the intent of the parties as expressed in the language employed in the policy.” Throgs Neck Begels v. GA Ins. Co. of NY, 241 A.D.2d 66, 69 (1st Dept 1998) (citation omitted). In general, “the court will construe the limitations of an insurance contract in the light of the speech of common [people].' Id., quoting Gittelson v. Mut. Life Ins. Co. of NY, 266 A.D. 141, 145 (1st Dept 1943). “Any ambiguities will be resolved against the insurer, as drafter of the policy [and][t]he touchstone for interpreting insurance contracts, as with other contracts, is the reasonable expectation of the parties.” Id. (citations omitted).
In general, additional insured endorsements in the construction context have been interpreted broadly by focusing “not [on] the precise cause of the accident ... but upon the general nature of the work.” Consolidated Edison Co. v. Hartford Ins. Co., 203 A.D.2d 83, 83 (1st Dept 1994); See also, Structure Tone v. Component Assembly Systems, 275 A.D.2d 603 (1st Dept 2000). Thus, coverage has been found regardless of the additional insured's negligence when the claimant is injured while engaged in work on behalf of the subcontractor whose work was covered by the relevant policy, and/or was employed directly or indirectly by the subcontractor. See e.g., Chelsea Assocs. LLC v. Laquila–Pinnacle, 21 AD3d 739 (1st Dept), lv denied,6 NY3d 742 (2005)(holding that insurer was required to indemnify plaintiff companies who were named as additional insured under subcontractor's policy for liability “arising out of (subcontractor's) work,” for claims arising out of injuries sustained by employee of subcontractor en route to his work assignment); Tishman Const. Corp. of New York v. American Mfrs. Mut. Ins. Co., 303 A.D.2d 323 (1st Dept 2003)(finding that work performed on behalf of subcontractor pursuant to contract between the additional insured and the subcontractor was covered by policy and that any negligence by the additional insured is irrelevant).
The court recognizes that additional insured endorsements at issue in the above-cited cases, like the one in the Virginia Surety policy, provide coverage to the general contractor for liability “arising out of the subcontractor's work,” whereas the Traveler's policy provides coverage for liability “caused by” Fujitec's work, and excludes coverage for independent acts by the general contractor, i.e. Bovis. However, as the record indicates that Fujitec's work included installing and maintaining the elevator at issue it cannot be said as a matter of law that this work did not cause the accident.
In addition, the record does not establish that the accident was the result of an independent act by Bovis.
In support of its argument that Fijutec's work did not “cause” the elevator accident, Travelers relies on Home Ins. Co. v. American Ins. Co., 147 A.D.2d 353 (1st Dept 1989). In that case, which involved an insurance policy covering real property, the court considered whether an exclusion for losses in such policy caused by artificially generated electrical current applied. The court interpreted “the phrase caused by.. [or] resulting from' in reference to an excluded peril [as] requir[ing] the insurer to prove that the excluded peril ... is the proximate cause of the loss.” Id., at 354. The court also wrote that, “in the context of this case, the causation inquiry stops at the efficient physical cause of the loss; it does not trace events back to their metaphysical beginnings.” Id. The holding in Home Ins. Co. v. American Ins. Co. is not controlling here as this dispute involves an insurance policy issued in the context of construction field as opposed to insurance on real property. In addition, the “caused by” phrase in Home Ins. Co. v. American Ins. Co. was used to exclude coverage whereas here, “caused by” is used to define the obligations of a subcontractor to a general contractor under an additional insured endorsement.
That being said, as there are factual issues as to whether the accident was caused by Fujitec's work, Virginia Surety is not entitled to summary judgment on its claim seeking half of the settlement proceeds. Likewise, although under the Fujitec/Bovis Contract, Fujitec agreed to indemnify Bovis for any claim “attributable to bodily injury ... caused by or arising out of, resulting from, or occurring in connection with performance of the Work by [Fujitec],” summary judgment on a claim for indemnification would be premature at this time as there are factual issues as to whether the injuries can be attributed to Fujitec's work on the elevator as opposed to the negligence of Bovis in operating the elevator. Pardo v. Bialystoker Center & Bikur Cholim, Inc., 10 AD3d 298 (1st Dept 2004); Gomez v. National Center for Disability Services, Inc., 306 A.D.2d 103 (1st Dept 2003). Moreover, the doctrine of res ipsa loquitur is not applicable here as Fujitec did not have exclusive control of the elevator which was being operated by Bovis at the time of the accident. See generally, Kambat v. St. Francis Hosp., 89 N.Y.2d 489, 494 (1997).
Finally, contrary to Fujitec's argument, the indemnification provision at issue does not violate General Obligations Law (GOL) § 5–322.1
, as the provision includes language limiting Fujitec's liability to that “permitted by law” or that caused by Bovis “sole negligence.” See Dutton v. Charles Pankow Builders, Ltd., 296 A.D.2d 321, 322 (1st Dept 2002)lv denied,99 N.Y.2d 511 [2003] ).
.GOL § 5–322.1 “declares void agreements purporting to indemnify contractors against liability for injuries contributed to, caused by or resulting from the negligence of the promisee ... or indemnitee, whether such negligence be in whole or in part.' “ Brown v. Two Exchange Plaza Partners, 76 N.Y.2d 172, 178, 179 (1990)
Accordingly, for the reasons above, there are triable issues of fact precluding a grant of summary judgment on Virginia Surety's claim seeking indemnification from defendants for half the amounts paid by it in connection with the settlement of the underlying claims of the five Crocetti employees.
Conclusion
In view of the above, it is
ORDERED that Virginia Surety's motion for summary judgment is granted to the extent of finding that Virginia Surety is entitled to reimbursed for half of the defense costs it incurred in mediating and settling the five underlying Crocetti actions, plus interest from the date of settlement and is otherwise denied; and it is further
ORDERED that on or before February 9, 2012, Virginia Surety shall submit to this court an order on notice setting forth the amounts of defense costs incurred by it in mediating and settling the five underlying Crocetti actions and attach relevant invoices which may be redacted to the extent they contain confidential information, and the non-redacted version of the invoices shall be provided to the court for in-camera inspection; and it is further
ORDERED that Travelers' cross motion for partial summary judgment is denied; and it is further
ORDERED that the parties shall appear for a status conference on February 16, 2012, at 9:30 am in Part 11, room 351, 60 Centre Street, New York, NY.