Dryden Mutual Insurance Company, Appellant,v.Stanley Goessl, et al., Defendants, AP Daino & Plumbing, Inc. et al., Respondents.BriefN.Y.April 28, 2016Court o.fAppea~ To be argued by: Bruce R. Bryan 30 minutes DRYDEN MUTUAL INSURANCE COMPANY, Plaimiff-Appellant, VS. STANLEY GOESSL, d/b/a S & K PLUMBING; ANDREW SMOLNIK and CATHERINE SMOLNIK, APL- 2014 - 00231 Index No. 10-1933 Defendants, AP DAINO & PLUMBING,INC., THE MAIN STREET AMERICA GROUP, Defendants-Respondems. Appellant’s Brief BRUCE R. BRYAN, ESQ. Attorney for Appellant, Dryden Mutual Ins. Co. 333 East Onondaga Street Syracuse, New York 13202 (315) 476-1800 (315) 474-0425facsimile PETER W. KNYCH, ESQ. Attorney for Appellant, Dryden Mutual Ins. Co. One Park Place, Suite 404 Syracuse, NY 13202 (315) 472-1175 (315) 234-4119facsimile Dated: December 2, 2014 DISCLOSURE STATEMENT Dryden Mutual Insurance Company is an insurance company licensed in the State of New York with offices located at P.O. Box 1089, Dryden, New York 13053. No parents, Insurance Company exist. subsidiaries or affiliates of Dryden Mutual JURISDICTION Jurisdiction with the Court of Appeals is based on two independent grounds: 1. Jurisdiction is based on CPLR §5602(a)(1)(i) in that the order and judgment of the Appellate Division, Fourth Department, on appeal to this Court is a final determination of the declaratory judgment action.. The Appellant contends the Appellate Division erred on questions of law when reversing the trial court judgment and ordering Dryden, and not Main Street, to provide liability coverage to Goessl. Points I, II and II in the Appellant’s brief concerning whether the respective insurance policies provided coverage to Goessl were preserved throughout proceedings before the trial court and the Fourth Department in that the purpose of the proceedings was to address the issues raised in these Points. As such, these issues were preserved at R 5- 693. The issue in Point IV regarding the claim that the Fourth Department failed to apply the proper standard of review was preserved in the Fourth Department’s Decision and Order which has been made part of the Record at pages 689-93. 2. Jurisdiction is also based on CPLR §5501 in that the Appellate Division reversed a final judgment of the trial court while finding new facts and entered a final judgment based on those new facts. The issue raised in Point V of the Appellant’s brief regarding the claim that the Fourth Department made new findings of fact when reversing the trial court was preserved in the Fourth Department’s Decision and Order. Said Decision and Order has been made part of the Record at pages 689-93. STATUS OF RELATED LITIGATION At the .time of the writing of this brief, there is no pending related litigation. TABLE OF CONTENTS Table of Authorities ....................................................................................................i Questions Presented ...................................................................................................1 Statement of Facts ......................................................................................................3 Argument: Point I Under New York Law, An Agreement Between a Worker and His Employer Labeling the Worker as an Independent Contractor is Not Dispositive of an Insurance Company’s Right to Deny Coverage or Its Obligation to Provide Coverage if the Worker is, in Actuality, an Employee of the Company ........................28 Point II The Main Street Policy Provides Liability Coverage to Goessl as an Employee of A.P. Daino For His Potential Liability in the Tort Action .......................... .........41 Point III The Dryden Policy Does Not Provide Liability Coverage to Goessl for his Work as an Employee of Daino ....................................................................64 Point IV The Majority Opinion Failed to Apply the Correct Appellate Standard of Review When It Substituted Its Review of the Trial Evidence and Reversed the Trial Judge’s Decision Which Was Based on the Trial Judge’ s Fair Interpretation of the Evidence ...................74 Point V The Majority Opinion Made Erroneous Findings of Fact to Reverse the Judgment of the Trial Court ..................79 Conclusion ...............................................................................................................88 TABLE OF AUTHORITIES 409-4I1 Sixth Street, LLC v. Mogi, 22 N.Y.3d 875 (2013) .................67, 76, 79 Abrams v. Great American Ins. Co., 269 N.Y.908 (1935) ......... ...................42 Baughman v. Merchants Mutual Insurance Co., 87 N.Y.2d 589 (1996) ................................................................ 31, 42, 42 69 70, 71 72, 81, 87 Caporino v. Travelers Ins. Co., 62 N.Y.2d 234 (1984) ...........................42, 72 City of Albany v. Standard Accident ln. Co., 7 N.Y.2d 422, ¯ 430 (1960) ......................................................................37, 38, 69, 80 First State Insurance Company v. J&S United Amusement Corp., 67 N.Y.2d 1044 (1986) ................................................................37, 39 Fung v. Japan Airlines Company, LTD., 9 N.Y.3d 351 (2007) ...................... Gallagher v. Houlihan Lawrence Real Estate, 259 A.D.2d 853 (3rd Dep’t 1999) ....................................... .....................................29 Gliemli v. NetherlandDairy Co., 254 N.Y.2d 60 (1930) .........................50, 53 In Re Basin St. Inc., 6 N.Y.2d 276 (1959) ......................................48, 49, 51 In Re Hertz Corp., 2 N.Y.3d 733 (2004) ...........~ ................................46, 51 In Re Morton, 284 N.Y. 167 (1940) .................................33, 47, 48, 49, 53 K2 Investment Group, LLC v. American Guarantee & Liability Ins. Co., 22 N.Y.3d 578 (2014) ......................................................................39 Jered Contracting Corp. v. New York City Transit Authority, 22 N.Y.Zd 187 (1968) ......................................................................34 Matter of 12 Cornelia St., 56 N.Y.2d 895 (1982) ..........................46, 48, 57 i Matter of Beach v. Velzy, 238 N.Y. 100 (1924) ...................................51, 53 Matter of Electrolux Corp., 288 N.Y. 440 (1942) ............................48, 49, 53 Matter of Field Delivery Service, 66 N.Y. 2d 516 (1985) ...........................53 Matter ofLiberman v. Gallman, 41 N.Y.2d 774 (1977) ..........................48,50 Matter of MNORX, Inc., 46 N.Y.2d 985 (1979) ...................................50, 51 Matter of Ted is Back Corp., 64 N.Y.2d 725 (1984) ..............................48, 57 Matter of Sullivan Co., 289 N.Y. 110 (1942) ......................................48, 57 Michaels v. City of Buffalo, 85 N.Y.2d 754 (1995) ...................................41 Morgan v. Greater New York Taxpayers Mutual Insurance Assoc., 305 N.Y. 243 (1953) ............................................ ¯ .......................... 42 Murray v. Union Railroad Co. of New York City, 229 N.Y. 110 (1920) ...........40 Thompson v. Grumman Aerospace Corp., 78 N.Y.2d 553 (1991) (2004) ......................................................................32, 34, 37, 51, 86 Villa Maria Institute of Music v. Ross, 54 N.Y~2d 691 (1981) ...................48, 50 Wawrzonek v. Central Hudson Gas & Electric Corp., 276 N.Y. 412 (1938) ............................................................................... 35, 40, 58 STATUTES CPLR §5501 .................................................................................79 OTHER SOURCES Webster’s New World Dictionary, 3rd College Ed. (1988) ........................... 71 ii o o QUESTIONS PRESENTED Whether the Appellate Division’s majority decision erred when it failed to judicially assess A.P. Daino’s and Goessl’s actual work relationship, and instead primarily relied on an agreement between them that mislabeled Goessl as an independent contractor? In reversing the trial court, the majority failed to judicially assess the actual relationship and primarily relied on the agreement that mislabeled Goessl. Whether the Main Street policy insured Goessl as an employee of A.P. Daino? In reversing the trial court, the majority erroneously held that the Main Street policy did not insure Goessl. Whether the Dryden policy insured Goessl given that his actual work relationship was that.of an employee of A.P. Daino? iln reversing the trial court, the majority erroneously held that Goessl iwas not an employee but was a subcontractor/independent contractor ’ and that Dryden insured Goessl in that work capacity. o Whether the majority failed to apply the correct appellate standard of review which required it to review whether the lower court’s decision could not be reversed under any fair interpretation of the evidence. In reversing the trial court, the Appellate Division did not follow the correct appellate standard of review. Whether the majority made erroneous f’mdings of fact to reverse the trial court? In reversing the trial court, the Appellate Division made erroneous findings of fact. STATEMENT OF FACTS For many years, Goessl worked as an employee for various plumbing companies, including A.P. Daino Stanley Goessl is a licensed plumber, called in the trade a "journeyman plumber." (R40; 63) Commencing in 1986 and for the next 13 years, Goessl was employed as a plumber for Carl Plumbing. (R40) He then was employed as a plumber for A. P. Daino Plumbing & Heating, Inc. ("A.P. Daino") for about one year. (R40-41; 464) Therea~er, he was employed as a plumber for Artisan Plumbing for about one year. (R41) In approximately 1999, the economy declined and work at Artisan Plumbing slowed. (R41; 64-65) Not wanting to go on unemployment, Goessl started doing plumbing work on his own under the name "S & K Plumbing," (R41) He filed a business certificate in Oswego County as "Stanley Goessl doing business as S & K Plumbing." (R64-65; 352-53) Goessl also obtained liability insurance under the name "Stanley Goessl d/b/a S & K Plumbing." (R69) Goessl had purchased the liability insurance before Mr. Daino approached him a number of months later to ask Goessl to work for A.P. Daino again. Id. For the next several months, before Goessl went to work for A.P. Daino, Goessl did various plumbing jobs as S & K Plumbing. (R43) He also did home inspections and snowplowing for a company called Preston Home 3 Inspection. (R42) Goessl set his own hours and no one Supervised him. (R42- 43) Less than one year later, A.P. Daino offered Goessl "a job" In 2000, Mr. Daino, the owner of A.P. Daino, approached Goessl and "offered [him] a job." (R43; 391) Goessl had worked for A.P. Daino two years earlier as an employee. (R40-41; 464) A.P. Daino almost entirely did plumbing work for residential builders on new construction houses. (R87; 354-55) It alsodid some plumbing work on commercial jobs and service calls. Id___~. Mr. Daino was a licensed "master plumber." (R383) In 2000, he employed five plumbers for the company. (R93) Mr. Daino told Goessl that A.P. Daino had the chance to do plumbing work for another residential builder and he Would accept the work if Goessl would come to work for him. (R64-65) When Mr. Daino made the proposal, he "never offered [Goessl] to be an employee" ofA.P. Daino. (R59-60; 65; 92; 97-98) Nor did he give Goessl the option of both working as an employee for A.P. Daino and doing side jobs as S & K Plumbing. Id__=. Mr. Daino did not seek legal advice on whether Goessl could be an employee of the company and still maintain his side business as S & K Plumbing. (R93) Goessl also mistakenly believed he could not be both an employee ofA.P. Daino and "maintain [his] freedom to do other work" as S & K Plumbing. (R67-68) 4 ¯ Apparently based on their mistaken belief, Mr. Daino and Goessl made an oral agreement that Goessl would call himself an "independent contractor" for A.P. Daino. (R59-60) Although labeled an "independent contractor," A.P. Daino would only pay Goessl $20 per hour for his labor. (RS0) Out of this modest wage, Goessl would be required to pay all of his income taxes and social security taxes. A.P. Daino also would not provide to Goessl employee benefits, such as health insurance, paid vacation or sick time, and worker’s compensation insurance. Mr~ Daino also made Goessl provide to A.P. Daino an annual certificate proving he had paid for and carded liability insurance. (R68-70) Goessl agreed to Mr. Daino’s proposal. But A.P. Daino still treated Goessl as an employee and expected Goessl to tell its customers he was employed by A.P. Daino When Goessl went back to work for A.P. Daino, which he did full time, five days a week, he did "pretty much" the same job for the company as when he worked for the company two years earlier as an employee. (R73; 79; 451; 468) A.P, Daino exercised the same level of direction and control over Goessl as it did over the other comparable employees in the company. (See R73-74; 84-86; 472-75; 490-91; 528) There was no difference between the level of direction and control that A.P. Daino had over Goessl when he came back to work and the level of direction and control Carl Plumbing had over him when he had worked as an employee for them for 13 years. (R56-57) Mr. Daino 5 "assumed" that when Goessl went on an assigned job for the company, he "would identify himself" as "someone working for A.P. Daino." (R84; 479) Mr. Daino claimed he was a "fair boss" to Goessl and the other employees. (R89) He admitted he exercised a degree of power over them. (R89) He treated Goessl essentially the same as other .comparable plumbers employed by the company. (See R73-74; 84-86) According to Mr. Daino, Goessl was an "important part of [his] business." (R100) . Goessl did not have an ownership interest in A.P, Daino. (R388) Nor was there any prospect of him becoming an owner. Id. In general, Goessl was under the same direction and control as the "official" employees. (See R74; 84-86) When Mr. Daino sent him to do work on A.P. Daino jobs, he "considered [him]self to be [A.P. Daino’s] .employee." (R57; 363) Commencing in 2000 and for the next nine years, Goessl always identified himself to customers on jobs for A.P. Daino as "Stan from A.P. Daino." (R53; 364; 380) The "official". employees likewise identified themselves to customers as from A.P. Daino. (R85)Goessl never identified himself to the customers as "Stan from S & K Plumbing." Id. 6 Goessl’s "actual relationship" with A.P. Daino A.P. Daino expected Goessl to work for the company full time. (R64) Goessl reported to the company office five days a week and worked approximately eight hours a day. (R43; 64; 79; 92; 360; 392-93) Because of Goessl’s higher level of experience, Mr. Daino assigned Goessl to supervise one ofA.P. Daino’s two crews of plumbers. (R51-52; 74) Everyone else in the crews were "official" employees of the company. (R46; 52; 74) A.P. Daino did not have any other plumbers who worked for the company as a subcontractor. (R364-65) When asked why he was the only subcontractor plumber, Goessl replied: "I don’t know why." (R365) Goessl was not shifted from crew to crew on a daily or weekly basis. (R46; 80) The crews consisted of two or three individuals because the jobs usually required at least two people working together to do the work. (R46; 85; 383; 487) Other than Goessl, only A,P. Daino employees were on the crews. (RS01) One of the individuals in Goessl’s crew was an apprentice. (R44; 52- 53) Ira Gray was the first apprentice in his crew. (R44) Later, Mr. Daino assigned his son, Jamie Daino, to apprentice in Goessl’s crew. (R52-53; 499- 500) Ira and Jamie were "official" employees of A.P. Daino. (R52-53; 499- 500) A.P. Daino told Goessl to train and manage Ira and Jamie so that eventually they might become licensed journeymen plumbers. (R51-53; 77- 78; 445-46) When assigned a job, Goessl would tell the apprentice "things that he needed to do" that were "based on what Mr. Daino had told [him and his] crew needed to do." (R446) Mr. Daino expected Goessl to instruct the apprentice on "what to do, when to do it, and how to do on Daino jobs." (R500) Moreovei’, Craig Daino expected Goessl to "monitor the performance or the quality of work of [the apprentice’s] job." Id. Goessl never personally paid Ira or Jamie for their work. (R446) Craig Kugler supervised the other crew. (R74) He was an "official" employee of the company. Id. Kugler had comparable experience and responsibilities. Id. Kugler was the highest paid employee in the company. (R471) According to Mr. Daino, Kugler was paid four dollars an hour less than Goessl "because he was anemployee and receiving benefits." (R473) But Mr. Daino also admitted that "[a]s to the journeymen plumbers who worked for [A.P. Daino]," Goessl was" the most competent." (R528) Mr. Daino gave the crews "some flexibility" on when to report to work in the morning. (R90) Mr~ Daino "didn’t know if he actually gave them discretion," but "it was pretty much they had agreed upon a start time and that~ was pretty much what was always expected." (R488) Goessl’s crew reported~ for work at 6:30am and Kugler’s crew reported to work at 8:00am. (R439)I Everyone would "go meet at the shop and leave from there to go to [their] jobs." (R47) Goessl and the "official" employees were expected to wear work boots. (R88) A.P. Daino also issued Goessl and the "official" employees items of clothing bearing the A.P. Daino name, including a company jacket, T-shirts, and hats. (R379; 477-78) Goessl passed the test to be a journeymen plumber and had his journeymen’s card for eighteen years. (R77; 97; 356-58) He renewed his journeymen’s card annually and had to show proof he was employed by a master plumber. Id. Goessl identified Mr. Daino as the master plumber for whom he was employed on his journeyman’s card. Id. As with, the other employees, A.P. Daino paid for Goessl’s annual renewal licensing fee. Id. When Goessl and the crews reported for work, they received their daily work assignments. (R47-49; 377-78) Goessl had absolutely no role in "select[ing] jobs to do on a daily basis." (R48-49) Nor did he assign work to anyone at A.P. Daino other than the apprentice assigned to work with him. 384) When asked what role he played "in determining wl~at job [he] was going to do," Goessl responded "I really don’t. He [Craig Daino] gives us a list, and all three of us go to that job." (R384) 9 Mr. Daino told Goessl and the other employees "either verbally or through a note which job [they] were to report to." (R439; 442) Mr. Daino placed the notes in the company trucks used by the crews to perform their assigned jobs. (R89; 489) The notes stated the "lot number or house that [the crew] had to go to." (R48) The notes could contain multiple assignments~ (R48) Mr. Daino told Goessl and the others "which job to do first." (R503) Goessl always "followed his instructions as to the order of the performance of the work." (R48) Goessl drove a company truck to the assigned jobsites. (R76; 80; 377- 78) Each A.P. Daino truck contained tools, materials, parts, and supplies owned by A.P. Daino to perform the assigned jobs. (R49-50; 80; 377-78; 489) Goessl regularly used A.P. Daino tools on the jobs. (R50; 57; 80-81; 92; 396) If Goessl "had problems with any equipment that [he] had been provided by Daino [he] could call Mr. Daino and report that problem." (R439) Goessl could use his own hand tools on a job, but there was no agreement requiring him to do so. !(R67; 491) As with the other employees, Goessl was provided with a company cell phone, although Goessl eventually used his own phone. (R389; 480-81) Goessl and the other employees used the company trucks to do the assigned jobs. (R377-78) 10 As with other employees, Goessl had authority to purchase materials to be used on assigned jobs by signing and using an A.P. Daino company credit card. (R77; 87; 368; 380-81; 492-93) The credit cards were kept in the company vehicles to allow Goessl and the other employees to purchase materials for the jobs when needed. (R492) For example, Goessl regularly used the company credit card at Home Depot to purchase materials for assigned jobs. Id. Goessl was also authorized to use a company credit card to purchase fuel for the company trucks. (R368; 492-93) Mr. Daino monitored the materials and supplies purchased by Goessl and the other employees when he went "back through and check[ed] to see what [they had] used." (R3 81) While performing an assigned job, it was not unusual for Mr. Daino to call: Goessl and order him to stop what he was doing and immediately go to another job. (R49; 89; 439-40) "If there was an emergency or something, [Goessl and his crew] had to pull off to go somewhere for a service call or something." (R49) Goessl was expected to do as he was told. (R89) Goessl said it happened about "two or.three time a week." (R439; 49) He "would be pulled off one job that Daino had assigned [to him] and then assigned to a different job." (R439; 49) Goessl always followed the "order or instruction." (R439-40; 49) He never said no. Id. 11 Mr. Daino inspected the work done by Goessl and the crews, although the need to inspect the work was rare. (R86) Mr. Daino gave the same level of inspection and supervision to both crews. (R86; 490) Mr. Daino exercised the same level of direction and control over Goessl’s crew and over Kugler’s crew consisting exclusively of "official" employees. (R490) The degree of individual supervision depended on a person’s knowledge and skill level as a plumber. (R86) Someone like GoesSl or Kruger needed less individual supervision because they were "experienced plumbers." (R86-87) Mr. Daino generally did not need to instruct Goessl and the employee plumbers on how to do a job because they already knew how to do it. (R525) ~ Nonetheless, Mr. Daino would "tell him what to do on a job." (R448) Mr. Daino "instructed [Goessl] on how to do certain jobs given that he is a master" plumber. (R401; 498-99) Mr. Daino would tell him the "method and manner of doing a certain job" and Goessl and the other employees "follow[ed] his instruction." (R401) Mr. Daino expected that if Goessl or the other employees "had questions on how to do a job, they would .come to [him]." (R499) For example, Goessl did .not have much experience on commercial jobs, and therefore he "wouldn’t know how to do it." (R448) Mr. ~ Daino "would give [him] directions on it" and tell him "[h]ow he wanted it." 12 (R448) Mr. Daino also had the power to go back to a job he had done and fix or redo it. (R503) As with both crews, Goessl had to report to A.P. Daino during the day to ascertain whether the company.needed other work to be performed. (R88; 498) If Goessl and his crew or the other crew completed their assigned jobs before the end of the work day, they were also expected to call into Mr. Daino to "[s]ee if there’s other work." (R443-44; 87) At the end of the workday, Goessl droVe "the truck back to [A.P. Daino’s] commercial building" in Central Square. (R378) About five times a year, A.P. Daino allowed Goessl to drive one of the A.P. Daino trucks home overnight, either because he had an assigned job near his home or because he had a mechanical problem with his personal vehicle and he needed transportation. (R55; 379) Goessl would also set up service calls by making telephone calls for A.P. Daino to customers. (R54; 385) When calling a customer to "set up a time and a day to be there to do a service call," he would identify.himself as "Stan from Daino." Id. Goessl understood that "if Mr. Daino wanted, he could fire ~or terminate [him] at any time." (R55; 89; 445) He worked on a day-by-day basis. (R497) A.P. Daino could terminate him even if he was in the middle of a job. (R497) 13 Goessl further understood that if he were terminated, the only money he would be owed by A.P. Daino would be for the hours he worked up to the moment of termination. (R445) The customers belonged to A.P. Daino. (R54-55; 82-83; 381; 384; 448) Goessl played absolutely no role in obtaining the jobs that he was sent to perform for the company. (R55) Goessl never "negotiat[ed] or enter[ed] into contracts on behalf of Daino." (R384) Nor did he have any "management responsibilities at Daino." Id. "Mr. Daino would get the contract or the customer he would assign [him] and other crew members of [his] to do it." Id. Mr. Daino expected that Goessl and his other employees would not solicit A.P. Daino’s customers for side work. (R88) Goessl never tried to solicit A.P. Daino customers "to do work for them that would not be billed through Daino?’ (R448) After completing an A.P. Daino job, the customer never contacted Goessl to do more work instead of calling A.P. Daino. (R449) A. P. Daino billed the customers,.not Goessl. (R54-55; 82-83; 381) As Goessl said, Mr. Daino "takes care of all of that." (R381) If the work performed by Goessl or his crew had a problem, the customer contacted and complained to Mr. Daino, not Goessl. (R523) ~ As a "fair boss," Mr. Daino would typically grant reasonable requests from the employees and Goessl. (R89-90) In general, Goessl asked for 14 permission to take time off from work. (R400) There were times when Mr. Daino denied permission because Goessl was needed. (R400-401; .440-41) Over a nine year period, there were a few times that Goessl did not call and did not go into work. (R67) Goessl never hired another plumber to substitute for him at A.P. Daino. (R53) Goessl also admitted he would have had to obtain Mr. Daino’s permission to do so. (R54) Like the "official" employees, Goessl was paid on an hourly basis. (R50) Over the period of nine years from 2000 to 2009, Goessl’s hourly rate only increased from $20 an hour to $24 an hour. (R360) Over the nine year period, Mr. Daino only paid Goessl "a little bit more money than some of [his]. employees," yet also gave the "official" employees employee benefits such as paid vacation and sick time, health insurance, unemployment insurance, and the employer’s share of social security taxes. (R90-91) In 2009, Goessl only made $33,000.00 gross income, before deduction for expenses. (R369) After 2006, all of his income was from A.P. Daino. (R45; 444-45) As with the "official" employees, Goessl was always paid for the hours he worked, regardless of whether there was any problem or issue with his work, or any other reason. (R401) He was also paid regardless of whether A.P. Daino received payment from a customer. (R51) 15 All work that Goessl performed for A.P. Daino was billed under the A.P. Daino name. (R495-96) It was never billed under S & K Plumbing or Stanley Goessl. Id. Typically, A.P. Daino made a 10% profit on the work of independent contractors. (R83) But A.P. Daino made a substantially greater profit off of Goessl’s work. (R84; 476-77) Mr. Daino characterized Goessl’s hourly rate as a "job cost" just like any other job cost for labor to do a job. Id. While A.P. Daino paid Goessl $24 an hour, Mr. Daino acknowledged he billed Goessl out to customers for service work at $65 to $70 and hour. Id. Mr. Daino justified his ability to bill Goessl out at three times his hourly rate on the basis that he had other costs of doing business such as vehicle and material costs. Id. This was the same profit he made ~from Kugler’s work, an undisputed "official" employee ofA.P. Daino. (R476-77) A. P. Daino required Goessl and the other employees to report their hours worked on a weekly basis..(R81) While the "official" employees who submitted weekly "timecards" showing the weekly hours they worked, Goessl submitted weekly !’invoices" in the name of S & K Plumbing showing the hours he worked. (R47; 95-96) As with the other employees, Goessl received a weekly paycheck. (R50; 360) His paycheck was made payable to "Stan Goessl" or "to the order of S & K Plumbing." (R385) A.P. Daino did not withhold taxes at the end of the year and it issued him a Form 1099. (R46; 66; 16 361; 468-69) Goessl paid income and social security taxes out of what he was paid by A.P. Daino. (R46o47) A. P. Daino was a plumbing business. (R72) All of A.P. Daino’s plumbers were on the books as employees except Goessl. (R364; 453; 529) A.P. Daino used independent contractors to perform other tasks. (R74-75) For example, A.P. Daino used an accountant and a cleaning service as independent contractors. Id. When comparing how A.P. Daino treated independent contractors and its employee plumbers, Goessl was treated in the same manner as the employees. (R76-82; 364; 494-96) The other independent contractors were treated very differently. Id. When Goessl began working for A.P. Daino, he continued doing part time work after hours or on the weekends for Preston Home Inspection and a few of his own customers. (R45; 65-66) He never interrupted his full-time work for A.P. Daino to do his work as S & K Plumbing. (R45) His other work was sporadic and involved "small plumbing jobs." (R65-66) He did it "on and off." (R65-66) Usually, it was for a family member who had "a little job to do." (R386-87) In time Goessl’s side business as S & K Plumbing dwindled until it became non-existent in 2006. (R45; 395) Goessl stopped doing work for Preston Home Inspection in late~2005 or 2006. (R45; 395) Goessl came to rely on the income he earned from A.P. Daino entirely. (R45; 444-45) 17 During the course of the nine years, Goessl thought about asking Mr. Daino to make him an "official" employee like the other employees so that he might receive employee benefits. (58-59) Despite that Mr. Daino was giving extensive benefits to the other employees, Mr. Daino still did not offer to make Goessl an "official" employee. (R372) According to Goessl, "Mr. Daino really doesn’t say much. Hejust kind of leaves it lay." Id. When asked why he did not do so, Goessl responded that he "just didn’t think that it would come about" because he "didn’t think Mr. Daino would agree to it." (R59) At one point, Goessl and his spouse discussed why at least Mr. Daino didn’t give him paid vacation like the other employees. (R373) But Goessl "just figured that he wouldn’t do it, if it came down to it." Id. Goessl concluded that Mr. Daino wouldn’t let him become an employee. (R375) Goessl never went to Mr. Daino and asked to make him an employee "because of the type of person he is." Id. Goessl did not "foresee that ever - ever being an option." Id. After Mr. Daino requested Goessl to provide him with a certificate showing he had liability insurance, Goessl believed he was assigned higher risk~plumbing jobs than other employees. (R375) Goessl said he "tend[ed] to get some of the tougher jobs that come up." (R375) Mr. Daino acknowledged 18 there "are some plumbing jobs that if done incorrectly they create a greater risk of causing substantial damage than other jobs." (R528) The fire On August 27, 2009, Mr. Daino put a note on the seat of a company truck "instruct[ing] [Goessl] to go" to the Smolnik residence with Jamie Daino, his assigned apprentice, and "replac[e] the hose bib." (R60; 93; 399; 521) The hose bib (or silcock) is another name for an outside faucet. (R312) Goessl reported to work that morning, read the note, and drove the company truck with Jamie to the Smolnik’s residence. (R60-61; 93; 400; 517) When Goessl arrived at approximately 6:40am, he introduced himself to Mrs. Smolnik as "Stan from Daino." (R61-62.; 402) He did not say anything about S & K Plumbing. (R62; 402) Goessl used his hand tools, torch, and A.P. Daino materials from the company truck to replace the outside faucet. He completed the work in ten minutes. (R312) Jamie went inside the house and turned the water back on. Id. They left. The house caught fire in the area where Goessl had replaced the outside faucet. (R311) It appeared that Goessl caused close to several hundred thousand dollars in damage to the Smolniks’ house and personal property. (R61; 312) In addition to fire personnel, Police Officer Matthew Jones ¯ responded to the fire.: Id. After the fire was quelled, Officer Matthew contacted 19 Mr. Daino by telephone about the fire. Id. According to Officer Mathew’s report, Mr. Daino "advised that he had two employees there doing work this morning." Id. The report further said "Mr. Daino agreed to have both workers meet me at the scene." Id. At approximately, 12:30pm, Mr. Daino called Goes sl by telephone and instructed him to return to the company’s office in Central Square to "fill .out a report for the police department because the house we had done the job on had caught on fire." (R62; 403) Mr. Daino also told Goessl "to cooperate with the police and give a statement." (R94) According to Officer Matthew’s report, "[b]oth employees from A.P. Daino Plumbing then arrived at the scene." (R311) Goessl gave a statement saying: "I am. employed w/A.P. Daino Plumbing. I have been employed with the company for over ten years." Id. He also described Jamie as "his co- worker." Id. Goessl set forth in his statement what he did at the Smolnik residence pursuant to Mr. Daino’s instruction. Id. Goessl was paid for the work that he did at the Smolnik residence, despite that he had apparently caused the fire. (R62; 94; 403) No deduction was made as a consequence of the fire. (R403) After the fire, Goessl learned that A.P. Daino had obtained worker’s compensation insurance for him 2O Unknown to Goessl, A.P. Daino had purchased workers’ compensation coverage for Goessl for the period before the fire. (R62) It had been Goessl’s belief that he never had worker’s compensation insurance before the fire. (R63) Only after the fire did Mr. Daino tell Goessl he was covered. (R63; 365- 66; 442) A.P. Daino never asked Goessl to reimburse the company for the coverage. Id. Mr. Daino explained "it was part of what [he] had to do to have workmans’ comp policy" and that it was "part of the cost of doing business." (R78-80) At some point, the company was audited by New York Compensation Managers, Inc. and was told by them that A.P. Daino had to provide workers’ compensation coverage for Goessl. (R78) Mr. Daino claimed he was required to obtain coverage for any subcontractor to the company. (R78; 94) But Mr. Daino admitted he knew that the purpose of workers’ compensation insurance is to provide payment "if an employee gets injured." (R505) Goessl confnnned that as of the date of the fire, he was exclusively doing work for A.P Daino. (RT0) He "didn’t have any prospects of S & K work.’~’ Id. As of the date of the trial, Goessl testified he is "an employee [of A.P. Daino] now." Id. 21 The Main Street Liability Policy A.P. Daino was insured by Main Street under a policy with a limit of liability of $1,000,000.00. Main Street denied coverage to Goessl for the losses caused by the fire. The Main Street policy contained broad coverage for property damage caused by A.P. Daino’s "employees." The policy said that A.P. Daino’s "employees" were "also an insured...but only for acts within the scope of their employment by you or while performing duties relating to the conduct of your business." (R236) (emphasis added) The policy also said the term "employee" included a "leased worker." (R238-41) A "leased worker" was defined as "a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties relating to the conduct of your business." Id. (emphasis added) A similar definition of an employee appeared in an exclusion for "bodily injury." The Main Street policy excluded coverage for "bodily injury" to: (1) An "employee" of the insured arising out of and in the course of’. (a) Employment by the insured; or (b) Performing duties related to the conduct of the insured’s business ...." (R230-31) (emphasis added). The Main Street policy did not define an employee byreference to a label that the insured would put on someone who worked for the insured. It also prohibited unilateral modification of the policy. (R242) The Policy said: 22 "This policy contains all the agreements between you and us concerning the insurance afforded." Id. The policy only authorized A.P. Daino "to make changes in the terms of this policy with our consent." Id. It further said the policy’s "terms can be amended or waived only by endorsement issued by us and made a part of this policy ...."Id. The Dryden Liability policy The Dryden policy insured Goessl up to a limit of liability for $1,000,000.00 but "only with respect to the conduct of a business of which he/she is the sole proprietor..." (R174) (emphasis added) The named insured for the Dryden policy was "Stanley Goessl doing business as S & K Plumbing." (emphasis added) (R142) The policy did not state that it insured Goessl when he worked as an employee for another business or company. Nor did the policy allow Goessl to label himself as an "independent contractor" when he actually worked as an employee under the direction and control of an employer. Under the Dryden policy, an "employee" was someone who worked for Goessl under his direction and control when doing business as S & K Plumbing. (R148) With property damage, an employee of Goessl was insured "while acting within the scope of his duties." (R175) The Policy did not define an employee according to how the personwas labeled. See Id. It defined an 23 employee according to whether the person was subject to Goessl’s direction and control. For example, when discussing coverage for "employee dishonesty" and. "money and securities," the Dryden policy defined an employee as a "person who is engaged in a service usual to your business operations and to whom you pay salary, wages, or commission." (R148; 164-67) The Policy further said that an "employee" was a person over whom Goessl had "the exclusive right to direct this person in the performance of his/her service." Id. The definition of"employee" further "exclude[ed] any...contractor ...."Id The Dryden policy prohibited unilateral modification of the Policy by Goessl. (R188) The Policy said: "[a] waiver or change of.any terms of this policy must be issued by us in writing to be valid." Id. BothMain Street and Dryden denied coverage for damages caused by the ¯ fire After Goessl was sued, he sought liability insurance coverage from A.P. Daino’s liability insurer, Main Street, under A.P. Daino’s policy defining "insured" as A.P. Daino’s employees. Main Street disclaimed liability coverage to Goessl. Goessl also sought liability coverage from Dryden, which had insured him for work he performed as a sole proprietor doing business as S&K Plumbing. Dryden disclaimed coverage to Goessl on the ground he was 24 working as an employee for Daino, but provided Goessl with a gratuitous defense while commencing this declaratory judgment action. (R107-119) The triaPcourt ruled that Main Street was liable for coverage and Dryden was not The trial judge conducted a bench trial in which the judge examined documentary evidence, heard testimony from witnesses, examined their demeanor, and assessed their credibility. Goessl in an affidavit submitted to the Court and made part of the trial record stated that "I take no position as to whether I was working at the Smolnik residence as a sole proprietor or an employee of A.P. Daino." (R532) Goessl’s answer to the complaint demanded coverage under both insurers’ policies.(R125-135) The judge applied longstanding precedent outlining the relevant factors for determining theactual work relationship between A.P. Daino and Goessl, and found that Goessl was an employee of A.P. Daino at the time of the accident. The court therefore declared that Dryden was not required to indemnify Goessl and that Main Street was required to potentially indemnify Goessl in the underlying tort action. (R5-29) In a divided decision, the Fourth Department reversed the trial court and ruled that Dryden was liable for coverage and Main Street was not Main Street appealed and the Appellate Division, Fourth Department, in a four to one decision, reversed. (R689-93) In deciding that the Main Street 25 policy did not provide liability coverage to Goessl, .the majority essentially said that based on Goessl’s and Daino’s subjective belief that Goessl was an independent contractor, that neither A.P. Daino nor Goessl would be considered an "employee" under the Main Street policy. (R 691) The majority said that A.P. Daino and Goessl intentionally structured their business relationship as a long-term subcontracting arrangement rather than an employee relationship. (R 691) In deciding that the Main Street policy did not provide coverage, the majority opinion placed great weight on the oral arrangement between Goessl and Daino wherein they had agreed nine years earlier that Goessl would be artificially labeled an "independent contractor." Id. In deciding that the Dryden policy provided coverage, the majority found that Goessl was working as a subcontractor for Daino at the time of the fire. (R 691) The majority relied on acts committed by A.P. Daino to further the artificial label, such as that A.P. Daino did not provide Goessl with health insurance or employee benefits, did not withhold taxes or pay social security or unemployment taxes, and sent Goessl a Form 1099-MISC, for miscellaneous income, rather than a W-2 wage statement. Id. The majority ignored well-settled common law factors to determine whether Goessl was in 26 fact an employee rather than an independent contractor based on their actual working relationship and thus whether their alleged business arrangement had mislabeled Goessl as an independent contractor. Id. The Appellate Division also based its decision on erroneous new factual findings not supported by the trial record. Id. For example, the majority erroneously found that the Main Street insurance policy did not define the term "employee" when in fact it did. See Id. The majority erroneously found that there was an arrangement between Goessl and A.P. Daino at the time of the fire that manifested Goessl’s intent not to be an employee of A.P. Daino. Id. The majority also erroneously and impliedly found that Goessl initially procured liability insurance specifically and solely to cover his liability exposure for his work for A.P. Daino. Id. ¯ One judge on the Fourth Department panel wrote a vigorous dissent. Id. The dissenting judge recognized that the majority had erroneously relied on the oral arrangement nine years earlier in which the parties had artificially labeled Goessl an independent contractor. Id. The dissenting judge also criticized the. majority for reaching its decision by refusing to follow the correct appellate standard of review that required an appellate court to give "due deference to the trial court’s determinations regarding witness credibility." Id. The dissenting judge further said there was "overwhelming 27 evidence presented at trial of Mr. Goessl’s employee status with Daino." Id. Finally, the dissenting judge declared that the majority’s opinion violated the "strong public policy that militates against the improper and unscrupulous classification of employees as independent contractors." Id. This Court granted leave to appeal. (R686-88) ARGUMENT POINT I UNDER NEW YORK LAW, AN AGREEMENT BETWEEN A WORKER AND HIS EMPLOYER LABELING-THE WORKER AS AN INDEPENDENT CONTRACTOR IS NOT DISPOSITVE OF AN INSURANCE COMPANY’S RIGHT TO DENY COVERAGE OR ITS OBLIGATION TO PROVIDE COVERAGE IF THE WORKER IS, IN ACTUALITY, AN EMPLOYEE OF THE COMPANY A. The Appellate Division’s Majority Decision The Appellate Division reversed the trial court’s decision that found Goessl to be an employee by almost exclusively relying on a "business arrangement" or agreement in which Goessl and A.P. Daino mislabeled Goessl as an independent contractor. The majority relied on the agreement despite the fact that the parties had no expertise or understanding of employment law. Specifically, the parties did not understand that Goessl in fact was an employee when considering their actual relationship. Based on this alleged "business arrangement," the majority: 1) as to the Main Street 28 policy, asserted that this business arrangement evidenced Goessl’s and A.P. Daino’s intent that Goessl not be covered as an employee under the Main Street policy, and held that this arrangement was dispositive in establishing that Goessl had no reasonable expectation he would be entitled to liability coverage from A.P. Daino’s liability insurer, Main Street, which would provide liability coverage to Goessl only if he were an employee of A.P. Daino; and 2) as to the Dryden policy, asserts that this business arrangement mislabeling Goessl an independent .contractor usurped or otherwise allowed the majority to disregard the trial judge’s finding that Goessl was an employee based on the actual work relationship. In making dispositive this alleged"business arrangement" based on an erroneously held subjective belief, the majority disregarded this Court’s precedent holding that the determining factor is not the subjective labeling, but rather a judicial assessment of the actual work relationship between Goessl and A.P. Daino. B. The Alleged Existence Of The Agreement Between Goessl And A.P. .Business ~Arrangement" Or Daino Must Not Displace A Judicial Assessment Of The Actual Work Relationship For Purposes Of Determining Whether Goessl Had A Reasonable Expectation Of Coverage Based On His Actual Status Of~Being An Employee Of Daino. The majority decision essentially concludes that once the worker and the company enter into such a "business arrangement," even if the relationship 29 is mislabeled as being that of independent contractor, the worker and company in effect concede that they have no expectation that the worker will be covered by the company’s liability insurer that insures workers who are employees. Under the facts of this case, the majority’s conclusion is wrong. The majority decision contradicts the Third Department’s decision in Gallagher v. Houlihan Lawrence Real Estate, 259 A.D.2d 853 (3rd Dep’t 1999). In Gallagher, the Third Department addressed this issue in the context of an insurance claim by the wife of a decedent worker who sought worker’s compensation benefits alleging that the decedent worker was an employee of the company, notwithstanding that the decedent worker had entered into an agreement with the company in which the decedent worker was labeled an independent contractor. See Gallagher v. Houlihan Lawrence Real Estate, 259 A.D.2d 853 (3r~ Dep’t 1999). The court in Gallagher held: ’ The mere fact that a contract designates a party as an independent contractor is not dispositive of the issue. (citation omitted) Id. at 853.. Based on this finding, the court remanded the matter to the Worker’s Compensation Board to assess the actual work relationship based on facts indicating whether the company maintained direction and control over the work. Id. 30 The majority herein relied on this Court’s decision in Baughman v. Merchants Mutuallnsurance Company, 87 N.Y.2d 589 (1996). Baughman is distinguishable and in fact supports Dryden’s position. Unlike the case at bar, Baughman did not involve any agreement between the named insured and the party seeking liability coverage under the named insured’s liability policy. Rather, this Court in Baughman did what Dryden contends must be done. A court must rely on the actual facts, and not subjective opinions, to determine whether the party seeking liability coverage is entitled to that coverage. This Court in Baughman held: An important guidepost when interpreting a business policy is to examine "the reasonable expectation and purpose of the ordinary business [person] when making an ordinary business contract" (citations omitted). The language of the exclusion makes plain that [the named insured’s] and [the insurer’s] reasonable expectations, which are binding on plaintiffs [the parties seeking coverage under the named insured’s liability policy], were that the policy should suffer those risks exclusively associated with [the named insured’s].business enterprise. ’ Id. at 593. In the case at bar, the majority’s decision as to the Main Street policy was not based on an objective assessment of the parties’ "reasonable expectations" of whether Goessl was an employee. Rather, the majority’s 31 decision was based on A.P. Daino’s and Goessl’s subjective "expectation" that arose out of an alleged business arrangement that mislabeled Goessl as an independent contractor. There was overwhelming evidence in this case based on their actual relationship that Goessl was an employee of A.P. Daino. The majority failed to follow this Court’s mandate that coverage be evaluated based on the "reasonable expectation and purpose of the ordinary business person" and instead erroneously applied a subjective standard. Baughman, 87 N.Y.2d at 593. As will be addressed in subsequent points in this brief, applying an objective standard to the issue of liability coverage requires a judicial assessment of the actual relationship and not mere reliance on the subjective opinions or erroneous beliefs of Goessl and A.P. Daino as to the impact of their "business arrangement" mislabeling Goessl’s status as an independent contractor. Therefore, this Court should reject the majority’s sole reliance on the "business arrangement" to relieve Main Street of its coverage obligation. In related cases, this Court has required a judicial assessment of the actual work relationship, notwithstanding the existence of an agreement labeling a worker an independent contractor. In Thompson v. Grumman Aerospace Corp., 78 N.Y.2d 553 (1991), two companies entered into ai written contract that defined which company would be 32 a worker’s employer. The issue before this Court was whether the written contract displaced a judicial assessment of the worker’s actual employment relationship. The worker was a party to the lawsuit but not a party to the contract. This Court held that the contract did not determine the employee’s status and would "not displace a judicial assessment of the employee’s actual relationship with [one of the companies]." Id. at 560. Moreover, in In Re Morton, 284 N.Y. 167 (1940), at issue was whether a worker was an employee under the unemployment compensation law. The company who hired the worker attempted to limit the inquiry into its work relationship with the worker to a written agreement. This Court held: that while an employer may elect to engage an independent contractor rather than an emploYee, no written agreement may preclude an examination to determine whether the actual relationship is such as to bring parties within the scope of the law [employment insurance law]. Id. at .175. In Morton, this Court recognized that "an agreement by the employee to waive the benefits of the [unemployment insurance law] is void by reason of Labor Law §512." Id. at 175. As vigorously asserted by the dissent, an agreement that mislabels an employee as an independent contractor is against public policy. This Court has held that courts should not enforce contracts or "business arrangements" 33 that were procured through fraud, collusive bidding, or similar conduct as being void for public policy. See Jered Contracting Corp. v. New York City Transit Authority,~ 22 N.Y.2d 187 (1968). As the dissent stated, the .arrangement was "contrary to the ....strong public policy that militates against the improper and unscrupulous classification of employees as independent contractors." The dissent also correctly observed that "Goessl’s designation as an independent contractor by A.P. Daino for income tax reporting purposes was improper (citations omitted)". The majority also erred when it failed to determine whether A.P. Daino and Goessl intended by their agreement that Goessl would not be covered under the Main Street policy that insured A.P. Daino’s business. See Thompson v. Grumman Aerospace Corporation, 78 N.Y.2d 553 (1991). In Thompson, this Court found that one of the reasons why a judicial assessment of the actual relationship was required for the purpose of determining whether a worker was entitled to worker’s compensation insurance was the following: IT]he ATS-Grumman contract is silent on and does not purport to define or resolve the issue of Thompson’s special employment status, generally or with respect to worker’s compensation benefits or’ consequences (citations omitted). Id. at 559. 34 The record in this case is devoid of any evidence that Goessl or A.P. Daino expected that Goessl would not be deemed an employee under the Main Street policy. There is no evidence that Main Street charged a lesser premium to A.P. Daino for liability insurance based on the alleged business arrangement, or that Main Street even knew about the alleged business arrangement. The majority decision violates this Court’s precedent when it effectively held that Goessl lost his right to liability insurance coverage under the Main Street policy because he mistakenly entered into a "business arrangement" that mislabeled him as an independent contractor. This is not a case where Goessl seeks to "escape the disadvantageous consequences of his actions." Nor did Main Street detrimentally rely on the "business arrangement" and was damaged. See e.g. Wawrzonek v. Central Hudson Gas & Elect’tie Corp., 276 N.Y. 412 (1938). Main Street did not reduce its premium or change its limits of liability based on any knowledge of this "business arrangement." If Goessl is deemed an insured under the Main Street policy, it does not change the limit of liability of the policy. The limit of liability remains the same whether there is one insured :or a dozen insureds. For the Appellate Division to assert that Goessl loses his right to liability coverage under the Main Street policy as an employee of Daino because he mistakenly believed he was an independent contractor is a 35 draconian result, unsupported by any case precedent, and against the Court of Appeals mandate that says that what controls whether there is insurance coverage is a "reasonable expectation" and not a subjective or mistaken expectation. Finally, A.P. Daino is liable in tort to the Smolniks for their damage caused by Goessl as its employee, regardless of whether A.P. Daino is an insured under the Main Street policy. As such, finding Goessl to be an insured under the Main Street policy does not require Main Street to pay any more money than it would otherwise have to pay for A.P. Daino’s liability based on the principle of respondeat superior. This lawsuit is about whether Main Street, which insures Daino’s business for the negligent acts of workers like Goessl under Daino’s direction and control, can transfer its, Main Street’s, liability onto Dryden based on Goessl’s and Daino’s mistaken belief that Goessl was an independent contractor. The Appellate Division erred in finding that an alleged mistaken or subjective belief by two plumbers, unsophisticated in employment law, is dispositive on the issue of insurance coverage. While the "business arrangement" labeling Goessl as an independent contractor may be a relevant fact to consider when assessing whether the actual 36 relationship was that of employer and employee, such fact is not dispositive. Therefore, the majority erred in its decision. C. A Mislabeled "Business Arrangement" Or Some Other Fiction Will Not Bind An Insurer Like Dryden Or Main Street To Provide Coverage And Will Not Displace An Assessment Of The Actual Work Relationship For the Purpose Of Determining Whether The Insurer Had A Reasonable Expectation That Its Policy Would Or Would Not Provide Coverage. The Appellate Division’s majority decision essentially asserts that the "business arrangement" between Goessl and Daino essentially displaced an assessment of the actual work relationship, and established that Daino and Goessl did not expect that Goessl would be covered as an employee under the Main Street policy. As to the Dryden policy, the majority decision did not assert that that the "business arrangement" is controlling and it correctly did not do so because Dryden was not a party to that "business arrangement" and cannot be bound by it. Dryden was not a party to that alleged business arrangement and cannot be bound by the subjective belief on the part of Goessl and Daino that their relationship was one of independent contractor and not employer/employee. See City of Albany v. Standard Aceident Ins. Co, 7 N.Y.2d 422 (1960); First State Insurance Company v. J&S United Amusement Corp., 67 N.Y.2d 1044 (1986); Thompson v. Grumman Aerospace Corp. 78 N.Y.2d 553 (1991), (for purposes of worker’s compensation insurance, an individual or company not 37 a party to a written contract that purports to define a worker’s employment status cannot be bound by the contract and a court will conduct a judicial assessment of the worker’s actual employment relationship). In City of Albany, the plaintiff attempted to assert that a statute that allegedly defined the plaintiff’ s decedent as not being an employee of the City of Albany, allowed the City to avoid the applicability of an insurer’s policy exclusion for bodily injury to an employee. This Court rejected the assertion that as to the insurer the statute controlled whether an employee arrangement existed and thus whether the policy exclusion applied. As the Court of Appeals held: In any event, section 50-a does not purport to affect or have any bearing on the definition of the word "employee" as used in an insurance policy. We are concemed, in the instant case, not with the liability of a municipality under a statute (citations omitted) but with the liability of an insurer under a contract of insurance. The issue is the intent of the contracting parties, not the intent of the Legislature, (citation omitted) and in deciding what the parties meant by the word "employee", " ’Our guide must be the reasonable expectation and purpose of the ordinary business man when making an insurance contract ...’ (citation omitted). The. language employed in the contract of insurance must be given its ordinary meaning, such as the average policyholder of ordinary intelligence, as well as the insurer, would attach to it.’ (citations omitted) (emphasis supplied.) .... Id. at 430. 38 In First State Insurance Company v. J&S United Amusement Corp., 67 N.Y.2d 1044 (1986), at issue was whether an insurer’s employee exclusion applied to eliminate coverage for an insured sued in a tort action. The appellate division held that insurance coverage could only be resolved in the underlying lawsuit where the insurer was not a party. This Court reversed the appellate division and held: Because it [the insurer] is neither party to nor a participant in the tort action, the employment determination made in that action is not conclusive with respect to its obligation to indemnify (citations omitted). Id. at 1046. See also K2 Investment Group, LLC v. American Guarantee & Liability Ins. Co., 22 N.Y.3d 578 (2014) ("A liability insurer’s duty to indemnify its insured does not depend on whether the insured settles or loses the [underlying tort action] case.") This Court’s decision in First State and K2 Investment Group, LLC stands for the proposition that this Court will not allow an insurance company’s rights and obligations to be determined by facts presented in the tort action that may not reflect the actual work relationship for which an insurer may or may not be obligated to provide insurance coverage. What controls an insurance company’s rights and obligations is the actual work relationship, not an insured’s subjective interpretations, beliefs, or opinions 39 (i.e., what the insured proves at a trial where the insurer is not a party) as to whether a worker is an independent contractor or employee. This Court has consistently acknowledged that a third party (such as insurers) who are not a party to the business arrangement or agreement attempting to define employment status will not be bound by the agreement, especially if it mislabels the actual relationship or it is otherwise inconsistent with the actual relationship. See generally Murray v. Union Railroad Co. of New York City, (229 NIY. 110 (1920); Wawrzonek v. Central Hudson Gas & Electric Corp., 276 N.Y. 412 (1938). For purposes of determining insurance coverage, there is little to no relevance of whether an insured subjectively believed he was an independent contractor or an employee. There are compelling public policy reasons why the Court of Appeals will not allow a "business arrangement" of which the insurer was not a party to bind the insurer to a coverage obligation. The insurer will typically not know of the business arrangement and thus will be deprived of the opportunity to evaluate the risk of loss associated with it. For courts to bind insurance companies to such unknown risks would only result in substantially higher premiums if not the insurance company’s exit from the insurance market. , Under well-established precedent of this Courti the alleged existence of the ~’business arrangement" labeling Goessl as an independent contractor as 4O found by the Appellate Division’s majority is not dispositive on the question of Dryden’s coverage obligation. POINT II THE MAIN STREET POLICY PROVIDES LIABILTY COVERAGE TO GOESSL AS AN EMPLOYEE OF A.P. DAINO FOR HIS . POTENTIAL LIABILITY IN THE TORT ACTION As discussed below, the trial court fairly interpreted the evidence that the Main Street policy covered Goessl as an employee of A.P. Daino for his potential liability in the tort action for damages resulting from the fire. As discussed below, the trial court correctly interpreted the law and undisputed facts of this case. A. The principal purpose of the Main Street policy is to insure against those risks associated with A.P. Daino’s business by, among other things, defining an "insured" to include persons working for A.P. Daino under its direction and control. This Court has held: An important guidepost when interpreting a business policy is to examine "the reasonable expectation and purpose of the ordinary business [person] when making an ordinary business contract." Baughman .v. Merchants Mutual Insurance Company, 87 N.Y.2d 589, 592-93 (1996) (quoting Michaels v City of Buffalo, 85 N.Y.2d 754, 757 (1995); Bird v St. PaulFire & Mar. Ins. Co., 224 N.Y. 47, 51 (1918)). As stated by this Court 41 in Morgan v. Greater New York Taxpayers Mutual Insurance Assoc., 305 N.Y. 243 (1953): [T]he language employed in the contract of insurance must be given its ordinary meaning, such that the average policyholder of ordinary intelligence, as well as the insurer, would attach to it. Morgan, 305 N.Y. at 248 (quoting Abrams v. Great American Ins. Co., 269 N.Y.90, 92 (1935)). In interpreting an insurance policy, this Court has cautioned that courts: "may not disregard clear provisions which the insurers inserted in the .policies and the insured accepted" and that "their construction is solely a question of law for the court." Baughman, 87 N.Y.2d at 592 (quoting Caporino v. Travelers Insurance Co., 62 N.Y.2d 234, 239 (1984)). In the present case, Main Street and A.P. Daino clearly intended that the purpose of the Main Street policy was to insure against those risks associated with A.P. Daino’s business. Under the insuring agreement of the Main Street policy, the policy states: We will pay those sums’ that the insured becomes legally obligated to pay as damages.., to which this insurance applies. (R 229) The policy broadly defines "insured" as meaning: 42 (R236) Under 2. Each of the following is also an insured: the your a. Your"employees"...but only for acts within scope of their employment by you or while performing duties to related to the conduct of business. the policy, the term "employee" not ,only means, what is understood under the common law to be an emploYee, but also: 5. "Employee" includes a "leased worker." Employee does not included a "temporary worker." (R238) The policy then defines "leased worker" as follows: 9. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between ; you and the labor leased firm, to perform duties related to the conduct of your business. "Leased worker" does not include "temporary worker." (R 239) In considering the foregoing provisions in the Main Street policy dealing with the meaning of the terms "insured" and "employee," it is plainly obvious that Main Street and A.P. Daino expected and intended to cover persons working for A.P. Daino under its direction and control. The policy used the word "employee" consistent with its well-accepted meaning under the common law. It covered an "employee" acting within "the scope of their employment" and 43 "employees" who were "performing duties related to A.P Daino’s business." It defined employees consistent with their actual relationship with A.P. Daino and not a label placed on them. It broadly included leased workers within the definition of an employee, because they too acted under A.P. Daino’s direction and control. Anyone who met the policy def’mition of"insured" was entitled to coverage (defense and indemnification) under the Main Street policy. Simply stated, Main Street insured the liability risks ofA.P. Daino’s business. It is standard in the insurance, industry for a policy like Main Street to insure Daino’s workers under Daino’s direction and control because under well- established principles of respondeat superior, A.P Daino will be liable for the negligence of workers who it directs and/or controls. Insurers, like Main Street, want to control liability claims and handle the risk by giving such workers insured status under the policy issued to the company which then allows Main Street to defend and potentially indemnify the worker for whose negligence the employer would be liable. B. Goessl’s tort liability arose solely out of the work he was doing for A.P. Daino at the Smolniks’ house. It is undisputed that the several hundred thousand dollars in damage to the Smolniks’ house and property occurred when Stanley Goessl, who had worked fulltime for A.P. Daino as a plumber for the previous nine years,~ went to the Smolniks’ house in an A:P. Daino truck to do A.P. Daino work, introduced 44 himself as "Stan from A.P. Daino" and did the assigned work that apparently caused the damage. As covered by the Main Street policy, Goessl’s liability arises out of his "acts within the scope of his employment with A.P. Daino" or "while performing duties relating to the conduct of [A.P. Daino’s] business." Both Goessl and Dryden asserted that Goessl was entitled to liability coverage under the Main Street policy because the work that he performed at the Smolniks was done as an "employee" ofA.P. Daino, as the word "employee" was broadly used in that policy. (R. 132) C. The trial judge fairly interpreted the evidence when it concluded that A.P. Daino’s actual relationship with Goessl was that of an employer and employee. As stated above, an ordinary businessperson interpreting the Main Street policy:would reasonably expect from the plain language of the policy that an A.P. Daino worker who met the well-known common law definition of an employee Would be insured under the policy. As discussed below, under the common law definition of an employee,, an employer/employee relationship exists when the employer has the right to control the means used to achieve the reSults or the results produced. ~ This Court has repeatedly held that the "actual relationship" of the parties determines whether a worker is an employee or an independent contractor. Attempts have been made in the past by employers to falsely 45 "label" workers in agreements as independent contractors. This Court has held that such "labeling" is not dispositive. Rather, if the facts demonstrate that the parties’ actual relationship is that of employer and employee, the agreement labeling the worker otherwise is accorded little or no weight. Here, there is overwhelming evidence that the "actual relationship" of A.P. Daino was that of employer and employee. Therefore, the oral agreement "labeling" Goessl as an independent contractor was correctly accorded little or no weight. As shown below, Goessl was an employee under the common law definition. His work in replacing the outside faucet at the Smolnik residence was an "act within the scope of his employment" by A.P. Daino. Moreover, he was "performing duties relating to the conduct of A.P. Daino’s business." (i) An employer/employee relationship exists when the~ employer has the right to control the means used to achieve the results or the results produced "An employer - employee relationship exists when the evidence demonstrates that the employer exercises control over the results produced by claimant or the means used to achieve the results." In Re Hertz Corp., 2 N.Y.3d 733,735 (2004); (citing Matter of 12 Cornelia St., 56 N.Y.2d 895, 897 (1982). Long ago, this Court described the difference between an 46 employee and an independent contractor. See In Re Morton, 284 N.Y. 167 (1940). As the Court stated in Morton." The distinction between an employee and an independent contractor has been said to be the difference between one who undertakes to achieve an agreed result and to accept the directions of his employer as to the manner in which the result shall be accomplished, and one who agrees to achieve a certain result but is not subject to the orders of the employer as to the means to which are used. Id. at 172. The "test is the existence of the right of control over the agent in respect of themanner in which his work is to be done." Id. An employee "works under the supervision and direction of his employer." Id___~. "[A]n independent contractor is one who is his own master." Id. An employee is "a person. engaged to obey his employer’s orders from time to time." Id___~. "[A]n independent contractor is a person engaged to do certain work, but to exercise his own discretion as to the mode and time of doing it, he is bound by his contract but not by his employer’s orders." Id. (ii) Control over the means to achieve the results is the most important factor "Although a determination that an employer - employee relationship exists may rest upon evidence that the employer exercises either control over the, results produced or over the means used to achieve the results..., control 47 over the means is the more important factor to be considered." Matter of Ted is Back Corp., 64 N.Y.2d 725, 726 (1984) (citing Matter of 12 Cornelia St., 56 N.Y.2d 895,897 (1982); Matter of Sullivan Co., 289 N.Y. 110 (1942)). An employer - employee relationship is also shown to exist by "the degree of control and direction reserved to the employer." Villa Maria Institute of Music v. Ross, 54 N.Y.2d 6911 692 (1981) (citing Morton, 284 N.Y. at 173; Matter ofLiberman v. Gallman, 41 N.Y.2d 774, 778 (1977)). (emphasis added) (iii) The "actual relationship" of the parties determines whether a worker is an employee or an independent contractor A court must examine the "actual relationship of the parties" to determine whether a worker is an employee. In Re Basin St. Inc., 6 N.Y.2d 276, 278 (1959) (citing Morton, 284 N.Y. at 175; Matter of Electrolux Corp., 288 N.Y. 440, 444 (1942) ("[W]e must...look to the actual practices of the parties")). "[T]he degree of control which must be reserved by the employer in order to create the employer-employee relationship cannot be stated in terms of mathematical precision." Morton at 173. "All aspects of the arrangement must be examined." Villa Maria Institute of Music v. Ross, 54 N.Y.2d 691,692 (1981) (citing Matter of Morton, 284 N.Y. at 173; Matter of Liberman v. Gallman, 41 N.Y.2d at 778. (iv) When an agreement that "labels" a worker as an ~. independent contractor is inconsistent with the actual relationship between the parties, the agreement has little or no weight 48 "It is settled law that the identity of the employer must be ascertained on the facts of the individual case, and that no written agreement may preclude an examination into the actual relationship of the parties." In Re Basin St., Inc., 6 N.Y.2d 276, 278 (1959) (citing Morton, 284 N.Y. at 175; Electrolux, 288 N.Y. at 444). The "actual practices" of the parties determines whether there is an employer-employee relationship, and not a "label" placed on their relationship in an agreement. Electrolux, 288 N.Y. at 444. For example, in Electrolux this Court examined-the "actual practices" of the parties, and said it was not bound by agreements labeling the relationship as something other than employer and employee. Id. Based on the "actual practices," this Court held that the workers were employees, despite the agreements. Such conclusion was especially true because the company retained "the right to terminate the contract upon short notice." Id~ The employer’s control was not direct or obvious. There was a system "of moral sanctions and indirect compulsion which effectively regiment[ed] the activities of its representatives into a pattern desired by respondent of minute and detailed control." Electrolux, 288 N.Y. at 446 "[T]he express desire of the .employer, though couched in terms of suggestion, [were] quite as effective as outright demands." Id. 49 Likewise, in Villa Maria Institute of Music v. Ross, 54 N.Y.2d 691 (1981), this Court held that the unemployment insurance appeal board was not required to accept a school’s characterization of its teachers as independent contractors. Id. (citing Matter of MNORX, Inc., 46 N.Y.2d 985, 986 (1979); Liberman, 41 N.Y.2d at 779). The board had examined all aspects of the actual relationship between the school and its teachers and determined the teachers were in fact employees. This Court upheld the board’s determination. In Gliemli v. NetherlandDairy CO., 254 N.Y.2d 60 (1930), this Court (Cardozo C.J.) said that the contract between the employer and employees had been "adroitly framed to suggest a different relationship." Id__~. at 62. "[B]ut the difference [was] semblance only." Id__~. The employees were assigned different routes, used company vehicles, and could be terminated at will. A company representative had the right to accompany the employees on their route, and .the employees were paid regardless of whether the customer paid .the employer. After examining the ~"actual relationship," Judge Cardozo found that "[m]uch of the [worker’s] apparent freedom [was] in truth apparent only." Id. If the employee did "anything at variance with the will of his employer, its policy or preference, he [knew] that his contract of employment will be ended overnight." Id. at 63. "He [~¢as] bound hand and foot as long as he work[ed] 5O the route at all, his freedom an illusion, and his independence but a name." Id~ "On the one side there [was] an intimacy of control and on the other a fullness of submission". Id. at 63-64. In recent years, this Court has reached the same conclusion when dealing with the issue of "special employees." An agreement with a leasing company labeling the worker as an employee of the leasing company does not control. The employee’s actual relationship with the true employer controls. Fung v. Japan Airlines Company, LTD., 9 N.Y.3d 351 (2007); Thompson v. Grumman Aerospace Corp., 78 N.Y.2d 553 (1991). Only when the record contains no evidence of the "actual relationship" of the parties will this Court rely on an agreement to determine whether an employer-employee relationship exists. See In Re Basin St., Inc., 6 N.Y.2d 276 (1959). Moreover, when the actual relationship of the parties demonstrates that a worker is in fact an independent contractor, this Court has mentioned the existence of an agreement as a non-dispositive factor. See In Re Hertz Corp., 2 N.Y.3d 733 (2004); MNORX~, 46 N.Y.2d 985; Matter of Beach v. Velzy, 238 N.Y. 100 (1924). (v) Types of facts indicating that an employer has the right to control the means used to achieve the results or control over the results produced This Court has identified a number of facts in prior cases that tend to show that a worker is an employee subject to the direction and control of an 51 employer over the means used to achieve the results or the results produced. Among the facts identified are the following: ¯ The employer expected the employee to start work by a specified time; ¯ The employer expected the employee to work a certain number of hours in a week; ¯ The employer paid the employee once a week; ¯ The employer required the employee to report the hours he worked each week; ¯ The employer could terminate the employee immediately or on short notice; ¯ The employer could also terminate the employee for failure to follow the employer’s instructions; ¯ The employer assigned the employee to a group or team of other employees; ¯ The employer assigned the employee to service customers of the employer; ¯ The employer supplied the tools and materials to be used to perform the work by the employee; ¯ The employer expected the employee to return tools and any unused materials to the employer; ¯ The employer provided company vehicles to be used to perform the work; ¯ The employer created a schedule for the employee to follow in the performance of the assigned work; 52 ¯ The worker held himself out to customers as an employee of the employer; ¯ The employer fixed the prices to be charged customers; ¯ The customer paid the employer, not the employee; ¯ The employer assumed the responsibility to collect payment from late paying customers; ¯ The employer took customer complaints; ¯ The employer retained the right to accompany and supervise the employee if needed; ¯ The receipt given to the customer bore the employer’s name; ¯ If the worker had once worked as an employee for the employer, there was no change in the employee’s duties or level of direction and control. See Morton, 284 N.Y. at 173-74; Beach, 238 N. Y. at 100-104; Electrolux, 288 N.Y. at 445; Gliemli v. Netherland Dairy Co., 254 N.Y.2d at 62; Matter of FieMDelivery Service, 66 N.Y. 2d 516, 521 (1985). (vi) As found by the trial court after a bench trial there is overwhelming evidence that Goessl was an employee of A.P. Daino Under the common law definition, Goessl was an employee of A.P. Daino and therefore he was insured by Main Street for the damage caused by the fire. Numerous facts demonstrated that A.P. Daino had sufficient control over the means by which Goessl achieved the results of his work or his results produced. The oral agreement between A.P. Daino and Goessl merely 53 "labeled" Goessl as an independent contractor. Their "actual relationship" was one of employer and employee. Among the facts demonstrating the actual relationship are the following: A.P.. Daino exercised the same level of direction and control over Goessl as it did over its other employees, including the supervisor of the other crew; A.P. Daino exercised essentially the same level of direction and control over Goessl as it did when Goessl had previously worked for the company as an employee; A.P. Daino exercised the same level of direction and control over Goessl as did Carl Plumbing when Goessl was employed by the company for 13 years; Mr. Daino expected Goessl to identify himself to customers as an employee of A.P. Daino, and Goessl complied; Mr. Daino said he was a "fair boss" to Goessl; Goessl thought of himself as an "employee" of A.P. Daino when he did his assigned jobs for the company; Goessl workedfor A.P. Daino fulltime and only did side jobs when they did not conflict with his commitment to A.P. Daino; As with the other supervisor, employed by A.P. Daino, Mr. Daino expected Goessl to instruct apprentice employees on "what to do, when to do it, and how to do Daino jobs" and to monitor their performance and quality of work; A.P. Daino paid Goessl a wage consistent with that of an employee, after deducting the savings to A.P. Daino by not paying Goessl for employee benefits; 54 ¯ Mr. Daino expected the A.P. Daino employee crew and Goessl to report to the shop each morning to receive their assigned jobs for the day; Mr. Daino put notes in the company trucks specifying the jobs that Goessl and the other A.P. Daino employees were instructed to perform that day, and the order in which they must perform the jobs; ¯ A.P. Daino, and not Goessl, selected the assigned jobs Goessl was to perform and the order in which they were to be performed; A.P. Daino expected Goessl and its employees to wear work boots, and gave. Goessl and the employees clothing to wear bearing the name of the company; A.P. Daino supplied the trucks, materials, and tools to be used to perform the assigned jobs, and although Goessl sometimes used his own hand tools, there was no agreement for him to do so; A.P. Daino paid the annual fee for renewal of Goessl’s joumeyman plumber’s card, and allowed Goessl to list Mr. Daino, a master plumber, as his employer; As with the other employees, A.P. Daino gave Goessl authority to sign his name to A.P. Daino company credit cards to purchase materials for jobs and gasoline for the company trucks; ¯ Mr. Daino monitored purchases of materials made by Goessl and the. other employees; Mr. Daino routinely pulled Goessl off of jobs and immediately reassigned him to other jobs and Goessl always complied with his orders; ¯ Mr. Daino gave the same level of inspection and supervision to both crews; ¯ A.P. Daino reserved the right to make Goessl redo or fix work he had been assigned by the company; 55 As needed, Mr. Daino instructed Goessl on how to do jobs over which Goessl had no experience, and Goessl always obeyed his instructions; A.P.Daino could terminate Goessl immediately, even in the middle of a job, and would only be obligated to pay Goessl for the hours he worked up to the moment of discharge; ¯ The customers belonged to A.P. Daino and Goessl was prohibited from soliciting them for side work as S & K Plumbing; ¯ Mr. Daino negotiated all Contracts with customers and the prices charged for work; ¯ A.P. Daino handled all complaints from customers, not Goessl; ¯ Goessl was paid the hours he worked, regardless of whether he negligently performed a job or a customer didn’t pay; ¯ In general, Goessl asked Mr. Daino for permission to take time off from work; ¯ . At the time of the fire, all of Goessl’s income came from A.P. Daino; ¯ A.P. Daino required Goessl to report his hours worked on a weekly basis and he was paid weekly; Although Goessl ultimately wished to become an "official" employee to obtain employee benefits, Goessl knew Mr. Daino would never agree to it; ¯ After the fire, Mr. Daino identified Goessl to the police officer as one of his "employees"; ¯ Goessl also identified himself to the police officer as an employee of A.P. Daino; A.P. Daino purchased workers’ compensation insurance for Goessl before the fire, knowing that the purpose of the insurance was to pay an "employee" money in the event he or she was injured. 56 The factors described about were present for the approximate nine years that Goessl worked for A.P. Daino as a fulltime job. (vii) The few facts consistent with "labeling" do not change the overwhelming conclusion that the actual relationship between A.P. Daino was that of employer and employee The Fourth Department’s majority opinion also mentioned that A.P. Daino did not withhold taxes for Goessl, did not pay Goessl employee benefits, and issued a Form 1099 at the end of the year. But such facts do not diminish the overwhelming evidence that the "actual relationship" between A.P. Daino and Goessl was employer and employee. The fact that A.P. Daino did not withhold taxes, did not pay employee benefits and issued a Form 1099, are all acts by A.P. Daino consistent with the artificial label placed on Goessl. They are not facts indicating that A.P. Daino had control over the means by which Goessl achieved results of his work or the results produced. At best, they are merely "incidental" facts that do not outweigh the overwhelming evidence of their actual relationship as employer and employee. See e.g. ,Matter of Ted is Back Corp., 64 N.¥.2d 725,726 (1984) (citing Matter of 12 Cornelia St., 56 N.Y.2d 895, 897 (1982); Matter of Sullivan Co., 289 N.Y. 110(1942)). ~(viii) The trial judge correctly gave little to no weight to the business I arrangement that was inconsistent with the a~tual work relationship. 57 The trial judge, looking at the actual work relationship, gave little to no weight to the "business arrangement" between Goessl and Daino, made nine years before the fire that misdescribed and mislabeled the actual work relationship between .them. The oral agreement was made by two individuals who were unsophisticated in employment law. It labeled Goessl an independent contractor when he was not. This appeal is about which of two insurance companies must pay, not whether Goessl, is seeking to "escape the disadvantageous consequences of [his] actions" when he erroneously agreed that his work status was that of an independent contractor. See Wawrzonek v. Central Hudson Gas & Electric Corp., 276 N.Y.412 (1938). Main Street was not, and will not be, negatively impacted by A.P. Daino’s. and Goessl’s oral agreement to mislabel their relationship. Main Street did not reduce its premium or alter its limits of liability based on this alleged business arrangement. In fact, Main Street did not know before the fire that this arrangement even existed. Moreover, in finding Goessl to be an employee of Daino and covered under the Main Street policy, Main Street’s limit of liability remains the same whether Goessl is or is not deemed to be an insured. Main Street’s limit of liability does not increase based on the number of insureds. ’ 58 As such, the trial judge was more than justified in giving little to no weight to the "business arrangement" that mislabeled Goessl an independent contractor. Neither Dryden nor Main Street took any action to their detriment because neither knew of the agreement. The trial judge ordered Main Street to defend and indemnify A.P. Daino for damages that Goessl caused as its employee because this was precisely the purpose for which the Main Street policy was issued. Because Goessl was an employee of A.P. Daino, the trial judge also ruled that Goessl was not covered under the Dryden policy. As such, the trial judge found that Dryden had no duty to defend or indemnify Goessl for damages he allegedly caused while working as an employee for Daino, a business for which he had no ownership interest. As discussed in Point III, Dryden never undertook or reasonably expected it would be insuring the potential liability arising out of A.P. Daino’s business. D. Goessl had a reasonable expectation that he would be covered under the Main Street policy as an employee of A.P. Daino despite the oral agreement he made nine .years earlier that mislabeled him an independent contractor The Appellate Division found that neither A.P. Daino nor Goessl "expected" that Goessl would be covered under the Main Street policy as an employee of A.P. Daino. For the reasons stated in Point I, the alleged "business arrangement" wherein Goessl mistakenly believed he was an independent contractor did not preclude Goessl from having a "reasonable 59 expectation" that the Main Street policy would provide liability coverage to him as an employee of A.P. Daino at the time of the fire. He was, among others, doing A.P. Daino business using A.P. Daino tools, supervising A.P. Daino employees, driving a A.P. Daino truck, and working under the direction and control of A.P. Daino. In fact, he considered himself to be an employee ofA.P. Daino when he did A.P. Daino work. (R 57) E. Main Street had a reasonable expectation it would be obligated to provide liability coverage to Goessl as an A.P. Daino employee who, at the time of the fire, was working within the scope of his employment performing A.P. Daino work. There is no evidence in the record that Main Street, before the fire, had any knowledge of the oral agreement erroneously labeling Goessl as an independent contractor. Its insurance contract with A.P. Daino was executed at a different time and in a different place. Main Street did not reduce its policy premium to A.P. Daino and did not change its limit of liability or take any other action based on the "business arrangement" mislabeling Goessl as an independent contractor because Main Street did not know of the "business arrangement." The policy language was clear and unambiguous that it insured "employees" as that term was commonly known and well understood. Yet now, Main Street seeks a windfall from the fact that two unsophisticated individuals entered into an ~agreement that is inconsistent with the common law meaning of an employee, as that meaning is embodied in its policy. 6O The Fourth Department’s majority view that the agreement is dispositive would also lead to an absurd result in to which Main Street would undoubtedly object. Among other things, the Main Street policy contains an exclusion for personal injuries suffered by an "employee." Specifically, Main Street excluded from coverage an employer’s liability for "’bodily injury’" to" (1) An "employee" of the insured arising out of and in the course of: (a) Employment by the insured; or (b) Performing duties related to the conduct of the insured’s business ...." (R 230-31)No doubt, if Goessl had sustained significant bodily injury at the Smolnik house fire and caused only minimal property damage, Main Street would adamantly contend it had no duty to pay for any personal injury to Goessl "arising out of his employment" by A.P. Daino or while Goessl performed duties related to A.P. Daino’s business. Yet Main Street would be compelled to pay for a personal injury to Goessl if he were an "independent contractor." The foregoing demonstrates the inconsistency in an interpretation of the policy that would allow an employer and employee to designate the worker as an "independent contractor." Such an interpretation would lead to an absurd result in the application of the same term in other provisions of the policy. Hence, Main Street never reasonably expected that its policy could be construed such that Goessl was not an employee because he had entered into 61 an independent oral agreement that incorrectly labeled him as an independent contractor. F. A.P. Daino also had a reasonable expectation, it would be obligated to provide liability coverage to Goessl as an A.P. Daino employee who, at the time of the fire, was working within the scope of his employment performing A.P. Daino work. As the dissent vigorously argued, the majority decision also violated the "strong public policy that militates against the improper and unscrupulous classification of employees as independent contractors." The maj ority opinion ’ incorrectly assumed that A.P. Daino and Goessl dealt with each other at arms length and that an arms length relationship continued until the date of the fire. This is not true. A.P. Daino and Goessl were apparently mistaken when they entered into the oral agreement. They believed that Goessl could not both be an employee of A.P. Daino and still conduct a side business as S & K Plumbing. They.created the "fiction" that Goessl would work for the company as an ¯ independent contractor, but from the beginning Goessl was still an employee. He was an independent contractor in name only. .He received none of the benefits of being an independent contractor but was subject to all of the burdens of being an employee. Even worse, he did not receive any employee benefits as did the other employees. 62 Over the course of nine years, the perceived need for the fiction ceased. Goessl’s side business under S & K Plumbing dwindled until it became nonexistent in 2006. Yet Goessl knew that Mr. Daino would never agree to make him an employee. (R 59) The reason is obvious. Mr. Daino was reaping a great financial benefit by keeping the fiction. He did not have to pay expensive employee benefits to Goessl. Regardless of whether Mr. Daino was unsophisticated about employment law or an "unscrupulous employer" who took advantage of Goessl, A.P. Daino nevertheless reasonably expected and understood based on their actual relationship that if Goessl caused property damage while doing A.P. Daino work, Goessl would be covered under A.P. Daino’s insurance policy because the policy was intended to cover A.P. Daino’s business and the risks associated with it. G. Conclusion The trial judge, after a bench trial found, based on a fair interpretation of the evidence that Goessl was working as an employee of A.P. Daino’s business at the time of the accident and thus met the Main Street policy definition of insured such that Goessl was entitled to liability coverage under the Main Street policy. This Court should reverse the decision and order of 63 the Fourth Department and reinstate the trial court order ruling against Main Street. POINT III THE DRYDEN POLICY DOES NOT PROVIDE LIABILITY COVERAGE TO GOESSL FOR HIS WORK AS AN EMPLOYEE OF DAINO / A. The Dryden Policy The insuring agreement of the liability coverage section of the Dryden policy states, in pertinent part: WHAT WE PAY FOR - COVERAGE L We pay up to our limit of liability shown, all sums for which the insured is legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence to which this coverage applies. (R 178) The policy defines "insured" as meaning, in pertinent part: 11. Insured - Each of the following is an insured underthe conditions and limitations set forth below. (R 174) a) If the named insured is an individual, both the individual and his/her spouse are insureds but only with respect to the conduct of a business of which he/she is the sole proprietor. The policy defines "business" as: 64 (R 173) A trade, profession, or other occupation, including farming, all whether full or part time. B. The Appellate Division’s Majority Decision. The trial judge found, after a bench trial, overwhelming evidence of employee status. The Appellate Division’s majority decision made an entirely different finding holding: The record in this case establishes that Goessl ... at the time of the fire, he was engaged in the conduct of his "trade, profession, or other occupation" as a plumbing subcontractor for A.P. Daino. (R 690) The majority concluded: Because the injury in the underlying action allegedly arose out of the conduct’ of Goessl’s plumbing business, plaintiff is obligated to defend and indemnify him in the underlying action. (citation omitted) C. The Trial Judge, After A Bench Trial, Found, Based On A Fair Interpretation Of The Evidence,~ That Goessl Was. Working As An Employee Of A.P. Daino’s Business At The Time Of This Accident And The Dryden Policy Does Not Provide Liability Coverage For Goessl’s Work As An Employee Of A.P. Daino The Appellate Division’s majority decision finding that the Main Street policy does not provide coverage is based on the Appellate Division’s finding 65 that "A.P. Daino and Goessl intentionally entered into a business arrangement whereby Goessl was an independent contractor rather than an employee... that neither A.P. Daino nor Goessl expected that Goessl would be considered an employee under the [Main Street] policy." R. 691. As argued in Point II, Goessl’s alleged decision to enter into this agreement with A.P. Daino does not bind Goessl relative to his rights to insurance under the Main Street policy. Moreover, it does not, according to longstanding Court of Appeals precedent, bind Dryden to provide coverage. Dryden was not a party to that agreement and for purposes of insurance cannot be bound by it if it does not accurately describe the actual relationship. Dryden was clearly entitled to have the trial judge assess the actual work relationship to determine ifGoessl was working as an employee for A.P. Daino’s business. The trial judge, after a bench trial, found that although Goessl and A.P. Daino may have subjectively and erroneously believed that Goessl was an independent contractor, there was compelIing and persuasive evidence to conclude, based on a fair interpretation of the evidence, that as of the time of the fire, and for years before, Goessl was working for A.P. Daino’s business as an employee under its direction and control. That evidence is summarizedand stated in detail in the Statement of Facts and in Point II, Subpart C, of this brief. 66 The majority, in overturning the trial court’s decision finding that Goessl was an employee at the time of the fire, asserted that he was a "subcontractor for A. P. Daino." (R 690) But the majority failed to explain why the trial judge’s decision finding that Goessl was an employee of Daino’s business and not a subcontractor, was against "any fair interpretation of the evidence." See 409-411 Sixth StreetLLCv. Mogi, 22 N.Y.3d 875, 876 (2013). In Mogi, this Court held: The decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to the credibility of witnesses. (citations omitted) . 409-411 Sixth Street, LLC v. Mogi, 22 N.Y.3d 875,876, 877 (2013). In 409-411 Sixth Street, the appellate division had reversed the decision of a fact-finding court. This Court reversed the appellate division holding: The Appellate Division did not apply this standard of review to this case, instead substituting its own view of the trial evidence. Accordingly, the case needs to be remitted to that court to apply the appropriate standard of review. Id. at p. 877. What may be inferred from the trial judge’s decision herein is that the judge correctly gave :little to no weight to the "business arrangement" that 67 Goessl and Daino entered into whereby Goessl agreed that he would be labeled an independent contractor. Dryden was not a party to this agreement and was not aware of it. This Court has held that a company or individual who is not party to such an agreement will not have the agreement displace an assessment of the actual relationship. Moreover, the trial judge was justified in giving little to no weight to the agreement, given that it did not reflect the actual relationship between Goessl and Daino of an employer and employee. There are powerful public policy reasons why insurers, like Dryden, must not have such agreements displace a thorough assessment of the actual relationship of the parties, rather than be bound by an agreement between the parties that:mislabeled the employee as an independent contractor. To bind Dryden to such an agreement would, as the Appellate Division dissent found: ~ [creates] greater liability exposure for [Dryden] than [Dryden] knowingly contracted for. (R 93) The Appellate Division decision, if it stands, will encourage, if not mandate, insurers like Dryden to substantially increase premiums or exit the insurance market for sole proprietors, like Goessl, because Dryden cannot reasonably be expected to cover a risk of which Dryden is unaware and will have difficulty to quantify. This Court has consistently held that insurers, like Dryden, should not be forced to insure risks that were not "reasonably 68 expected" to be covered under that policy and certainly not risks based on a fiction or an agreement that erroneously describs a worker as an independent contractor. See City of Albany, supra. Assuming that the trial judge’s decision that the actual relationship of Daino and Goessl at the time of the fire was that of employer/employee is correct, the only issue remaining is whether the trial judge correctly concluded that neither Dryden nor Goessl had, or could have had, a reasonable expectation under the terms of the Dryden policy that Goessl was not covered under the policy for his work as an employee of Daino. The policy clearly and unambiguously covered Goessl "only with respect to the conduct of a business of which he/she is the sole proprietor," The Court of Appeals~ decision in Baughman, which analyzed a party’s claim for insured status by deciding whether a truck was being used "exclusively" in the scope of the named insured’s business, is illustrative of the reasoning and analysis that should be followed herein. In deciding whether Stanley Goessl has insured status under the Dryden policy, Goessl has insured status "only with respect to the conduct of a business of which he/she is the sole proprietor ...."(R 174) (emphasis added) In Baughman, this Court found that "the principal purpose of such a policy is to insure against those risks associated with [the named insured’s] 69 business." At issue was whether the owner of a truck involved in an accident (who was not a named insured under the insurance policy) should be covered as an insured. The court stated that the owner of the truck would be covered depending on the applicability of a policy exclusion that stated there would be no coverage if." the [vehicle] is not being used exclusively in the business of the named insured.., but this limitation shall not apply to a [vehicle] while in route, at the request of the named insured, to engage in such exclusive use and not transporting property for others. Baughman 87 N.Y.2d at 592. This Court held that this policy exclusion: makes plain that [the named insured] and [the insurer’s] reasonable expectations, which are binding on plaintiffs [who were seeking insured status] will that the policy should suffer those risks exclusively associated with [the named insured’s] business enterprise. They [the named insured and the insurer] did not agree to underwrite or pay premiums for private risks put in play by others who were not parties to the contract of insurance or otherwise introduced by uncovered activities unless specific conditions were satisfied. Id. at 593. This Court placed great emphasis on the use of the word "exclusively" holding that both the named insured and insurer, by agreeing to be subject to the written insurance policy, had agreed to "restricting coverage for the truck 70 only if it was being operated ’exclusively in the business [of the named insured].’" Id. In the present case, Dryden’s policy language does not use the word "exclusively," but it uses the analogous word "only" in stating that Goessl has insured status "only with respect to the conduct of a business of which he is the sole proprietor." (R 174) (emphasis added) Just as the owner of the t,ruck involved in the accident in Baughman was not an insured under the insurance policy because the truck was not used exclusively for the named insured’s business, so too is Goessl not an insured under the Dryden policy because he had insured status "only" with respect to the conduct of a business of which he is the sole proprietor. Moreover, when Goessl was working for A.P. Daino as an employee in A.P. Daino’s plumbing business, he was not engaged in "the conduct of a business of which he/she is the sole proprietor" as that language is found and used in the Dryden policy definition of insured. Webster’s dictionary defines "proprietor" as: proprietor: 1) a person who has a legal title or exclusive right to some property; owner 2) the owner of a proprietary colony 3) one who owns and operates a business establishment. Webster’s New Schuster, Inc. Worm Dictionary, Third College Edition, 1988,, Simon & 71 There can be no reasonable interpretation of the Dryden policy language that Goessl’s work as an employee for A.P. Daino, a company in which he had no ownership interest, is work that falls within the Dryden policy definition of"insured." Goessl was working for A.P. Daino’s business as an employee at the time of the fire and was not working for a business he owned. As this Court stated in Baughman, this activity [working as an employee of A.P. Daino]: can in no way be deemed to be within the reasonable contemplation of the insurance- contracting parties expectations for the coverage of [the Dryden] policy. See Baughman, 87 N.Y.2d at 594. While the Appellate Division Fourth Department may have perceived "equitable considerations" warranted a finding that Dryden should be found under its policy to cover this loss, (.i.e. Goessl paid the premium to Dryden subjectively believing that Dryden would cover him for his work for Daino), as this Court has held: We may not disregard clear provisions in which the insurer inserted in the policies and the insured accepted (citation omitted) and equitable considerations will not allow an extension of coverage beyond its fair intent and meaning in order to obviate objections which might have been foreseen and guarded against. (citations omitted). Caporino v. Travelers Ins. Co., 62 N.Y.2d at 239. 72 As an aside, Goessl did obtain value and beneficial insurance coverage from Dryden under the policy in issue notwithstanding that it does not cover him for his liability working as an employee for A.P. Daino. The Dryden policy, for which Goessl paid a premium, obligated Dryden to cover Goessl for any damage occurring during the policy period that was caused by Goessl’s. negligent performance of any non-Daino work during the approximately thirteen years he conducted of his own business as S & K Plumbing as the sole proprietor. (R 339) Thus, if Goessl had been sued in 2011 for damage that occurred in 2011 because of work that he had ¯ negligently performed in 2001 for Preston Homes, Dryden would be obligated to provide Goessl with defense and potential indemnification. D. To Make Dryden Responsible For Goessl’s Negligence Based On A Mislabeling Of Goessl as an Independent Contractor When He was Actually an Employee Would Violate Dryden’s Reasonable Expectation of The Risk It Was Insuring As part of the insurance policy application process, Dryden evaluated the risk and calculated the premium based on the understanding that it was insuring a sole proprietorship with no employees. (R 346) If the Appellate Division’s majority decision stands, Dryden will be deemed to have been insuring a plumber who was working full time, five days a week, under .the direction and control of another company that had not applied for insurance with Dryden. Goessl was supervising Daino’s employees. Theoretically, 73 nothing would have prevented Goessl from supervising hundreds of employees for another company under an arrangement like he had with Daino. The coverage obligation, which the Appellate Division’s majority decision imposed on Dryden and any similarly situated insurance company, was the result of a risk that clearly was not reasonably expected by Dryden when it insured Goessl as a sole proprietorship. E. This Court Should Reverse The Appellate Division’s Majority. Decision And Reinstate Judge McCarthy’s Decision Finding That Dryden Has No Coverage Obligation For all the reasons stated above, the Court should reverse the Appellate Division’s majority decision and reinstate the trial judge’s order finding that Dryden has no coverage obligation. POINT IV THE MAJORITY OPINION FAILED TO APPLY THE CORRECT APPELLATE STANDARD OF REVIEW WHEN IT SUBSTITUTED ITS REVIEW OF THE TRIAL EVIDENCE AND REVERSED THE TRIAL JUDGE’S DECISION WHICH WAS BASED ON THE TRIAL JUDGE’S FAIR INTERPRETATION OF THE EVIDENCE As stated by the dissenting judge: It is well settled that, "[o]n an appeal from a judgment rendered after a nonjury trial, our scope of review is as broad as that of the trialcourt (see Matter of Capizola v Vantage Intl., 2 AD3d 843, 84412003]). Upon such a review, the record should be ’viewed in the light most favorable to sustain the 74 (R 692) judgment’ (Farace v State of NewYork, 266 AD2d 870, 871 [1999]; see Parone v Rivers, 84 AD2d 686 [ 1981 ]), and this Court should evaluate ’the weight of the evidence presented and grant judgment warranted by the record, giving due deference to the trial court’s determinations regarding witness credibility, so long as those findings could have been reached upon a fair interpretation of the evidence’ (New York Tel. Co. v Harrison & Burrowes Bridge Contrs., 3 AD3d 606, 608 [2004] [internal quotation marks and citations omitted]). ’[T]he decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to the credibility .of witnesses’ (Thoreson v Penthouse Intl., 80 NY2d 490, 495 [1992] [internal quotation marks omitted], rearg denied 81 NY2d 835 [1993])" (Matter of City of Syracuse Indus. Dew Agency [Alterm, Inc.], 20 AD3d 168, 170.) As stated by the dissenting judge, "the majority’s rejection of the [trial] court’s factual finding that Goessl was an employee ofA.P. Daino, is contrary to the well-settled standard that we apply when reviewing non-jury verdicts. ..." (R 693) This Court recently held: The decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially ~when the findings of fact rest in large measure on 75 considerations relating to the credibility of witnesses. (citations omitted) 409-411 Sixth Street, LLC v. Mogi, 22 N.Y.3d 875,876 (2013). In 409-411 Sixth Street, the appellate division had reversed the decision of a fact-finding court. This Court reversed the appellate division holding: The Appellate Division did not apply this standard of review to this case, instead substituting its own view of the trial evidence. Accordingly, the case needs to be remitted to that court to apply the appropriate standard of review. Id. at p. 877. The trial court, after conducting a bench trial in which it considered A.P. Daino’s and Goessl’s credibility on such critical issues as A.P. Daino’s control over Goessl’s work, issued a lengthy decision with numerous findings of fact. (R 10-29) The court correctly applied the common law factors and found that an employer/employee relationship unquestionably existed between A.P. Daino and Goessl. The Appellate Division’s decision found that Goessl was working as an independent contractor/subcontractor for A. P. Daino. (R 689-693) There was, as the Appellate Division dissent stated, overwhelming evidence of an employer/employee relationship between Daino and Goessl. See Point II of this memorandum of law. Had the Dryden policy never been purchased by Goessl and had Main Street contended that Goessl did not meet 76 its policy definition of "insured," it is inconceivable that any court would conclude that Goessl was not deemed to be an employee of Daino at the time of the fire. The procurement of the Dryden policy should not justify an opposite result whereby Main Street no longer has a coverage obligation and Dryden does. Dryden was not aware of the "business arrangement" relied on so heavily by the Appellative Division in imposing a coverage obligation on Dryden. The existence of this business relationship should not displace the trial court’s thorough and fair assessment that what existed was an employer/employee relationship that obligated Main Street to provide coverage and relieved Dryden of an obligation to provide coverage. The trial judge’s analysis of the actual relationship and the trial judge’s decision to give little to no weight to the "business arrangement" is a fair interpretation of the evidence that resulted in a fair result: Main Street, which insured Daino’s business, was obligated to provide coverage for Mr. Goessl who was working for Daino, using Daino equipment, supervising Daino employees and doing Daino.work at the time of the accident whereby Dryden, which insured a sole proprietorship with no employees, could not have reasonably contemplated that it would pay a loss for an insured working full time under the direction 77 and control, and as an employee ofA.P. Daino’s business, a business Dryden did not insure. The Appellate Division’s majority opinion, in reversing the trial court’s judgment, gave absolutely no deference as required by this Court to the trial court’s findings and instead "substituted its own view of the trial evidence." The Appellate Division’s decision does not even attempt to explain why the trial court’s decision is not the result of a fair interpretation of the evidence. Where the Appellate Division attempts to justify its decision in relieving Main Street of a coverage obligation is by stating that Goessl and Daino, who intentionally entered into a "business arrangement," could not have expected that Goessl would be covered under the Main Street.policy. The Appellate Division’s reasoning does not explain why Dryden, which was not a party to this business arrangement, and had no knowledge of it, could be bound to provide liability coverage to decision, recognizing that Dryden is Goessl. The not bound Appellate Division by this "business arrangement," simply ignores the trial judge’s finding of what the Appellate Division dissent said was overwhelming evidence of an employer/employee relationship. The Appellate Division simply makes a conclusory statement that Goessl was working as a subcontractor for Daino at the time of the accident. ~. 78 It is respectfully submitted that the Appellate Division simply "substituted its own view of the evidence" and did so in violation of Court of Appeals precedent requiring that the "decision of the fact finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence." 409-411 Sixth Street, LLC, 22 N.Y.3d 876. It is respectfully submitted that this case should be remitted back to the Appellate Division to apply the appropriate standard for review. POINT V THE MAJORITY OPINION MADE ERRONEOUS FINDING OF FACT TO REVERSE THE JUDGMENT OF THE TRIAL COURT Under CPLR §5501, it states: The Court of Appeals shall review questions of law only, except that it shall also review questions of fact where the Appellate Division, on reversing or modifying a final or interlocutory judgment, has expressly or impliedly found new facts and a final judgment pursuant thereto is entered. A. The majority erred when it made the new finding that the MSA policy did not define the term "employee" ~ The National Grange policy issued defines "insured" to include A.P. Daino’s employees. (R 236) The majority decision erroneously states: "The term "employee" is not defined in the National Grange policy..:.." (R 691) 79 In fact, the trial record contains the National Grange policy which defines "employee" as including: (R 238) 5. "Employee" includes a "leased worker". "Employee" does not include a temporary worker. The National Grange policy then goes on to define a "leased worker" as follows: 9. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. "Leased worker" does not include a "temporary worker." (R 239) ~ While Dryden does not contend that Goessl d/b/a S&K Plumbing is a "labor leasing firm," Dryden does contend that the "reasonable expectation and purpose" of the National Grange policy, as evidenced by its broad definition of "employee," is to cover individuals who are working full time for A.P. Daino under A.P. Daino’s direction and control, even if that worker does not obtain health insurance or other employee’s benefits or have taxes withheld on his behalf by the alleged employer and even if that worker submitted invoices for his wages, as was Goessl’s practice with A.P. Daino. See City of Albany v. Standard Aceident Insurance Co., 7 N.Y.2d 422 (1960) 8O (The language employed in the insurance contract must be given its ordinary meaning, such as the average policyholder of ordinary intelligence, as well as the insurer, would attach to it.) See also Baughman v. Merchants Mutual Insurance Co., 87 N.Y.2d 589, 593 (1996). B. The majority erroneously made the new finding that A.P. Daino and Goessl intentionally structured their business relationship as one of independent contractor. Contrary to the majority’s new finding of fact, Goessl submitted an affidavit that stated: I take no position as to the legal determination to be made by this Court as to whether I was working at the Smolnik residence as a sole proprietor or an employee of A.P. Daino. (R 532) Goessl, a plumber who was not legally sophisticated, testified that while doing A.P. Daino jobs, he considered himself to be A.P. Daino’s employee (R 57, 363), but that he also considered himself"an independent." (R 57) He also said although he considered himself an employee, he did not go to A.P. Daino to request he become an official employee with employee- type benefits because he simply did not think that A.P. Daino would agree to it. (R 59) When Goessl was asked how to describe how he came to work full time for A.P. Daino as an alleged independent subcontractor, Goessl testified he 81 was approached by A.P. Daino to come work for him (R 391);.A.P. Daino never offered to have Goessl work for him as an employee (R 392); "He [Mr. Daino] knew I was doing my own kind of thing and it just of kind of rolled right into that, into the setup we had" (R 392); Goessl did not ask Mr. Daino to be an employee (R 65); Goessl mistakenly believed he could not be an employee of A.P. Daino and still have an ability to do non-Daino work as an independent contractor. (R 67-68) Mr. Daino never told Goessl that he could work both as an official employee for A.P. Daino, but still do non-Daino work or jobs as an independent contractor. (R 92) Mr. Daino, who initially was saving thousands of dollars a year on his worker’s compensation policy premium by not insuring Goessl as an employee, testified he never allowed Goessl to become an "official" employee because "there was never a reason to. I, you know, I don’t know why that would have ever been an issue." (R 93) When Mr. Daino initially approached Goessl nine years earlier to see if he wanted to work for A.P. Daino, Goessl was working as an independent contractor for third parties using his own tools and equipment. Mr. Daino never, at that time or at any time thereafter, offered to allow Goessl to work as an employee, even though Goessl was working five days a week, eight hours a day for the next nine years for A.P. Daino. 82 (R 43) In 2005 or 2006, Goessl stopped doing all third-party work as an independent contractor and by the year 2009, all of his income was from doing work for A.P. Daino. (R 45) By the time of the accident, there was evidence that even Mr. Daino believed Goessl was working as his employee. A certified copy of the police report of the investigation of the fire in issue states: "Craig [Daino] advised that he had two of his employees there doing the work this morning." (R 311) Goessl, in a statement to police, said: "I am employed by A.P. Daino Plumbing. I have been employed with the company for over ten years." (R 312) The majority’s decision relied heavily on its erroneous new finding of fact that A.P. Daino and Goessl intentionally structured their business relationship as one of independent contractor as opposed to employer/employee. Goessl, however, contradicted himself as to whether he believed he was A.P. Daino’s employee or independent contractor. There was evidence that Goessl, a plumber with no apparent understanding of the law, did not know he could work as an employee for A.P. Daino, yet still do non- Daino work as an independent contractor; and there is evidence that Mr. Daino structured the relationship over the unsophisticated Goessl in order to avoid 83 paying two or three thousand dollars in yearly worker’s compensation premium for Goessl. C. The majority made the new finding that Goessl first obtained liability insurance at Daino’s request. The majority decision states: At A.P. Daino’s request, Goessl obtained his own liability coverage, which is further evidence that neither party considered Goessl to be an employee under the [National Grange] policy. (R 691) The trial record does not contain any evidence that GoessI first obtained liability insurance at Mr. Daino’s request and is silent as to whether Goessl maintained liability coverage with Dryden solely at Mr. Daino’s request or to also obtain liability coverage himself as an independent contractor for a liability claim potentially arising from .non-Daino work that he had performed in years past, but that caused damage during the policy period. The trial record indicates that Goessl did work as S&K before he was approached by Mr. Daino in 2000. (R 43) Goessl first purchased liability coverage for S&K before he went to work as an alleged independent contractor for ,A.P. Daino and not because of A.P. Daino’s demand that he do so. (R 69) Goessl did non-Daino work as a subcontractor for a company named Preston up until 2006 and that Preston required him to provide proof he had liability 84 insurance. (R 395) The trial record thus establishes that for several years while he worked at A.P. Daino, Goessl continued to do non-Daino work as an independent contractor for third parties, thereby necessitating his own liability coverage and his purchase of liability coverage did not evidence that he believed he was an independent contractor of A.P. Daino. Dryden’s underwriter gave an affidavit that even after GoessI stopped doing non-Daino work, his liability policy with Dryden protected him for liability for damage that occurred during the Dryden policy period as a result of any of the hundreds of non-Daino jobs that he had done as an independent contractor in years past. (R 339) The Appellate Division placed great weight on Goessl’s procurement of liability insurance through Dryden in deciding that Goessl was an independent contractor and not an employee of A.P. Daino. Goessl did not initially procure liability insurance at the request of Goessl, and there is no evidence in the record that he continued to maintain liability insurance at the time of the fire solely because of any request or demand by A.P. Daino. The Dryden policy in effect for Goessl at the time of the fire insured Goessl for liability claims made against him as a result of any of the hundreds of plumbing jobs or inspections that he had done as an actual independent contractor (not working for A.P. Daino) such that if damage occurred during the policy period it would cover him for his potential liability. (R 339) 85 D. The majority made the erroneous new finding that Goessl was a subcontractor and not an employee of A.P. Daino Although the Appellate Division decision stated that it reversed the trial court’s judgment on the law, the Appellate Division, in doing so, made a finding of fact that Goessl was working as a subcontractor for A.P. Daino at the time of the accident at issue in the underlying action and was not otherwise working as an employee of A.P. Daino at the time of that accident. The Appellate Division’s decision holding that the Dryden policy provided liability coverage to Goessl was based on a factual finding that Goessl was working "as a plumbing subcontractor for A.P. Daino." (R 690) The Appellate Division decision ignored the numerous facts which New York courts have held are the principal factors that are heavily weighted in determining a worker’s status as an independent subcontractor or as an employee. ~ Under Court of Appeals precedent, Dryden was entitled to have employment status determined based on the actual work relationship and not on a "business arrangement" in which Daino subjectively viewed Goessl as an independent contractor. See Thompson v. Grurnman .4erospace Corp., 78 N.Y.2d 553 (1991). The Appellate Division made a finding of fact against Dryden that Goessl was a subcontractor based not on the actual relationship between Goessl and A.P. Daino, but rather based on an alleged oral 86 arrangement in which they made a conclusory statement and otherwise mislabeled their relationship, as one of subcontractor or independent contractor rather than what the evidence reflected their actual relationship was, which was that of employee/employer. Dryden had no knowledge of this agreement before the fire, and its reasonable expectations as to what Dryden must cover must not be controlled by this agreement. See Baughman v. Merchants Mutual Ins. Co., 87 N.Y.2d at 592-593. E. The majority made the erroneous new finding that Goessl determined his own hourly rate .The found, among other things, that "Goessl determined his own hourly rate." (R 691) There is no evidence in the record that Goessl determined his own hourly rate. Rather, the trial record contains testimony from Mr. Daino that he paid Goessl more per hour than other workers because Goessl did not receive employment-type benefits such as vacation time, sick time or health insurance. (R 473) To assert that "Goessl determined his own hourly rate" is also contrary to the trial record where both Goessl and Mr. Daino testified that A.P. Daino could fire Goessl at any time (R 497) and where Goessl testified that although he believed he should be classified as an official employee of A.P. Daino, he never went to Mr. Daino to request that he become an official employee because he did not think that A.P. Daino would agree to it. (R 59) 87 Mr. Daino testified that it was only once or twice in nine years that Goessl said that he needed to increase his hourly rate. (R 481) Goessl’s request for a higher hourly rate on those one or two occasions over nine years was nothing more than what is the equivalent of an employee for A.P. Daino asking to be paid more per hour. CONCLUSION This Court should reverse the decision and order of the Fourth Department and reinstate the order of the trial court ruling against National Grange and for Dryden. In the alternative, this Court should remit this case back to the Fourth Department to apply the appropriate standard for review. Dated: December 2, 2014 Respectfully submitted, KNYCH & WHRITENOUR, LLC Peter ~¢ ych, Esq Attorneys for Appellant Dryden Mutual Insurance Company 88 Office and P.O. Address One Park Place, Suite 404 300 South State Street Syracuse, New York 13202 Telephone: (315) 472-1175 Bruce R. Appellate C for Appellant Dryden Mutual Insurance Company Office and P.O. Address 333 E. Onondaga St. Syracuse, New York 13202 Telephone: (315) 476-1800 TO: , Esq. KENNY SHELTON LIPTAK NOWAK, LLP Attorneys for Defendants A.P. A.P. Daino Plumbing & Heating, .Inc. and The Main Street America Group 14 Lafayette Square, Suite 510 Rand Building Buffalo, New York 14203 Telephone (716) 853-3801 Thomas J. Lynch, Esq. LYNCH LAW OFFICE Attorneys for Defendant Stanley Goessl 2700 Bellevue Avenue Syracuse, New York 13219 Telephone: (315) 471-1318 89 SMITH SOVIK KENDRICK & SUGNET, P.C. Kristin L. Norfleet, Esq. Attorneys for Defendants Andrew Smolnik and Catherine Smolnik Office and P.O. Address 250 South Clinton Street, Suite 600 Syracuse, New York 13202 Telephone: (315) 474-2911 9O