Dryden Mutual Insurance Company, Appellant,v.Stanley Goessl, et al., Defendants, AP Daino & Plumbing, Inc. et al., Respondents.BriefN.Y.April 28, 2016To be Argued by: JESSICA L. FOSCOLO (Time Requested: 15 Minutes) APL-2014-00231 Appellate Division Docket No. CA 13-00513 Oswego County Clerk’s Index No. 10-1993 Court of Appeals of the State of New York DRYDEN MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, – against – STANLEY GOESSL, D/B/A S&K PLUMBING, Defendant, AP DAINO & PLUMBING, INC., THE MAIN STREET AMERICA GROUP, Defendants-Respondents, ANDREW SMOLNIK and CATHERINE SMOLNIK, Defendants. BRIEF FOR DEFENDANTS-RESPONDENTS KENNEY SHELTON LIPTAK NOWAK LLP Robert A. Crawford, Esq. Jessica L. Foscolo, Esq. Attorneys for Defendants-Respondents The Calumet Building 233 Franklin Street Buffalo, New York 14202 Tel.: (716) 853-3801 Fax: (716) 853-0265 January 22, 2015 i DISCLOSURE STATEMENT Main Street America Group is the parent company of NGM Insurance. There are no other affiliations. AP Daino & Plumbing, Inc. has no parent, subsidiary or other affiliations. ii TABLE OF CONTENTS Page DISCLOSURE STATEMENT ......................................................................... i TABLE OF AUTHORITIES ............................................................................ iv QUESTIONS PRESENTED ............................................................................. 1 PRELIMINARY STATEMENT ...................................................................... 2 STATEMENT OF FACTS ............................................................................... 4 1. Goessl d/b/a S&K Plumbing ........................................................ 4 2. AP Daino and S&K Plumbing’s Financial Arrangement ............ 5 3. S&K Plumbing’s Work for AP Daino ......................................... 7 4. The Fire ........................................................................................ 9 5. The Dryden Policy........................................................................ 9 6. The MSA Policy ........................................................................... 11 7. The October 15, 2012 Decision and Order of the Trial Court .................................................................................... 12 8. The Appellate Division’s May 9, 2014 Decision ......................... 13 ARGUMENT .................................................................................................... 15 I. The Dryden Policy Provides Coverage to Stanley Goessl, d/b/a S&K Plumbing for the Fire which Arose Out of his Work Performed on behalf of S&K Plumbing ............................. 15 II. Goessl d/b/a S&K Plumbing Does not Qualify as an Insured on the MSA Policy Because he/it is not an Employee of AP Daino ................................................................ 20 A. The degree of control over the methods and means of the hired party’s work ........................................... 21 iii B. How payment is made, and whether social security or other taxes are withheld ................................................... 24 C. The provision of employee benefits ..................................... 24 D. Whether the alleged employer retains the right to discharge and the permanency of the working relationship ............................................................. 25 E. The degree of skill required to perform the job.................... 25 F. The extent of the hire worker’s control over when and how long to work ........................................................... 25 G. The opportunity for profit and loss ....................................... 26 H. The management authority and/or responsibilities of the hired worker ............................................................... 26 I. Whether the hired party is in business .................................. 27 J. Whether or not the worker is treated differently than employees ..................................................................... 28 K. Whether the hired party is required to procure its own insurance ....................................................................... 29 CONCLUSION ................................................................................................. 30 iv TABLE OF AUTHORITIES Cases: Page Breed v Insurance Co. of N. Am., 46 N.Y.2d 351, 413 N.Y.S.2d 352 (1978) .............................................. 16 Chalcoff v. Project One, 12 A.D.3d 872, 784 N.Y.S.2d 738 (3d Dept. 2004) ............................... 21 Chase Manhattan Bank, N.A. v. The Travelers Group, Inc., 269 A.D.2d 106 (1 st Dept. 2000) ............................................................ 20 Chiumento v. State, 5 Misc. 3d 918, 784 N.Y.S.2d 324 (Ct. Cl. 2004) .................................. 24 Commissioners of State Ins. Fund v. Lindenhurst Green & White Corp., 101 A.D.2d 730, 475 N.Y.S.2d 42 (1 st Dept. 1984) ............................... 21 Curry v. Atlantic Mut. Ins. Co., 283 A.D.2d 937, lv. den. 96 N.Y.2d 721 (4 th Dept. 2001) ..................... 20 Essex Ins. Co. v. Pingley, 41 A.D.3d 774, 839 N.Y.S.2d 208 (2d Dept. 2007) ............................... 17 Fagnani v American Home Assur. Co., 64 N.Y.2d 967, 488 N.Y.S.2d 646 (1985) .............................................. 16 Fisher v. SDAM Management Inc., 284 A.D.2d 845, 727 N.Y.S.2d 724 (3d Dept. 2001) ............................. 21 Gallagher v. Houlihan Lawrence Real Estate, 259 A.D.2d 853 (3d Dept. 1999) ............................................................ 18 Gfeller v. Russo, 45 A.D.3d 1301, 846 N.Y.S.2d 501 (4th Dept. 2007) ............................ 21 Harjes v. Parisio, 1 A.D.3d 680, 766 N.Y.S.2d 270 (3d Dept. 2003) ................................. 24, 26 Hartford Acc. & Indem. Co. v Wesolowski, 33 N.Y.2d 169, 350 N.Y.S.2d 895 (1973) .............................................. 15, 16 v Mace v. Morrison & Fleming, 267 A.D. 29, 44 N.Y.S.2d 672 (3d Dept. 1943), order aff'd, 293 N.Y. 844 (1944) ............................................................ 23-24 Marques v. Salgado, 12 A.D.3d 817, 784 N.Y.S.2d 241 (2d Dept. 2004) ............................... 21 Matter of Morton, 284 N.Y. 167 (1940) ............................................................................... 19 Murray v. Union Ry. Co. of N.Y. City, 229 N.Y. 110 (1920) ............................................................................... 19 National Abatement Corp. v. National Union Fire Ins. Co. of Pittsburgh, 33 A.D.3d 570 (1 st Dept. 2006) .............................................................. 20 Newin Corp. v Hartford Acc. & Indem. Co., 62 N.Y.2d 916, 479 N.Y.S.2d 3 (1984) .................................................. 15 People ex rel. Feinberg v. Chapman, 274 A.D. 715, 87 N.Y.S.2d 41 (3d Dept. 1949) ..................................... 23 State of New York v. Home Indem. Co., 66 NY2d 669, 495 N.Y.S.2d 969 (1984) ................................................ 17 Thompson v Grumman Aerospace Corp., 78 N.Y.2d 553 (1991) ............................................................................. 18 1 QUESTIONS PRESENTED 1. Does a liability policy issued by Dryden Mutual Insurance Company provide coverage to its named insured, Goessl d/b/a S&K Plumbing, for liability in connection with a fire arising out of its work performed as a longstanding subcontractor of AP Daino & Plumbing, Inc.? Answer: Yes. As the Appellate Division, 4 th Department determined, the liability policy issued by Dryden provides coverage to its named insured, Goessl d/b/a S&K Plumbing for liability in connection with a fire arising out of its work performed as a longstanding subcontractor of AP Daino & Plumbing, Inc. 2. Did MSA properly deny coverage to Goessl d/b/a S&K Plumbing for liability in connection with a fire arising out of its work performed as a longstanding independent subcontractor of MSA’s named insured, AP Daino & Plumbing, Inc.? Answer: Yes. As the Appellate Division, 4 th Department determined, MSA properly denied coverage to Goessl d/b/a S&K Plumbing for liability in connection with a fire arising out of its work performed as a longstanding independent subcontractor of MSA’s named insured, AP Daino & Plumbing, Inc. 2 PRELIMINARY STATEMENT This appeal arises from action brought by Dryden Mutual Insurance Company (“Dryden”) seeking a declaration that it does not owe coverage to its insured, Stanley J. Goessel (“Goessl”) in connection with a fire that occurred on August 27, 2009 at a residence located in Central Square, New York (“the Fire”). Dryden issued a business general liability insurance policy to Goessl, who was doing business as S&K Plumbing. The Main Street America Group (“MSA”) issued a general liability policy to AP Daino Plumbing & Heating, Inc. (“AP Daino”). Dryden sought to avoid its coverage obligations to Goessl and argued that Goessl was an employee of AP Daino and therefore entitled to coverage under the MSA policy. MSA denied coverage because Goessl was an independent contractor and therefore did not qualify as an insured under the MSA policy. Following a bench trial, the trial court issued a judgment and order finding that Goessl was an employee of AP Daino and not an independent contractor. As a result, the trial court determined MSA, as insurer of AP Daino, was obligated to cover the property damage caused by the fire. By decision dated May 9, 2014, the Appellate Division, Fourth Department reversed the trial court’s order and judgment in a 4-1 decision and determined Goessl was an independent contractor and not an employee of AP Daino. As a 3 result, the Appellate Division held that Goessl was entitled to coverage under the Dryden policy and not under the MSA policy. Dryden now appeals the Appellate Division’s decision to this Court. As discussed below, the record proof demonstrates that Goessl was not an employee of AP Daino, but instead was an independent subcontractor. Goessl owned his own plumbing business and was free to perform work for others. Goessl did not want to be AP Daino’s employee and chose to remain an independent contractor. Goessl maintained his own business insurance policy with Dryden for several years providing coverage for his plumbing business. Dryden charged and collected annual premiums for these policies and through its insurance contract, it agreed to provide coverage for Goessl’s plumbing business, which included work performed for AP Daino. Goessl was paid by AP Daino as a 1099 independent contractor and deducted certain business expenses on his tax returns. Because he is not AP Daino’s employee, Goessl does not qualify as an insured under the MSA policy. Goessl is the named insured under the Dryden policy, which was procured to provide liability coverage for, inter alia, property damage claims such as those arising from the Fire. The Appellate Division’s decision should therefore be affirmed. 4 STATEMENT OF FACTS 1. Goessl d/b/a S&K Plumbing Prior to forming S&K Plumbing, Goessl worked as an employee at Carl Plumbing for 13 years. (R. 40) After leaving Carl Plumbing, Goessl worked as an employee for AP Daino for approximately one year. (R.40, 478) During this time, AP Daino withheld social security taxes from Goessl’s pay, paid unemployment insurance for Goessl and report his wages on a W2 form. (R. 468-469) Goessl then left AP Daino and started working as an employee for Artisan Plumbing. (R. 41) Goessl stayed with Artisan Plumbing for approximately one year before leaving in approximately 2000 and starting S&K Plumbing. (R.41, 43) Goessl filed a business certificate for S&K Plumbing in Oswego County as “Stanley Goessl d/b/a S&K Plumbing.” (R.69, 353) After approximately one year of doing business as S&K Plumbing, Goessl reconnected with Craig Daino, who is (and was at all times relevant) the owner and sole principal of AP Daino. (R.43) Goessl, as S&K Plumbing, began subcontracting work from AP Daino at that time with the expressed and mutual understanding that Goessl was working for AP Daino in his capacity as sole proprietor of S&K Plumbing, and that S&K Plumbing was therefore an independent contractor (or a subcontractor) retained by AP Daino. (R.43-48) During this nine year period, there was never any agreement to reestablish Goessl 5 an employee of AP Daino. Id. Goessl remained a subcontractor for AP Daino through the date of the fire at issue in this litigation, which occurred on August 27, 2009. (R.70) Goessl always considered himself “an independent” and he “didn’t want to be an employee.” (R. 57, 58, 60) 2. AP Daino and S&K Plumbing’s Financial Arrangement As a subcontractor, Goessl submitted invoices to AP Daino on S&K Plumbing letterhead and was paid by AP Daino via check made out to “S&K Plumbing, Stanley Goessl.” (R. 46-47, 318, 360-361, 414-418, 674-679) Goessl set his own hourly rate. (R. 481) On more than one occasion, from 2000 through 2009, S&K Plumbing sent written notification to Craig Daino at AP Daino, on official S&K Plumbing letterhead, that S&K Plumbing was raising its rates. Id. Each time, Daino agreed to pay the new rate increase. Goessl dictated these terms – not Daino. (R.481-488) AP Daino employees filled out timecards. (R. 475) AP Daino employees had to account for their whereabouts in detail, and had to specify the work that they performed. (R. 483) Goessl, on the other hand, turned in an S&K Plumbing invoice that simply indicated the number of hours worked, without any of the detail required by AP Daino employees. Id. No taxes or other withholdings were taken out of the payments made by AP Daino to S&K Plumbing. (R.46, 353, 361) Goessl received an IRS Form 1099 6 relative to his income from AP Daino. (R.317, 361) All AP Daino employees received W-2 forms. (R.365) Goessl testified that, in his tax returns, he regularly claims reimbursement for mileage relative to his work with AP Daino. (R.373- 374) All AP Daino employees received paid vacation time, paid sick leave, medical benefits and 401K plans. (R. 473) Goessl did not receive any paid vacation time or paid sick leave from AP Daino, nor did Goessl receive medical benefits or a 401K plan. (R. 371-362) Goessl (as S&K Plumbing) never received any bonuses from AP Daino as did the employees of AP Daino. (R.353) AP Daino employees all received a company cell phone. Goessl, however, did not. (R.480-482) If Goessl needed to make a work-related telephone call, Goessl would use his own personal cell phone. If AP Daino needed to contact Goessl by telephone, they would call him on his own personal cell phone. Id. Goessl was not reimbursed or compensated in any way by AP Daino for the use of his personal cell phone. Id. Although Goessl was eventually covered under AP Daino workers’ compensation insurance policy, Goessl was not even aware (until after the fire) that he was listed on AP Daino’s workers’ comp policy. (R.366-367) Daino testified that he believed all subcontractors/workers were required to be listed on the workers’ comp policy, which is why and how Goessl was identified to the workers’ compensation carrier. (R.510) 7 3. S&K Plumbing’s Work for AP Daino Goessl performed his work independently. Daino was very rarely at the work site and did not supervise, control or direct the manner or methods of Goessl’s daily work. (R.525) Goessl was often assigned specialized tasks that were more difficult than the tasks assigned to the AP Daino employees. Goessl testified that AP Daino typically reserved the more difficult plumbing assignments for S&K Plumbing, and that the relatively easier assignments were typically given to the AP Daino employees because he was a more highly skilled plumber than the AP Daino employees. (R.450-467) However, if Goessl performed his work incorrectly or negligently, Daino would expect Goessl to return to the work site and correct the mistake without getting any further pay from AP Daino. (R. 503) Goessl never directed, instructed, or assigned work to any employees of AP Daino, with the sole exception of those occasions when Goessl was working with an AP Daino apprentice. On those occasions, Goessl would direct the AP Daino apprentice to perform work according to a task list provided by Craig Daino. Goessl would “send them [the apprentices] on their task, and I do my own.” (R.460) Goessl decided when he would start working each day and Goessl decided when he would leave work each day. (R.406) Daino did not have any input into 8 Goessl’s decisions in this regard. Goessl could also come and go as he pleased, and could (and would) take days off whenever he wanted without first notifying Daino. (R.67) AP Daino employees could not do this. All of the AP Daino employees worked 40 hours per week, every week. Goessl, however, worked anywhere from 30 to 40 hours per week, depending on AP Daino’s work volume. (R.474-475) Daino made clear that he did not give “permission” to Goessl to take time off. Daino explained that Goessl “would pretty much just tell me he’s not coming in.” According to Daino, this occurred approximately 20 to 30 times during the past several years. Other times, Goessl would simply take the day off without giving Daino any advanced notice whatsoever. (R. 464) Goessl testified that the subcontracting work he received from AP Daino was fairly regular and was sufficient to meet the S&K Plumbing overhead, and so the need for Goessl to seek out substantial other work was not pressing. (R. 352-355, 395-405, 419-421) On occasion when Goessl borrowed the AP Daino truck for plumbing work, he always used his own money to replace the gasoline. Dryden highlights the fact Goessl used an AP Daino truck on occasion; however, Dryden conveniently leaves out the fact that Goessl paid for the gasoline whenever he used an AP Daino truck. (R. 387). 9 4. The Fire On August 27, 2009, Daino performed certain plumbing work at the Smolnik residence in Central Square, New York (“the Premises”). (R.60-61) Daino did not provide any instruction or direction whatsoever to Goessl regarding how to do his job. (R. 525) Goessl even used some of his own tools for the job. (R. 491-492). Goessl reported to Premises with an AP Daino apprentice, Jamie Daino. Although Dryden argues this fact supports it position, this fact is of no legal import. (See infra.) As explained by Goessl during his EUO, an apprentice is required to work with a journeyman, and it does not matter whether the apprentice and journeyman work for the same company. (R.436-450) The residence sustained a fire near in the area where Goessl had performed work and it appeared to be caused by it. (R. 311-312) 5. The Dryden Policy At the time of the fire, Goessl d/b/a S&K Plumbing was insured by a general liability policy issued by Dryden for the period March 30, 2009 to March 30, 2010 (No. T1027603) (“the Dryden Policy”). (R. 142-196, 684) The Dryden Policy provides liability coverage subject to a $1 million per occurrence limit. (R. 684). The Dryden Policy contains a Principal Coverages provision, including Coverage L which provides, in relevant part: Coverage L – Bodily Injury and Property Damage 10 We provide bodily injury or property damage coverage only if a limit of liability is shown on the Declarations page or the Supplemental Declarations page. The bodily injury or property damage must be caused by an occurrence. The occurrence must take place in the coverage territory and during the policy period. WHAT WE PAY FOR – COVERAGE L We pay up to our limit of liability shows, 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. We assume no other obligations or liability to pay sums or to perform acts or services unless the coverage is specifically provided for in the Supplementary Payments[.] (R.178) The Dryden Policy contains the following definition of “Insured”” 11. Insured – Each of the following is an insured under the conditions and limitations set forth below: 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[.] (R.174) AP Daino required that S&K Plumbing procure this insurance policy in order to perform work for AP Daino. (R. 375-377) To show proof of insurance, a Certificate of Insurance was issued to S&K Plumbing by S&K Plumbing’s 11 insurance agent (Haylor, Freyer & Coon, Inc.) for the time period inclusive of the date of the subject accident (3/30/2009 through 3/30/2010). (R. 684) Dryden is listed on the Certificate as the “Insurer” and AP Daino is listed as a “Certificate Holder.” Id. According to Goessl, this Certificate was expressly requested and required by AP Daino as proof that S&K Plumbing had the appropriate insurance. (R. 368- 369) Goessl explained that S&K Plumbing could not work for AP Daino without such an insurance policy. Goessl personally paid the insurance policy premiums to Dryden and was never reimbursed from any source for these premium payments. (R. 369) No AP Daino employees were required to purchase their own liability insurance, as was S&K Plumbing. Id. Dryden was or should have been, at all times, fully aware through its own annual underwriting reviews of the Dryden policy that Goessl was receiving income from his business as S&K through his longstanding subcontractor relationship with AP Daino. (R. 340-346) 6. The MSA Policy MSA issued a Contractors policy to AP Daino for the period January 1, 2009 to January 1, 2010 (No. MPVV68274) (“the MSA Policy”). R. 197-295. The policy includes Business liability coverage, which provides, in part: 12 1. Business Liability We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury”, “property damage”, “personal injury”, or “advertising injury” to which this insurance applies[.] (R. 229) Section C. of the MSA policy defines “Who is An Insured” under the MSA Policy, to include: 2. Each of the following is also an insured: a. Your “employees”, other than either your “executive offers” (if you are an organization other than a partnership, joint venture or limited liability company) your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. (R. 236) The MSA Policy defines “employee” to “include a “leased worker” . . . but not include a “temporary worker.” (R. 238) The MSA Policy’s definition of “leased worker” is not applicable here, since the definition requires that such worker is leased to AP Daino by a labor leasing firm. (R. 239) 7. The October 15, 2012 Decision and Order of the Trial Court Following a bench trial, the trial court issued a decision and order dated October 15, 2012. (R. 6-7). The order declares that (1) Dryden has no duty to 13 defend or indemnify Goessl under the Dryden Policy in connection with the Fire; and (2) MSA has a duty to defend and potentially indemnify Goessl under the MSA Policy in connection with the Fire. The order also granted judgment in favor of Dryden and Goessl for the cost of defending Goessl in the underlying action. 8. The Appellate Division’s May 9, 2014 Decision By decision dated May 9, 2014, the Appellate Division, Fourth Department reversed the trial court’s October 15, 2012 order and judgment (R. 6-7) in a 4-1 decision and determined Goessl was an independent contractor and not an employee of AP Daino (R. 689). As a result, the Appellate Division held that Goessl was entitled to coverage under the Dryden policy and not under the MSA policy. The Appellate Division made an appropriate and correct legal determination based on the facts in the record that Goessl was not AP Daino’s employee. This is not a new factual finding subject to further review. Instead, it is a legal finding based on, inter alia, the following facts in the record: AP Daino did not provide Goessl with health insurance or other employee benefits, such as bonuses, retirement plan or paid time off; R.420-456, 510-511. AP Daino did not withhold taxes, pay social security or unemployment taxes on Goessl’s behalf; R.424-604; 461-462. 14 Goessl determined his own hourly rate and submitted invoices to AP Daino on behalf of S&K Plumbing unlike the timecards used by AP Daino employees R.414-418, 450-467, 604-624. Goessl received a Form 1099-Misc for miscellaneous income (as opposed to a W-2 wage statement); R.446-448. Goessl obtained his own liability insurance policy from Dryden, which no AP Daino employees were required to do; R.138-201, 333- 345, 433-456, 531-532, 604-624. Goessl personally paid the insurance policy premiums to Dryden and was never reimbursed from any source for these premium payments; R.404-405. Dryden now appeals the Appellate Division’s decision to this Court. As discussed below, the record proof demonstrates that Goessl was not an employee of AP Daino, but instead was an independent subcontractor. Goessl owned his own plumbing business that was insured by Dryden. The fire arose out of Goessl’s work for that plumbing business and Dryden is obligated to provide coverage to Goessl for the loss. 15 ARGUMENT I. The Dryden Policy Provides Coverage to Stanley Goessl, d/b/a S&K Plumbing for the Fire which Arose Out of his Work Performed on behalf of S&K Plumbing The Dryden Policy agreed to provide liability coverage to its named insured, Goessl d/b/a S&K Plumbing “with respect to the conduct of a business in which he/she is the sole proprietor.” (R. 174). Goessl was the sole proprietor of S&K Plumbing on the date of the Fire and was performing work relating to the conduct of his business at the residence that was damaged by fire. Despite Dryden’s assertion to the contrary, the Dryden Policy’s definition of “employee” are immaterial to the question of whether Goessl qualifies as an insured under its (or MSA’s) policy. The Dryden Policy was issued individually and directly to Goessl d/b/a S&K Plumbing. There is no question that Goessl qualifies as an insured under the Dryden Policy. Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies. See Hartford Acc. & Indem. Co. v Wesolowski, 33 N.Y.2d 169, 350 N.Y.S.2d 895 (1973); Newin Corp. v Hartford Acc. & Indem. Co., 62 N.Y.2d 916, 479 N.Y.S.2d 3 (1984). If, however, the language in the insurance contract is ambiguous and susceptible of two reasonable interpretations, the parties may submit extrinsic evidence as an aid in construction, and the resolution of the 16 ambiguity is for the trier of fact. See Fagnani v American Home Assur. Co., 64 N.Y.2d 967, 488 N.Y.S.2d 646 (1985). On the other hand, if the tendered extrinsic evidence is itself conclusory and will not resolve the equivocality of the language of the contract, the issue remains a question of law for the court. See Hartford, supra. Under those circumstances, the ambiguity must be resolved against the insurer which drafted the contract. See Breed v Insurance Co. of N. Am., 46 N.Y.2d 351, 413 N.Y.S.2d 352 (1978). Goessl, in seeking out and obtaining a separate insurance policy with Dryden, was insuring his actions, activities and/or ventures as a specialist in the plumbing and heating trade. As set forth in his sworn affidavit, he purchased this policy from Dryden “for when I was doing business as S&K Plumbing.” Indeed, after purchasing the policy with Dryden, Goessl went out into the market specifically as S&K Plumbing and sought work in his specialized trade. Everything Goessl did after purchasing the Dryden policy, including working with AP Daino, was done with the expressed understanding that he was acting as S&K Plumbing, an independent contractor. Both Goessl and Craig Daino made clear during their depositions that there were explicit discussions between the two regarding Goessl’s status as independent contractor, and that the two entered into a very specific arrangement to formalize this understanding, including the procurement of the Dryden policy confirmed by certificate of insurance. 17 Also important, it is undisputed that Goessl continuously performed work in the trade, as S&K Plumbing, on jobs other than with AP Daino. Although Goessl admitted that the lion’s share of his work was with AP Daino and that there were gaps in time when he performed only AP Daino work, Goessl never did anything to discontinue his assumed name, nor did he turn down any other work. Instead, Goessl testified that he did not need to actively and continuously seek work (other than with AP Daino) because the work with AP Daino was sufficient to meet his financial needs. Under New York law, with respect to the coverage issues at bar, it is Goessl’s intention that governs Dryden’s obligations, so long as sufficient evidence is put forward of that intention, particularly where the term “independent contractor” is not defined in the agreement as issue. See Essex Ins. Co. v. Pingley, 41 A.D.3d 774, 776, 839 N.Y.S.2d 208, 209-10 (2d Dept. 2007) (the insurance company bears the burden of establishing that the provision applies in a particular case and it is subject to no other reasonable interpretation); State of New York v. Home Indem. Co., 66 NY2d 669, 671, 495 N.Y.S.2d 969 (1984) (the test for ambiguity is whether the language of the insurance contract is “susceptible of two reasonable interpretations.” Further support for this position is evidenced by Goessl’s continued payments of his insurance premium with Dryden, as well as Dryden’s continued acceptance of the premium payments. See Essex, supra. 18 Dryden argues that even though Goessl and AP Daino expressly and mutually agreed to establish and maintain a contractor/subcontractor relationship, they actually lacked the sophistication and legal expertise to understand that they were in an employer/employee relationship. Solely for its own benefit, Dryden requests that this Court assess and determine what “actual work relationship” existed between Goessl and AP Daino. To support this position, Dryden cites inapposite cases addressing employment status in workers compensation and unemployment insurance disputes where, unlike here, the worker contests that he or she is an independent contractor. The cases involve employment status determinations in order to assess the rights of a worker to collect workers compensation and/or unemployment benefits. In other words, these cases all arise from a worker’s own claim that he or she is an employee in order to seek certain benefits under policies issued to others. They do not support Dryden’s attempt to avoid providing coverage to its own named insured. See e.g. Gallagher v. Houlihan Lawrence Real Estate, 259 A.D.2d 853 (3d Dept. 1999) (concerning whether a deceased claimant was an independent contractor with a real estate firm for purposes of receiving workers compensation benefits); Thompson v Grumman Aerospace Corp., 78 N.Y.2d 553 (1991) (determining applicability of workers compensation exclusivity rule where worker was designated as an employee of a leasing company in its contract with worker’s 19 putative employer); Matter of Morton, 284 N.Y. 167 (1940) (involving worker’s claim for unemployment benefits). In Murray v. Union Ry. Co. of N.Y. City, 229 N.Y. 110 (1920) -- a case cited by Dryden – the Court explains this distinction: “[E]mployment, like any other contract, presupposes understanding. The new relation cannot be thrust upon the servant without knowledge or consent . . . He must understand that he is submitting himself to the control of a new master. We are not concerned at the moment with cases in which the rights of third persons are involved. We speak of cases where the parties to the disputed relation are the parties in controversy.” Id. at 113. Murray also explains that the parties to a purported employment contract must do so with knowledge and consent as “there can be no unwitting transfer from one service to another.” Id. The record is clear that both Goessl and Daino did not consent to or have knowledge of any employer/employee relationship between them. Instead, they deliberately constructed a relationship to remain independent from each other. There is no dispute between Goessl and Daino on this point. Dryden is obligated to cover the fire. The Dryden policy covered S&K plumbing for any and all ventures entered into by Mr. Goessl as S&K Plumbing, including his stint with AP Daino. 20 II. Goessl d/b/a S&K Plumbing Does not Qualify as an Insured on the MSA Policy Because he/it is not an Employee of AP Daino The MSA Policy was issued to AP Daino and provides coverage to those qualifying as insureds, including AP Daino’s “employees.” It is well established that the putative insured bears the burden of proving it qualifies as an insured under a policy. See e.g., National Abatement Corp. v. National Union Fire Ins. Co. of Pittsburgh, 33 A.D.3d 570 (1 st Dept. 2006) (“The party claiming insurance coverage bears the burden of proving entitlement, and is not entitled to coverage if not named as an insured or an additional insured on the face of the policy”); Chase Manhattan Bank, N.A. v. The Travelers Group, Inc., 269 A.D.2d 106 (1 st Dept. 2000) (“An insured has the burden of proving that the provisions of a policy provide coverage”). This burden has not been met here, where the overwhelming evidence reflects that Goessl established and maintained an independent subcontractor relationship with AP Daino and was not its employee at the time of the fire. The term “employee” is not substantively defined by the MSA policy and should be given its plain and ordinary meaning. See Curry v. Atlantic Mut. Ins. Co., 283 A.D.2d 937, 938, lv. den. 96 N.Y.2d 721 (4 th Dept. 2001). In determining whether an employer-employee relationship exists or whether an independent contractor relationship exists, no single factor is controlling, and a court’s decision may be based on one or more of several factors, 21 including but not limited to the degree of control exercised over the hired party’s work; the manner and method of payment; the permanency of the work and the right to discharge; the degree of skill required to perform the work; the opportunity for profit and/or loss; the management authority and/or responsibilities of the hired worker; the provision of benefits; whether the hired party is actively in business; the degree to which the hired worker is treated differently than the employees, among other factors, depending on the circumstances. See Chalcoff v. Project One, 12 A.D.3d 872, 784 N.Y.S.2d 738 (3d Dept. 2004); Marques v. Salgado, 12 A.D.3d 817, 784 N.Y.S.2d 241 (2d Dept. 2004); Fisher v. SDAM Management Inc., 284 A.D.2d 845, 727 N.Y.S.2d 724 (3d Dept. 2001); Gfeller v. Russo, 45 A.D.3d 1301, 846 N.Y.S.2d 501 (4th Dept. 2007); Commissioners of State Ins. Fund v. Lindenhurst Green & White Corp., 101 A.D.2d 730, 475 N.Y.S.2d 42 (1 st Dept. 1984). The court has broad discretion to consider these factors, and others, in combination with one another, and the court’s determination should be made on a strict case-by-case basis. See Chalcoff, supra; Gfeller, supra; Fisher, supra. A. The degree of control over the methods and means of the hired party’s work. Dryden’s brief argues that among all of the factors for determining employment status control of the method and means of the work is the critical 22 factor in determining whether one is an independent contractor or an employee for the purposes of tort liability. Dryden, however, fails to properly define this factor, and also supplies the Court with incorrect information. For example, Dryden argues that AP Daino indeed controlled the “methods and means” of Goessl’s work because Goessl reported to work everyday at the same location and AP Daino instructed him what job the Daino crew would perform that day. Dryden also claims that when Goessl finished a job, he would call Daino to receive his next assignment and that when Goessl wanted time off, he was required to ask Daino permission but permission was sometimes denied. After making these incorrect statements, Dryden then concludes that these facts clearly show that AP Daino controlled the method and means by which Goessl performed the work.” In the first place, Goessl did not show up for work everyday at the same place. To the contrary, Goessl reported, albeit fairly consistently, – at a time of his choosing – to whatever site he was working at, at that particular time. Second, Goessl did not have to ask permission to take time off, but instead routinely took time off without asking Craig Daino. Both Goessl and Daino expressly admitted this fact during their depositions. Dryden’s assertion to the contrary is patently false. Third, the fact that Goessl informed Daino when he finished a job so as to learn of the next job is significant of nothing. Obviously, as a subcontractor, when 23 a job has been completed, S&K Plumbing (Goessl) had to contact AP Daino to learn of the next assignment. As such, this factor is nowhere considered by the courts on the issue of employment status. Contrary to Dryden’s misleading assertions, scrutiny of the sworn testimony in this case reveals that Craig Daino “very rarely” went out to the various work sites and in fact did not exercise any control whatsoever over the methods or means in which Goessl performed his tasks. Daino expressly testified that he believed Goessl was a fully qualified and highly competent journeyman plumber who already knew how to do all of the tasks associated with his work at AP Daino, which is why he hired S&K Plumbing (Goessl) as a subcontractor in the first place. Dryden also makes much of the fact that Goessl occasionally received limited instruction from Daino regarding what needed to be done at a particular job site. New York case law, however, makes clear that some direction and instruction is routinely provided to subcontractors and/or independent contractors in order to make sure that a job is completed correctly. It is instead day-to-day control, instruction and/or direction that the Court is looking for when making its determination of employment status. See People ex rel. Feinberg v. Chapman, 274 A.D. 715, 87 N.Y.S.2d 41 (3d Dept. 1949) (the mere fact that the work is to be done under the direction and to the satisfaction of a person representing the employer does not render the person contracting to do work a servant); Mace v. 24 Morrison & Fleming, 267 A.D. 29, 44 N.Y.S.2d 672 (3d Dept. 1943), order aff'd, 293 N.Y. 844 (1944); Harjes v. Parisio, 1 A.D.3d 680, 766 N.Y.S.2d 270 (3d Dept. 2003); Chiumento v. State, 5 Misc. 3d 918, 784 N.Y.S.2d 324 (Ct. Cl. 2004). B. How payment is made, and whether social security or other taxes are withheld. It is undisputed that Goessl, as S&K Plumbing, was paid by check from AP Daino and that no withholdings whatsoever were taken out. An IRS tax form 1099 was issued by AP Daino to S&K Plumbing every year from 2000 to 2009. Also regarding payment, it is undisputed that AP Daino employees filled out their timecards differently than Goessl. AP Daino employees had to account for their whereabouts in detail, and had to specify the work that they performed. Goessl, on the other hand, turned in an S&K Plumbing invoice that simply indicated the number of hours worked, without any of the detail required by AP Daino employees. C. The provision of employee benefits. All AP Daino employees received paid vacation time, paid sick leave, medical benefits and 401K plans. Goessl did not receive any paid vacation time or paid sick leave from AP Daino, nor did Goessl receive medical benefits or a 401K plan. Also, Goessl (as S&K Plumbing) never received any bonuses from AP Daino, as did the employees of AP Daino. Thus, this factor also weighs heavily in 25 favor of the determination that S&K Plumbing was a subcontractor and not an employee. D. Whether the alleged employer retains the right to discharge and the permanency of the working relationship. Although, ostensibly, this factor weighs in favor of Dryden’s argument, it should be duly noted that Goessl was paid weekly by AP Daino at a rate of $24 per hour. Because of the term of Goessl’s work and the manner of payment, Goessl could be dismissed, essentially, at any time without leaving AP Daino in the lurch, so to speak, with respect to its work on any particular project. Although Goessl’s situation differs en forma from an independent contractor who has been retained by written contract and who is paid upon completion of a large project, the mere fact that Goessl could be terminated by Daino at any time should not be considered a significant factor for the Court when making its determination on this issue. E. The degree of skill required to perform the job. This factor weighs in favor of a determination that S&K Plumbing was an independent contractor. According to Goessl, Craig Daino assigned to Goessl the more difficult and specialized tasks because of Goessl’s superior level of workmanship and expertise. F. The extent of the hired worker’s control over when and how long to work. 26 This factor weighs heavily in favor of a determination that Goessl, as S&K Plumbing, was an independent contractor. Both Goessl and Daino testified that Goessl was the one who determined when he would report to work, and that Goessl could (and would) take days off whenever he wanted without the permission of Daino. In fact, Goessl and Daino both testified that, sometimes, Goessl would not even inform Daino that he took time off until after he got back. G. The opportunity for profit and loss. It is undisputed that, on more than one occasion, from 2000 through 2009, S&K Plumbing (Goessl) sent written notification to Craig Daino at AP Daino, on official S&K Plumbing letterhead, that S&K Plumbing was raising its rates. Each time, Daino agreed to pay the new rate increase. Daino admitted during his deposition that Goessl dictated these terms – not Daino. This fact weighs heavily in favor of a finding that Goessl was a subcontractor with an opportunity for profit at its own will, and not an employee. See Harjes v. Parisio, 1 A.D.3d 680, 766 N.Y.S.2d 270 (3d Dept. 2003). Regarding Goessl’s risk of loss, it is undisputed that if Goessl performed his work incorrectly or negligently, he would expect Goessl to return to the work site and correct the mistake without getting any further pay from AP Daino. This fact also weighs heavily in favor of independent contractor status. H. The management authority and/or responsibilities of the hired worker. 27 This factor weighs heavily in favor of a determination that S&K Plumbing (Goessl) was an independent contractor. Both Goessl and Daino testified that Goessl did not have any management authority whatsoever at AP Daino, nor did Goessl exercise any such responsibilities for AP Daino. Goessl stuck with his own handy work on the AP Daino’s work sites and did not involve himself in the supervision or instruction of anyone with the sole exception of occasional instruction to AP Daino apprentices. On this point, it should be duly noted that both Goessl and Daino made clear that, in the plumbing trade, apprentices will generally be supervised by any qualified worker on site, whether or not said worker is an employee or an independent contactor. It is simply common practice in the trade to help apprentices when an apprentice is on site, no matter the worker’s association to the apprentice. Thus, when viewed within the context of the custom and practice of the plumbing trade, it can be said that Goessl generally kept to himself on this job with the exception of the occasional advice given to an apprentice – something common for journeyman and/or master plumbers, whether an said master plumber or journeyman is an employee or an independent contractor. I. Whether the hired party is in business. Dryden makes much of this factor, arguing that this factor weighs in its favor merely because S&K Plumbing had not worked for entities other than AP 28 Daino for a period of time prior to the subject accident. However, scrutiny of Goessl’s testimony indicates that the work that he received from AP Daino was sufficient for Goessl to maintain his overhead and therefore Goessl did not actively seek out other jobs or market S&K Plumbing. Furthermore, Goessl did in fact perform work for other entities; these jobs were simply less frequent. Also, S&K Plumbing at all times relevant maintained an independent checking account with the business name “S&K Plumbing” printed on the checks. Contrary to Dryden’s argument, these circumstances do not weigh in favor of employee status. J. Whether or not the worker is treated differently than employees. As noted above, Goessl was treated differently than the AP Daino employees in many, many ways. Goessl was paid a higher rate; nothing was withheld from his paychecks and he received an IRS form 1099; he could come and go and take days off as he pleased without permission and without informing Craig Daino; he was assigned more specialized tasks; he worked less hours than all of the AP Daino employees and his hours varied; he received no vacation time, sick time, bonuses or 401K plan, as did AP Daino employees; he maintained his own tools and equipment, although he did use AP Daino tools and equipment as well; he increased his pay rate at his own will without input from Daino; he played 29 no role in AP Daino management or general supervision but instead stuck to his assigned job. All of these factors weigh heavily in favor of independent contractor status and, when viewed together, far outweigh the factors that weigh against independent contractor status. K. Whether the hired party is required to procure its own insurance. This factor also weighs heavily in favor of the determination that S&K Plumbing was an independent contractor. An insurance policy was issued by Dryden to S&K Plumbing for its subcontracting work with AP Daino. In fact, Dryden renewed the policy annually for the period 2000 through 2009 and even thereafter, doing so only after performing an internal underwriting review every time. AP Daino required that S&K Plumbing procure this insurance policy in order to perform work for AP Daino. A Certificate of Insurance was issued to S&K Plumbing by S&K Plumbing’s insurance agent (Haylor, Freyer & Coon, Inc.) for the time period inclusive of the date of the subject accident (3/30/2009 through 3/30/2010). Dryden is listed on the Certificate as the “Insurer” and AP Daino is listed as a “Certificate Holder.” According to Goessl, this Certificate was expressly requested by AP Daino as proof that S&K Plumbing had the appropriate insurance. Goessl explained that S&K Plumbing could not work for AP Daino without such an insurance policy. Goessl testified that he personally paid the 30 insurance policy premiums to Dryden and was never reimbursed from any source for these premium payments. No AP Daino employees were required to purchase their own liability insurance, as was S&K Plumbing. In light of the overwhelming evidence demonstrating that Goessl was an independent contractor of AP Daino at the time of the Fire, Dryden cannot meet its burden of establishing Goessl is an insured on the MSA Policy. CONCLUSION By reason of the foregoing, Defendants/Respondents MSA and AP Daino respectfully request that this honorable Court affirm the Decision and Order if the Appellate Division, Fourth Department, and for such other and further relief as to this honorable Court appears just and fair. DATED: January 22, 2015 Buffalo, New York Respectfully submitted, KENNEY SHELTON LIPTAK NOWAK LLP By: s/ Jessica L. Foscolo Robert A. Crawford Jessica L. Foscolo The Calumet Building 233 Franklin Street Buffalo, New York 14202 Tel.: (716) 853-3801 Fax: (716) 853-0265