Lend Lease (US) Construction LMB Inc., et al., Appellants,v.Zurich American Insurance Company, et al., Respondents.BriefN.Y.January 11, 2017APL-2016-00016 New York County Clerk’s Index No. 158438/13 Court of Appeals STATE OF NEW YORK LEND LEASE (US) CONSTRUCTION LMB INC. and EXTELL WEST 57TH STREET LLC, Plaintiffs-Appellants, against ZURICH AMERICAN INSURANCE COMPANY, ACE AMERICAN INSURANCE COMPANY, XL INSURANCE AMERICA, INC., TRAVELERS EXCESS AND SURPLUS LINES COMPANY and AXIS SURPLUS INSURANCE COMPANY, Defendants-Respondents. >> >> REPLY BRIEF FOR PLAINTIFF-APPELLANT LEND LEASE (US) CONSTRUCTION LMB INC. CARROLL MCNULTY & KULL LLC Attorneys for Plaintiff-Appellant- Lend Lease (US) Construction LMB Inc. 570 Lexington Avenue, 8th Floor New York, New York 10022 212-252-0004 Of Counsel: Matthew J. Lodge Date Completed: May 23, 2016 To Be Argued By: Matthew J. Lodge Time Requested: 30 Minutes RULE 500.1(f) DISCLOSURE STATEMENT Lend Lease Americas Holdings, Inc. is the parent company of Lend Lease Americas Inc. Lend Lease Americas Inc. is the parent company of Lend Lease (US) Construction Holdings Inc. Lend Lease (US) Construction Holdings Inc. is the parent company to Lend Lease (US) Construction Inc., Schal Bovis Inc., M/L Bovis Holdings, Ltd., Bovis Lend Lease Interiors, Inc., Bovis Lend Lease Trinidad & Tobago, Bovis Lend Lease SA de CV (Mexico) and Servicios Bovis Lend Lease, SA de CV (Mex). M/L Bovis Holdings, Ltd. is the parent company of Plaintiff-Appellant Lend Lease (US) Construction LMB Inc. Plaintiff-Appellant Lend Lease (US) Construction LMB Inc. is the parent company of Bovis International, Inc. (DE) and Lehrer McGovern Bovis SARL (France). Bovis International, Inc. is the parent company of WTW Bovis SDN BHD (Malaysia) and Bovis Lend Lease Japan, Inc. (Japan). Bovis Lend Lease Japan, Inc. (Japan) is the parent company of Bovis Lend Lease Telecoms Inc. (Japan). i TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... ii I. PRELIMINARY STATEMENT ........................................................................................ 1 II. ARGUMENT ...................................................................................................................... 4 POINT I: THE TOWER CRANE CONSTITUTES “TEMPORARY WORKS,” AS DEFINED BY THE POLICY ............................................................................................. 4 A. THE TOWER CRANE IS A “TEMPORARY STRUCTURE” ...................................... 4 1. The Insurers Cannot Distinguish the Case Law Upon Which Lend Lease Relies ........ 4 2. The Tower Crane Is “Incidental to the Project”............................................................ 9 3. Ejusdem Generis Applies to the Definition of “Temporary Works” .......................... 12 B. THE VALUE OF THE TOWER CRANE WAS INCLUDED IN THE “TOTAL PROJECT VALUE” ...................................................................................................... 16 POINT II: THE INSURERS CANNOT SATISFY THEIR BURDEN OF SHOWING THAT THE CONTRACTOR’S TOOLS EXCLUSION APPLIES ................................. 19 A. THE CONTRACTOR’S TOOLS EXCLUSION DOES NOT ENCOMPASS THE TOWER CRANE ........................................................................................................... 20 B. THE SPECIFIC “TEMPORARY WORKS” DEFINITION CONTROLS OVER THE GENERAL EXCLUSIONARY LANGUAGE.............................................................. 23 C. THE INSURERS CANNOT REFUTE THAT APPLICATION OF THE CONTRACTOR’S TOOLS EXCLUSION IN THIS CONTEXT WOULD RENDER THE “TEMPORARY WORKS” DEFINITION SUPERFLUOUS .............................. 25 D. THE TOWER CRANE DID NOT NEED TO BE ENDORSED TO THE POLICY BECAUSE IT IS A “TEMPORARY STRUCTURE” THAT IS ALREADY COVERED PROPERTY UNDER THE POLICY ........................................................ 27 POINT III: LEND LEASE IS ENTITLED TO SUMMARY JUDGMENT ........................... 28 III. CONCLUSION ................................................................................................................. 28 ii TABLE OF AUTHORITIES CASES American Home Assurance Company v. Port Authority of New York and New Jersey, 66 A.D.2d 269, 412 N.Y.S.2d 605 (1st Dept. 1979) ...................................................................... 20 Barnhart v. Thomas, 540 U.S. 20 (2003) ...................................................................................... 13 Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790 (Ct. of App. 2003) ..... 20 Breed v. Insurance Co. of N. Am., 46 NY2d 351 (N.Y. Ct. App., 1978) ....................................... 6 Consolidated Edison Company of New York, Inc. v. Allstate Insurance Company, 98 N.Y.2d 208, 746 N.Y.S.2d 622 (2002) .................................................................................................. 26 Garza v. Marine Transport Lines, Inc., 861 F.2d 23 (2d Cir.1988) .............................................. 20 Glacier Construction Company v. Travelers Property Casualty Company of America, 2011 WL 9367470 (U.S.D.C. Colo. 2011) ...................................................................................... 7, 8 Greenfield v. Philles Records, 98 N.Y.2d 562 (N.Y. Ct. App., 2002) ............................................ 6 Landry v. G.C. Constructors, 514 Fed. Appx. 432, 434 (5th Cir. 2013), cert. denied, 134 S. Ct. 212 (2013) ................................................................................................................................... 7 Matter of People of the State of New York v. Applied Card Sys., Inc., 11 N.Y.3d 105 (App. Ct. 2008).......................................................................................................................................... 13 McCoy v. Kirsch, 99 A.D.3d 13, 951 N.Y.S.2d 32 (2d Dept. 2005) .............................................. 5 Reliance Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 262 A.D.2d 64 (1st Dept. 1999).......................................................................................................................................... 26 Rocon Manufacturing, Inc. v. Ferraro, 199 A.D.2d 999, 605 N.Y.S.2d 591 (4th Dept. 1993) .................................................................................................................. 24, 25 Throgs Neck Bagels, Inc. v. GA Ins. Co. of N.Y., 241 A.D.2d 66, 671 N.Y.S.2d 66 (1st Dept. 1998).......................................................................................................................................... 22 United States Fire Ins. Co. v. General Reinsurance Corp., 949 F.2d 569 (2d Cir.1991) .............. 20 Walters v. Great Am. Indem. Co., 12 N.Y.2d 967, 238 N.Y.S.2d 960 (1963) ............................. 23 White v. Continental Cas. Co., 9 N.Y.3d 264 (N.Y. Ct. App. 2007).............................................. 6 iii York v. Sterling Ins. Co., 114 A.D.2d 665, 494 N.Y.S.2d 243 (3d Dept. 1985) ............................ 6 OTHER AUTHORITIES “Dynamic Response of Tower Crane With Pile Foundation,” Physical Modelling in Geotechnics, Ng, Zhang, & Wang (Eds.), 6th Ed. (2006) ................................................................................ 9 Temporary Structures in Construction, Robert T. Ratay (Ed.), 3d Ed. (2012) ............................... 9 REGULATIONS 29 C.F.R. § 1401 ............................................................................................................................. 8 1 I. PRELIMINARY STATEMENT In their opposing Brief, the Insurers continue to maintain that coverage is unavailable for the Tower Crane on the basis that it is not “Covered Property” because it is purportedly not a “temporary structure” that is “incidental to the project” and it was not included in the “Total Project Value.” Even if the Tower Crane is “Covered Property,” the Insurers argue that the Contractor’s Tools Exclusion is applicable to preclude coverage in this matter. Notwithstanding these positions, the Insurers’ arguments, as well as the First Department’s majority decision, rest on a misinterpretation of the Policy language that must be rejected. According to the plain language of the Policy, the Tower Crane satisfies the definition of “Temporary Works” because it is a “temporary structure” that is “incidental” to the Project. The Insurers maintain that the Tower Crane cannot be considered “incidental” by relying on an exceedingly narrow interpretation of that word, i.e., “of minor consequence” or “subordinate to.” That narrow definition, however, fails to consider the full context of the policy, which expressly contemplates items of significant magnitude, such as scaffolding, that qualify as “Temporary Works” under the policy. In order to give the proper meaning to each term in the “Temporary Works” provision, the proper definition for “incidental,” as explained by the First Department dissenting opinion, must be “appurtenant to.” Any other interpretation of “incidental” results in an exceedingly narrow reading of 2 “Temporary Works” that inappropriately restricts the coverage intended by the Policy. The Insurers have also taken the unsustainable position that the cost of the assembly and use of the Tower Crane was not included within the “Total Project Value,” preventing it from being considered “Covered Property”. Similar to its position on the meaning of “temporary structure,” this argument ignores the wording of the Policy as well as the contract language regarding the Tower Crane’s purpose. In particular, the Pinnacle Contract specifically includes the cost of the erection and use of the Tower Crane, and that cost is included within the “Total Project Value.” As such, the Insurers simply have no basis to argue that the Tower Crane is not “Covered Property.” To the extent that the Court finds that the Tower Crane is “Covered Property,” the Insurers maintain that the Contractor’s Tools Exclusion applies to preclude coverage. This argument, however, is contrary to the language of the Policy as well as well-settled principles of contract interpretation. As noted by the underlying dissent, if the Exclusion is applied in the manner suggested by the Insurers, it would essentially swallow the coverage afforded by the “Temporary Works” provision. Moreover, widely-accepted rules of contract interpretation require that this Court enforce the specific “Temporary Works” definition to control over the general exclusionary provision in the Policy when they conflict. 3 As a result, the Insurers cannot meet their burden of establishing that the Contractor’s Tools Exclusion applies to avoid their coverage obligations. In sum, the Insurers are unable to establish that the Tower Crane is not “Covered Property” under the Builder’s Risk Policy or that coverage is precluded by the Contractor’s Tools Exclusion. Therefore, for the reasons explained at length below, Lend Lease respectfully requests that this Court reverse the First Department’s decision and enter summary judgment in Lend Lease’s favor. 4 II. ARGUMENT POINT I THE TOWER CRANE CONSTITUTES “TEMPORARY WORKS,” AS DEFINED BY THE POLICY Despite the fact that the Tower Crane expressly meets the definition of “Covered Property” under the Policy, the Insurers continue to attempt to circumvent their obligations to provide coverage to Lend Lease based on an overly-restrictive and improper reading of the “Temporary Works” definition, as well as an unsupportable application of the “Total Project Value” provision. As noted by the First Department dissenting opinion, a proper reading of the “Temporary Works” definition encompasses the Tower Crane, as it is both a “temporary structure” and “incidental to the project.” [R. 865]. Additionally, the contract detailing the erection and use of the Tower Crane was expressly included in the “Total Project Value” submitted to the Insurers. Any assertions set forth by the Insurers to the contrary are entirely without merit and should be rejected. A. THE TOWER CRANE IS A “TEMPORARY STRUCTURE” 1. The Insurers Cannot Distinguish the Case Law Upon Which Lend Lease Relies Preliminarily, the Insurers’ position that the First Department majority answered the question as to whether the Tower Crane is in fact a “temporary structure” is misplaced. The majority decision did not address Lend Lease’s 5 position that the Tower is, in and of itself, a “temporary structure” separate and apart from the requirement that it was “incidental to the project.” Instead, the focus of the majority opinion was solely upon whether the Tower Crane was “incidental” to the Project. [R. 841-842]. It did not address the case law cited by Lend Lease in support of the position that the Tower Crane is a “structure,” nor did it dispute the fact that the Tower Crane can be considered a “temporary structure” generally. The excerpt of the majority decision relied upon by the Insurers was taken directly from a discussion regarding whether the Tower Crane is a “temporary structure” that was “incidental to the project,” not whether the Tower Crane is, more generally, a “temporary structure.” [R. 843]. With respect to whether the Tower Crane is a “temporary structure,” the Insurers’ assertion that many of the cases cited by Lend Lease should not be considered because they involve the application of New York Labor Law is simply unfounded. As previously noted, while Lend Lease relies upon cases that discuss the meaning of “structure” within the context of New York Labor Law, those cases also evaluate the meaning of that term in a broader sense. See McCoy v. Kirsch, 99 A.D.3d 13, 951 N.Y.S.2d 32 (2d Dept. 2005)(“A structure may include constructs that are less substantial and perhaps more transitory than buildings…”) Additionally, although the Insurers attempt to argue that Lend Lease cannot compare the general standard applied to New York Labor Law and insurance 6 policies, they have not provided any basis for that position. It is well-settled that, similar to the way in which New York Labor Law is liberally construed in favor of workers, insurance policies “are to be liberally construed in favor of the insured.” York v. Sterling Ins. Co., 114 A.D.2d 665, 494 N.Y.S.2d 243 (3d Dept. 1985). Thus, contrary to the Insurers’ arguments, these cases help to illustrate the meaning of the word “structure” because they apply the same standard that is applied in interpreting an insurance policy. Moreover, to the extent the Insurers have taken the position that the aforementioned cases should not be considered based on the application of “well- settled principles of contract construction,” that position misapplies those principles. Specifically, the policy is unambiguous only when its language is subject to “a definite and precise meaning...” Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (N.Y. Ct. App., 2002)(quoting Breed v. Insurance Co. of N. Am., 46 NY2d 351, 355 (N.Y. Ct. App., 1978)). While parties are free to contract as they wish, the interpretation of such terms is a question of law for the Court, and the policy must be construed in favor of the insured. White v. Continental Cas. Co., 9 N.Y.3d 264 (N.Y. Ct. App. 2007). In light of these principles of contract interpretation, it is untenable for the Insurers to assert that this Court should not consider the interpretation of “temporary structure” in the foregoing cases on the 7 basis of a unilateral position regarding the meaning of those terms in the policy at issue. The Insurers’ further attempts to distinguish the other cases upon which Lend Lease has relied are similarly unavailing. Particularly, the Insurers assert that the court’s decision in Landry v. G.C. Constructors, 514 Fed. Appx. 432, 434 (5th Cir. 2013), cert. denied, 134 S. Ct. 212 (2013), that a crane constitutes a “temporary structure” is not applicable because that determination was in the “limited context” of whether an employer had an obligation to repair a hydraulic leak that caused injury to an employee. This position, however, makes no meaningful distinction. That the Landry decision involved facts that were not identical to those at issue in this litigation does not render the court’s decision irrelevant. To the contrary, the court in Landry evaluated whether a crane that was erected for the sole purpose of construction should be considered a “temporary structure,” which is the very issue that is present here. As the court found in Landry, the Tower Crane is a “temporary structure” as that term is used in the Builder’s Risk Policy’s definition of “Temporary Works.” The Insurers have also attempted to argue that the court’s decision in Glacier Construction Company v. Travelers Property Casualty Company of America, 2011 WL 9367470 (U.S.D.C. Colo. 2011), which was affirmed by the Tenth Circuit in Glacier Construction Company v. Travelers Property Casualty Company of 8 America, 569 Fed. Appx. 582 (10th Cir. 2014), is not persuasive because the policy at issued involved a broader use of the term “temporary structure.” Although the Insurers are correct in asserting that the policy discussed in Glacier did not include a list of items such as the list appearing in the Policy here, that distinction does not alter the court’s interpretation of the term “temporary structure.” To the contrary, the court in Glacier, without employing ejusdem generis, interpreted the express term “temporary structure” to include wells and pumps that were installed for the purpose of dewatering a construction site. Glacier, 2011 WL 9367470 at *1. The Insurers cannot cite to even one case to support their argument that the Tower Crane is not a “temporary structure” within the meaning of the Builder’s Risk Policy. Additionally, the Insurers abandon a prior argument in which they relied upon a CFR provision that included a very limited reference to a tower crane’s “fixed jib” that is listed as an example of power-operated equipment. That provision, 29 C.F.R. § 1401, includes a definition of “tower crane” as “a type of lifting structure which utilizes a vertical mast or tower to support a working boom (jib) in an elevated position.” (Emphasis added). As a result, the very provision upon which the Insurers have previously relied describes tower cranes as “structures.” 9 The relevant question is whether the undefined term “temporary… structure” used within the Policy’s definition of “Temporary Works” includes tower cranes. Based on a common sense interpretation of those words as well as the common use of the phrase “temporary structure” to describe tower cranes as set forth herein, it is clear that the Tower Crane is in fact a “temporary structure” within the meaning of the Policy. This is supported not only by case law, but by the regulations discussed above and scholarly articles regarding the use of tower cranes. See, e.g., “Dynamic Response of Tower Crane With Pile Foundation,” Physical Modelling in Geotechnics, Ng, Zhang, & Wang (Eds.), 6th Ed. (2006)(“The tower crane is a temporary structure…”); see also Temporary Structures in Construction, Robert T. Ratay (Ed.), 3d Ed. (2012). As such, the Tower Crane falls within the definition of “Temporary Works” and is, therefore, “Covered Property” under the Builder’s Risk Policy. At the very least, the Insurers’ arguments should be rejected as the Policy must be liberally construed in favor of Lend Lease. 2. The Tower Crane Is “Incidental to the Project” As set forth at length in Lend Lease’s opening Brief, the underlying majority position, upon which the Insurers rely, applies an exceedingly restrictive definition to the term “incidental,” the effect of which unduly limits the coverage that is afforded by the Policy and directly conflicts with the expectations of the contracting parties. To interpret the term “incidental” solely as “subordinate to” or 10 having a “minor consequence” is to ignore the numerous other definitions that commonly apply to that term and are consistent with the intended coverage under the Policy. The Insurers have provided no legal basis to support their assertion that “subordinate to” is the proper definition that should be used to interpret the Policy, and have, instead, argued only that the application of any other definition would result in an overbroad reading of the Policy. Particularly, the Insurers maintain that defining “incidental” as “appurtenant to something else that is primary, but still necessary to that primary thing” would render that term “superfluous” because coverage would then extend to “everything used in connection with the construction.” [Insurers’ Brief, pg. 34]. This position fails, however. To the extent the term “incidental” is defined as “appurtenant to,” the phrase “all incidental to the project” serves the function of a catch-all phrase that encompasses items similar to those listed in the “Temporary Works” definition. Thus, defining “incidental” as “appurtenant to” does not create an overbroad reading of the “Temporary Works” provision because it limits its reach to those items that are similar to those that are expressly listed in that provision. The Insurers’ misread the dissent’s interpretation of the phrase “all incidental to the project” that appears within the “Temporary Works” definition. The dissent does not refute its own opinion in stating that temporary structures or 11 buildings are “by their very name, incidental to the project” and also noting that the “all incidental to the project” clause should be interpreted as a catch-all phrase. To the contrary, the dissent explains that the clause “all incidental to the project” follows the full list of items that appears within the “Temporary Works” provision, and it rejects the Insurers’ position that reference to “temporary buildings or structures” is limited solely to office and job site trailers. [R.860-864]. Based on this reading, the dissent concludes that “the ‘temporary works’ definition should be construed as comprising all of the items specifically mentioned, in addition to any similar, unmentioned temporary structures that are ‘incidental to the project.’” [R. 860]. This opinion is consistent with the dissent’s conclusion that “incidental” should be interpreted as “appurtenant to” because the dissent recognizes that the “Temporary Works” definition contemplates items not specifically enumerated therein, such as office or job site trailers, that are entitled to coverage under the Policy. [R. 860-864]. The Project that gives rise to this litigation is a 74-story building in Manhattan worth over $700,000,000. For the Insurers to take the position that any aspect of the Project that meets the definition of “Temporary Works,” whether scaffolding, shoring or temporary structures, is “of minor consequence” is simply untenable. These elements of the construction, as acknowledged by the First Department dissent, are all “crucial and…complex, but can still be described as 12 ‘incidental’ since they will never be a part of the building itself.” [R. 864]. In that regard, to the extent that the Insurers cite to a portion of the Pinnacle Contract to support its argument that scaffolding, fences and jobsite trailers are “incidental” to the Project because fewer details were provided in connection with those items, that argument neglects the fact that one of the key components to the Pinnacle Contract was the assembly and use of the Tower Crane, which explains the detail attributed to the Crane. Lend Lease entered into a separate contract specifically for purposes of hoists and sidewalk bridge scaffolding. [R. 479]. That contract was valued at $15,000,000, which is far from minimal and directly refutes the Insurers’ position. [R. 479]. Lend Lease does not dispute that the erection and use of the Tower Crane involved an extensive process at the Project. That process, however, does not prevent the Tower Crane from being “incidental” to the Project as it is “appurtenant to” the Building. In sum, the size of the Tower Crane does not change the fact that it was erected for purposes of the construction, and, therefore, it was “incidental” to the Project. The Insurers’ argument to the contrary cannot be supported. 3. Ejusdem Generis Applies to the Definition of “Temporary Works” Preliminarily, to the extent the Insurers rely upon the last antecedent rule to support their interpretation of the “Temporary Works” definition, that rule is 13 simply not applicable in this scenario. The last antecedent rule is a grammatical rule that governs the way in which a limiting clause or phrase modifies a noun or phrase that it follows. See Matter of People of the State of New York v. Applied Card Sys., Inc., 11 N.Y.3d 105 (App. Ct. 2008); see also Barnhart v. Thomas, 540 U.S. 20 (2003)(explaining that the “grammatical ‘rule of the last antecedent’” governs the way in which “a limiting clause or phrase” modifies a noun or phrase). The “Temporary Works” definition includes a list of items, some specific and some general, that do not modify each other. As a result, any reliance upon the antecedent rule is misplaced, and the proper doctrine that is relevant to the interpretation of the Policy is ejusdem generis. Applying ejusdem generis, in addition to the fact that the Tower Crane is plainly included in the definition of “Temporary Works” as a “temporary structure” that is “incidental to the project,” the specific examples such as “scaffolding” and “form work” in the “Temporary Works” definition also support the position that the Tower Crane is “Covered Property.” In arguing to the contrary, the Insurers have sought to contort the Policy’s definition of “Temporary Works” by dividing it into two separate parts – (1) “scaffolding…formwork, falsework, shoring, fences…” and (2) “temporary buildings or structures, including office and job site trailers…” In doing so, rather than consider the specific list of items alongside the general list of items, as is required by ejusdem generis, the 14 Insurers attempt to create a distinction that separates the specific from the general and focuses only upon the latter portion of the “Temporary Works” definition. A review of the “Temporary Works” definition as a whole, however, illustrates that the Insurers’ proposed distinction does not exist. The general terms in the definition of Temporary Works – “temporary buildings or structures, including office and job site trailers, all incidental to the project” – reference unidentified items that fall within the definition of “Temporary Works” that were not otherwise enumerated. In order to determine which unidentified items meet that description, it is necessary to consider the general terms in conjunction with each of the specific items listed therein, including, among other things, scaffolding, formwork and falsework. Upon consideration of these specific terms alongside the general terms, the unavoidable conclusion is that the common theme is that each item is temporarily erected and assembled at the Project to provide assistance with the construction of the Building. The Insurers’ attempt to differentiate the Tower Crane from the other items by identifying formwork, falsework and shoring as “supports” for the Project is belied by the fact that the other specific items listed in the “Temporary Works” definition, such as scaffolding and job trailers, cannot fall within that same category. Thus, the Insurers’ proposed interpretation is not only a strained reading of the definition, but is also contrary to the principles of ejusdem generis. 15 The fact that the Tower Crane is actively involved in the construction does not prevent it from being classified in the same category as the items listed in the “Temporary Works” definition. That distinction ignores the common thread that links each of the items in the definition, which is their temporary integration into the Building to aid in the completion of the construction. The timing and duration of the use of the Tower Crane is irrelevant, and, as noted earlier, the complexity of the Tower Crane is comparable to the other elements listed in the “Temporary Works” definition based on the sheer magnitude of the Project. Therefore, these bases upon which the Insurers rely to somehow differentiate the Tower Crane are not persuasive and should be rejected. The foregoing interpretation of the “Temporary Works” definition does not result in an overly broad reading of the Policy that extends coverage to every item assembled at the Project. To the contrary, this interpretation applies the widely- accepted application of ejusdem generis, in order to obtain a result that is consistent with the language of the policy, especially when construed in favor of the insureds. The Tower Crane was assembled for the same purpose and served a very similar function as scaffolding, formwork, falsework, and temporary trailers. Therefore, according to the principles of ejusdem generis, the Tower Crane is included within the definition of “Temporary Works,” and the Insurers’ attempt to rewrite the coverage afforded by the Policy should not be permitted. 16 B. THE VALUE OF THE TOWER CRANE WAS INCLUDED IN THE “TOTAL PROJECT VALUE” In their response, the Insurers do not dispute that Extell did in fact include a line item for “Superstructure Concrete” in the amount of $89,000,000 in the “Total Project Value” of the Project. Nonetheless, they maintain that this amount does not include the assembly and use of the Tower Crane such that it can be considered “Covered Property.” In support of this position, the Insurers suggest that: (i) the sale value of the Tower Crane must have been included in the Pinnacle Contract to be part of the “Total Project Value;” (ii) the existence of a rental cost for the Tower Crane demonstrates that the actual value of the Tower Crane was not included within the Pinnacle Contract; and (iii) the Tower Crane was not included in the “Total Project Value” because Pinnacle purportedly obtained separate coverage for the Crane. Each of these arguments, however, lacks merit based on the express language of the Pinnacle Contract. As noted in Lend Lease’s opening Brief, the Pinnacle Contract plainly sets forth the terms and details for the construction and use of the Tower Crane at the Project. [R. 299-326]. The Insurers do not dispute that the Pinnacle Contract encompassed Pinnacle’s erection and use of the Tower Crane, and, in fact, the Insurers have expressly admitted that Pinnacle agreed to erect the Tower Crane and make it available to other for the use at the Project. [Insurers’ Brief, pg. 39]. Therefore, because the value of that Contract was expressly included within the 17 “Total Project Value” that was submitted to the Insurers, the erection and use of the Tower Crane was necessarily included therein as well. The Insurers’ reliance upon the $77,000 rental price for the Tower Crane is unavailing. Particularly, the $77,000 rental price expressly applies only for “additions or deletions” to the Contract Price, and, therefore, is not included in the $89,000,000 line item for Pinnacle’s work. [R. 210]. This conclusion is further supported by the fact that the $77,000 rental price expressly states that it applies “at Completion of Job.” [R. 211]. Thus, the $89,000,000 price that was submitted as part of the “Total Project Value” encompasses that which was incorporated into the Contract itself, including the requirement that Pinnacle erect and facilitate the use of the Tower Crane. [R. 300-307]. Any rental amount that was paid by Post Road Iron Works, Inc., or any other contractor, is a value that is separate and apart from the $89,000,000 value assigned to the Pinnacle Contract. However, to the extent that another contractor, such as Post Road Iron Works, needs to use the Tower Crane to complete its work, the cost to use the Tower Crane would be reflected in the contract price for that contractor. That contract price, in turn, is included in Total Project Value. Additionally, despite their direct acknowledgement of the inclusion of the Tower Crane’s assembly and use in the Pinnacle Contract, the Insurers maintain, without any support for their argument, that the full sale value of the Tower Crane 18 must be included in the “Total Project Value” in order to be entitled to coverage. Aside from the fact that there is no basis to support this non-existent requirement, such an interpretation would render coverage for scaffolding and similar items meaningless. Although the Insurers’ attempt to refute that conclusion by asserting that the value of scaffolding or job site trailers are included in the schedule of project values, that argument is premised on a mischaracterization of the line item descriptions included in that schedule. In particular, those line items do not identify specific objects; instead, they are abbreviated descriptions of the various trade subcontracts. [R. 479]. For example, the Pinnacle Contract is identified as “Superstructure Concrete” along with a value of $89,000,000, which corresponds to the title that appears on the Contract itself as well as the price of the Pinnacle Contract. [R. 299-326, 479]. Similarly, the line item for “Hoist, Sidewalk Bridge” is the description given for the hoist and sidewalk bridge scaffolding subcontract. [R. 479]. To the extent the Insurers assert that the value of those scaffolding materials – rather than the cost to erect, maintain, use and dismantle the scaffolding – is included in the schedule of values, that conclusion is misguided. At the end of the Project, the scaffolding contractor “typically returns to the job site and dismantles the scaffolding … and keeps the various components of the scaffolding … and reuses them on future jobs.” [R. 799]. To argue that the subcontractor has sold the value of the 19 scaffolding to the Project is illogical. This example clearly illustrates that any argument by the Insurers that “Total Project Value” must include the full value of items such as scaffolding and the Tower Crane (and not the cost to assemble and use them) would render the coverage afforded by the Policy meaningless. Finally, whether the Pinnacle Contract required Pinnacle to obtain insurance coverage for the Tower Crane is not at issue here, and, therefore, has no bearing on the coverage issues that are the subject of this litigation. Simply because a provision within the Pinnacle Contract requires Pinnacle to obtain coverage for its own benefit does not affect the Insurers’ obligations under the Builder’s Risk Policy. Similarly, as discussed in detail below, Lend Lease was under no obligation to obtain the Scheduled Contractor’s Equipment endorsement to cover the Tower Crane because the Tower Crane is already “Covered Property” under the Policy. As a result, the Insurers are unable to maintain that the Tower Crane, which was expressly made part of the Pinnacle Contract and listed as a line item to the Insurers, was not included in the “Total Project Value.” POINT II THE INSURERS CANNOT SATISFY THEIR BURDEN OF SHOWING THAT THE CONTRACTOR’S TOOLS EXCLUSION APPLIES The Insurers do not dispute the standard that applies in determining whether an exclusion is applicable, which requires that “the carrier…establish that its 20 construction or interpretation of the policy is the only construction that can fairly be placed thereon.” American Home Assurance Company v. Port Authority of New York and New Jersey, 66 A.D.2d 269, 276, 412 N.Y.S.2d 605 (1st Dept. 1979) (emphasis in the original). As illustrated below, the Insurers have failed to meet their burden in establishing the application of the Contractor’s Tools Exclusion. A. THE CONTRACTOR’S TOOLS EXCLUSION DOES NOT ENCOMPASS THE TOWER CRANE As previously noted, “an insurance policy [must be read] in light of ‘common speech’ and the reasonable expectations of a businessperson.” Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790 (Ct. of App. 2003). The language of the Policy should be viewed as “a reasonably intelligent person…who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.” United States Fire Ins. Co. v. General Reinsurance Corp., 949 F.2d 569, 572 (2d Cir.1991) (quoting Garza v. Marine Transport Lines, Inc., 861 F.2d 23, 27 (2d Cir.1988)). Despite this standard, however, the Insurers have taken the position that the Policy should be read in a way that ignores the reasonable expectations of Lend Lease and applies an Exclusion that was not meant to apply to a structure like the Tower Crane. In support of this position, the Insurers rely upon only two documents that 21 purportedly refer to the Tower Crane as “equipment.” Nonetheless, the Insurers arguments with respect to these documents are conclusory and baseless. Beginning with the Pinnacle Contract, although the Insurers maintain that it refers to the Tower Crane as “heavy equipment,” that assertion misrepresents the actual language of the Contract. Particularly, the actual provision to which the Insurers refer includes the following list: “[d]iesel fuel tower cranes, all cherry pickers, any assist cranes, concrete pumps, and other heavy equipment required for the erection of the building.” [R. 184]. Notably, this list does not refer to the Tower Crane as heavy equipment, as the Insurers claim, but rather, it identifies various items without attributing any description to the Tower Crane itself. As such, the Insurers’ position that the Tower Crane is “expressly” referred to as “heavy equipment” in the Pinnacle Contract is simply not true. Moreover, the Insurers’ reliance upon the “Sublease of Equipment and Indemnification,” as well as their continued reference to Favco, to argue that the Tower Crane must fall under the Contractor’s Tools Exclusion ignores both the repeated references to the Tower Crane as a structure throughout the Pinnacle Contract and its extensive nature. The Tower Crane was not a tool that was brought to the Project by Pinnacle, but rather, the erection of the Tower Crane was within Pinnacle’s scope of work. In particular, it was a structure that Pinnacle was required under its Contract to erect and integrate into the Building for purposes of 22 the construction. [R. 300-307]. In that regard, Lend Lease’s representation that the Tower Crane was custom-built for the Project is by no means disingenuous. The Pinnacle Contract provides that, as part of its scope of work, Pinnacle is obligated to construct the Tower Crane and, in doing so, Pinnacle must hire a New York licensed structural engineer to design the construction, including the manner in which the Tower Crane is founded on and integrated into the Building. [R. 301- 302]. As noted previously, the Pinnacle Contract further requires that the Tower Crane be “structurally sound” and that “reinforcing of the structure” may be necessary. [R. 185, 189]. Finally, Pinnacle was required under its contract to allow Lend Lease and other contractors use the Tower Crane during construction. “The touchstone for interpreting insurance contracts, as with other contracts, is the reasonable expectation of the parties.” Throgs Neck Bagels, Inc. v. GA Ins. Co. of N.Y., 241 A.D.2d 66, 671 N.Y.S.2d 66 (1st Dept. 1998). The Insurers cannot argue that a custom-designed, custom-built structure that was erected for this Project was meant to be included under the plain language of the Contractor’s Tools Exclusion. Such an interpretation would ignore the reasonable expectations of the parties and impose a reading of the Policy upon Lend Lease that is untenable in light of the facts surrounding the erection and use of the Tower Crane. Finally, as set forth in the one case that the Insurers previously relied upon regarding its interpretation of the Exclusion, “[policy] language should be 23 construed most favorably to the insured…so as to reflect that meaning which the insured was led to believe or had reason to believe the language meant at the time he entered into the contract.” Walters v. Great Am. Indem. Co., 12 N.Y.2d 967, 969, 238 N.Y.S.2d 960 (1963). Applying that standard, the language of the Contractor’s Tools Exclusion expressly encompasses “[c]ontractor’s tools, machinery, plant and equipment including spare parts and accessories.” The only reasonable interpretation of that language is that it was not meant to encompass a structure that a contractor was required to construct under the terms of its contract and integrate into the Project for the benefit of various contractors over the course of the construction. Such an interpretation does not “read requirements or restrictions” into the Policy, as the Insurers suggest, but rather, carries the plain meaning “which the insured was led to believe or had reason to believe” at the time the contract was entered. B. THE SPECIFIC “TEMPORARY WORKS” DEFINITION CONTROLS OVER THE GENERAL EXCLUSIONARY LANGUAGE In response to the argument that the “Temporary Works” definition is a specific provision that controls over the general Contractor’s Tools Exclusion, the Insurers rely upon two arguments: (1) the Tower Crane is not specifically included within the “Temporary Works” definition; and (2) an exclusion is designed to reduce coverage. Both of these arguments, however, are without merit. 24 First, as set forth at length above, the Tower Crane is expressly included within the definition of “Temporary Works” as it is a “temporary structure.” [R. 345]. While the Insurers continue to maintain that the Tower Crane does not fall within that definition, the weight of the evidence and case law establishes that the Tower Crane is, in fact, a “temporary structure” within the meaning of the Policy. Moreover, to the extent that the Insurers argue that employing the principle of ejusdem generis somehow, in and of itself, refutes the application of the standard set forth in Rocon Manufacturing, Inc. v. Ferraro, 199 A.D.2d 999, 605 N.Y.S.2d 591 (4th Dept. 1993), is to confuse two entirely distinct principles. Particularly, the use of ejusdem generis to evaluate the meaning of a specific term does not prohibit the application of the standard requiring the enforcement of a specific provision in a Policy over a general one. Ejusdem generis assists this Court in determining that the Tower Crane is in fact a “temporary structure,” and the specific definition of “Temporary Works,” which includes the term “temporary structure,” controls over the general Contractor’s Tools Exclusion. Those conclusions are not mutually exclusive. Although the Insurers’ further rely upon the position that an exclusion’s purpose is in fact to limit the coverage afforded by the Policy, that argument ignores the purpose for employing the standard set forth in Rocon Manufacturing. In particular, it is when there is an “apparent inconsistency” between a specific and 25 general provision that the specific provision controls. 199 A.D.2d at 1000. Thus, it is not Lend Lease’s position that the Exclusion is ineffective because it limits coverage. Rather, the Exclusion cannot be applied where it directly conflicts, as it does here, with a specific provision of the Policy, such as the “Temporary Works” definition. In that regard, if the Contractor’s Tools Exclusion is applied in the manner in which the Insurers suggest, it would preclude coverage for items that have been specifically identified as “Covered Property” in the Policy, such as scaffolding, formwork and the Tower Crane. That direct inconsistency must be resolved in favor of the application of the specific provision of the Policy, which, in this case, is the “Temporary Works” definition. C. THE INSURERS CANNOT REFUTE THAT APPLICATION OF THE CONTRACTOR’S TOOLS EXCLUSION IN THIS CONTEXT WOULD RENDER THE “TEMPORARY WORKS” DEFINITION SUPERFLUOUS As set forth at length in Lend Lease’s opening Brief, in the event that the Contractor’s Tools Exclusion is applied to preclude coverage for the Tower Crane, the “Temporary Works” definition, which expressly includes the Tower Crane as a “temporary structure,” would be rendered meaningless. New York law requires that an insurance policy should be read “in a way that ‘affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect.’” Consolidated Edison Company of New York, Inc. v. Allstate Insurance Company, 98 N.Y.2d 208, 746 N.Y.S.2d 622 (2002). The 26 Insurers’ proposed reading of the Policy, however, strips the “Temporary Works” definition of meaning by precluding coverage for the Tower Crane despite its express inclusion in the meaning of “Covered Property.” That interpretation must be rejected. As noted by the underlying dissenting opinion, if the reading of the Exclusion proposed by the Insurers is adopted, the exclusion would be “so broad that a plausible argument could be made that any of the items listed in the definition of temporary works constitutes a ‘contractor’s tool [], machinery, plant [or] equipment.’” [R. 867]. In that regard, the interpretation proposed by the Insurers, which was adopted by the majority in the First Department, essentially results in the exclusion swallowing the coverage afforded by the Policy, which is a result that must be avoided. Reliance Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 262 A.D.2d 64 (1st Dept. 1999). The Insurers further argue that Lend Lease’s interpretation would render the Contractor’s Tools Exclusion meaningless. This position is entirely baseless. A finding that the Tower Crane, as a “temporary structure,” is not encompassed by the Exclusion would by no means result in a scenario in which the Exclusion serves no purpose. To the contrary, the Contractor’s Tools Exclusion continues to apply to actual tools and similar machinery and equipment that are brought to and from the Project by a particular contractor. The Exclusion is inapplicable to 27 scaffolding, formwork and “temporary structures,” such as the Tower Crane, all of which are specifically identified as being “Covered Property” under the definition of “Temporary Works.” Despite the Insurers’ representations, both the “Temporary Works” definition and the Contractor’s Tools Exclusion can be given meaningful effect without rendering either provision superfluous. Such a scenario requires, however, that the Contractor’s Tools Exclusion does not apply to the Tower Crane. D. THE TOWER CRANE DID NOT NEED TO BE ENDORSED TO THE POLICY BECAUSE IT IS A “TEMPORARY STRUCTURE” THAT IS ALREADY COVERED PROPERTY UNDER THE POLICY The Insurers’ assertion that coverage is precluded because the Tower Crane was not specifically endorsed to the Policy is not only an attempt to distract this Court from the inclusion of the Tower Crane under the coverage afforded by the Policy, but it also relies upon the flawed logic that the Tower Crane is “equipment” that falls under the meaning of the Contractor’s Tools Exclusion. This position should be rejected in its entirety. Contrary to the Insurers’ position, there was no requirement for the Tower Crane to be included in a separate endorsement because it is encompassed by the express coverage of the Builder’s Risk Policy for all of the reasons set forth above. To suggest that the Tower Crane should have been endorsed solely because a portion of that Crane includes a make or model number is illogical. Simply put, 28 the Tower Crane is a “temporary structure” that falls under the definition of “Covered Property,” and, therefore, there is no requirement that the Tower Crane be separately endorsed to a Policy under which it is already afforded coverage. POINT III LEND LEASE IS ENTITLED TO SUMMARY JUDGMENT As set forth in Lend Lease’s Appellate Brief and at length above, Lend Lease has fully met its burden to obtain summary judgment in connection with the coverage afforded for the Tower Crane. A plain reading of the Policy requires that the Tower Crane be considered “Covered Property,” as it is a “temporary structure” that is “incidental to the project” and it was included in the “Total Project Value.” The Policy’s Exclusion for “contractor’s tools” is inapplicable to the damage at issue in this litigation, and, therefore, the Insurers have not met their burden of establishing its application. Because it is entitled to coverage under the Builder’s Risk Policy, Lend Lease respectfully submits that the First Department erred in granting the Insurers’ Motion for Summary Judgment and denying its Motion for Summary Judgment. Therefore, Lend Lease requests that this Court reverse that Decision. III. CONCLUSION 29 For the reasons set forth above, Lend Lease respectfully requests that the Court reverse the First Department’s Decision and grant summary judgment in its favor; and for such other and further relief as this Court deems just and proper. Dated: New York, New York May 23, 2016 _______________________________ Matthew J. Lodge CARROLL, MCNULTY & KULL LLC Attorneys for Plaintiff-Appellant Lend Lease (US) Construction LMB Inc. 570 Lexington Avenue, 8th Floor New York, New York 10022 (212) 252-0004