APL-2017-00001
New York County Clerk’s Index No. 653199/11
Court of Appeals
STATE OF NEW YORK
GILBANE BUILDING CO./TDX CONSTRUCTION CORP., A JOINT VENTURE;
GILBANE BUILDING COMPANY; TDX CONSTRUCTION CORPORATION,
Plaintiffs-Appellants,
against
ST. PAUL FIRE AND MARINE INSURANCE COMPANY; FIDELITY AND GUARANTY
INSURANCE COMPANY; UNITED STATES FIDELITY AND GUARANTY COMPANY;
SELECT INSURANCE COMPANY; ZURICH AMERICAN INSURANCE COMPANY; ROYAL
SURPLUS LINES INSURANCE COMPANY; ARROWOOD SURPLUS LINES INSURANCE
COMPANY; NEW HAMPSHIRE INSURANCE COMPANY; PACIFIC EMPLOYERS INSUR-
ANCE COMPANY; ILLINOIS UNION INSURANCE COMPANY; GREAT AMERICAN
INSURANCE COMPANY; WESTCHESTER FIRE INSURANCE COMPANY; GREENWICH
INSURANCE COMPANY; UNITED NATIONAL CASUALTY INSURANCE COMPANY;
LIBERTY MUTUAL INSURANCE COMPANY; WESTPORT INSURANCE CORPORATION;
NATIONAL CASUALTY COMPANY; AMERICAN HOME ASSURANCE COMPANY;
INSURANCE COMPANY OF THE STATE OF PA; NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA; HAYWARD BAKER INC.; SAMSON CONSTRUCTION
INC.; PILE FOUNDATION CONSTRUCTION CO.; PERKINS EASTMAN ARCHITECTS P.C.;
IRON & STEEL CO., INC.; CRUM & FORSTER SPECIALTY COMPANY; ROADWAY
CONTRACTING, INC.; SOIL SOLUTIONS, INC.; CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.; and SPX CORPORATION,
Defendants,
and
LIBERTY INSURANCE UNDERWRITERS,
Defendant-Respondent.
>> >>
REPLY BRIEF FOR PLAINTIFFS-APPELLANTS
SAXE DOERNBERGER & VITA, P.C.
Attorneys for Plaintiffs-Appellants
35 Nutmeg Drive, Suite 140
Trumbull, Connecticut 06611
203-287-2100
Of Counsel:
Richard W. Brown
Date Completed: May 2, 2017
To Be Argued By:
Richard W. Brown
Time Requested: 30 Minutes
i
TABLE OF CONTENTS
Page
TABLE OF CONTENTS ........................................................................................ i
TABLE OF AUTHORITIES ................................................................................. ii
PRELIMINARY STATEMENT ............................................................................ 1
ARGUMENT ............................................................................................................ 3
I. LIBERTY FAILS TO ADDRESS APPELLANTS’ ARGUMENTS
AS TO WHY THE DECISION SHOULD BE REVERSED ....................... 3
A. Case Law Supports Appellants’ Position That the Liberty
Endorsement Does Not Require a Direct Contract Between the
Named Insured and Additional Insured .................................................... 3
B. The Decision Conflicts with the Plain Meaning of the Liberty
Endorsement and Well-Settled Rules of Policy Interpretation ................. 7
II. THE LIBERTY ENDORSEMENT IS AMBIGUOUS AND
MUST BE CONSTRUED AGAINST LIBERTY AND IN FAVOR
OF COVERAGE ............................................................................................ 9
III. QUESTIONS OF FACT EXIST REGARDING SATISFACTION
OF THE LIBERTY POLICY NOTICE CONDITIONS .......................... 10
A. The Express Terms of the Liberty Policy Do Not Impose an
Independent Notice Obligation Upon Gilbane/TDX .............................. 11
B. Questions of Fact Exist Regarding Whether Gilbane/TDX
May Rely Upon the Named Insured’s Notice to Liberty ........................ 12
C. Questions of Fact Exist as to Whether Gilbane/TDX is Excused
Due to A Reasonable Belief of Non-Liability ........................................ 16
D. The Trial Court Properly Held That Questions of Fact Exist as to
Whether Gilbane/TDX Satisfied the Notice of Suit Conditions ............. 18
CONCLUSION ....................................................................................................... 21
ii
TABLE OF AUTHORITIES
Cases
1700 Broadway Co. v. Greater New York Mut. Ins. Co.,
54 A.D.3d 593 (1st Dep’t 2008) ........................................................................... 14
AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc.,
102 A.D.3d 425 (1st Dep’t. 2013) ......................................................................4, 7
Ambrosio v. Newburgh Enlarged City Sch. Dist.,
5 A.D.3d 410 (2nd Dep’t 2004) ............................................................................ 14
American Home Assur. Co. v. Zurich Ins. Co.,
26 Misc. 3d 1223 (A), 2010 NY Slip Op 50237 (U)
(Sup. Ct., Kings County 2010) ............................................................................... 7
Argentina v. Otsego Mut. Fire Ins. Co., 86 N.Y.2d 748 (1995) .............................. 16
Best Buy Co., Inc. v. Sage Elec. Contracting, Inc.,
No. 600781/2006, 2009 N.Y. Misc.
LEXIS 4125 (N.Y. Sup. Ct. Jan. 23, 2009) ........................................................6, 7
City of New York v. Cont’l Cas. Co., 27 A.D.3d 28 (1st Dep’t 2005) .................... 19
Ell Dee Clothing Co. v. Marsh, 247 N.Y. 392 (1928) .............................................. 19
ERC 16W Ltd. Partnership v. Xanadu Mezz Holdings, LLC,
95 A.D.3d 498 (1st Dep't 2012) .......................................................................... 18
Liberty Mut. Fire Ins. Co. v. Zurich Am. Ins. Co.,
2016 U.S. Dist. LEXIS 13604; 2016 WL 452157
(No. 42 Civ. 1:14 07568) (S.D.N.Y. Feb. 4, 2016) ............................................4, 5
Linarello v. City Univ. of N.Y.,
6 A.D.3d 192 (1st Dep’t 2004) ...................................................................... 4, 6, 7
Murnane Bldg. Contractors, Inc. v. Zurich American Ins. Co.,
09-16699, 33 Misc.3d 1215(A) (N.Y. Sup. Ct. Oct. 5, 2011),
rev’d on other grounds, 107 A.D.3d 674 (2nd Dep’t 2013) ................................... 6
iii
National Union Fire Ins. Co. v. Ins. Co. of N. Am.,
188 A.D.2d 259 (1st Dep’t 1992) ......................................................................... 13
New York Telephone Co. v. Travelers Cas. and Sur. Co. of Am.,
280 A.D.2d 268 (1st Dep’t 2001) .................................................................. 12, 13
Plaza Construction Corp. v. Zurich Am. Ins. Co.,
2011 N.Y. Misc. LEXIS 1234, at *8-9
(N.Y. Sup. Ct. 2011) ............................................................................................... 7
Rosen v. City of New York, 245 A.D.2d 202 (1st Dep’t 1997) .............................. 13
Sperling v. Great American Indem. Co.,
7 N.Y.2d 442, 199 N.Y.S.2d 465 (1960) ................................................................ 9
SSBSS Realty Corp. v. Public Serv. Mut. Ins. Co.,
253 A.D.2d 583 (1st Dep’t 1998) ............................................................ 16, 18, 20
St. James Mech., Inc. v. Royal & Sunalliance,
44 A.D.3d 1030 (2nd Dep’t 2007) ........................................................................ 21
State of New York v. Home Indem, Co.,
66 N.Y.2d 669, 495 N.Y.S.2d 969 (1985) ....................................................... 9, 10
Travelers Ins. Co. v. Volmar Const. Co., 300 A.D.2d 40 (1st Dep’t 2002) ............ 20
White v. City of New York, 81 N.Y.2d 955 (1993) ................................................ 16
Zoological Soc’y of Buffalo, Inc. v. Carvedrock, LLC,
Case No. 10-CV-35-A, 2014 U.S. Dist.
LEXIS 103800 (W.D.N.Y July 29,2014) ...................................................... 5, 6, 7
1
PRELIMINARY STATEMENT
Appellants Gilbane Building Co./ TDX Construction Corp., a Joint Venture,
and its individual members, Gilbane Building Company and TDX Construction
Corporation (hereinafter, “Appellants” or “Gilbane/TDX”) submit this Reply
Memorandum of Law in further support of its appeal from the Order and Decision
of the Appellate Division, First Department, dated September 15, 2016 (the
“Decision”).
The additional insured endorsement provides additional insured status to any
“person or organization with whom you [Samson] have agreed to add as an
additional insured by written contract…” (the “Liberty Endorsement”). The
express terms of the Liberty Endorsement require only that the named insured
agree in writing to add a party as an additional insured for a party to qualify as
such. It is undisputed that Samson, the named insured, entered into a contract with
the Dormitory Authority of the State of New York (“DASNY”) (the
“DASNY/Samson Contract”), under which it agreed to procure commercial
general liability insurance and name Gilbane/TDX as additional insureds on such
insurance. (R. 639, 878, 912-913). The conditions of the Liberty Endorsement
have, therefore, been satisfied and Gilbane/TDX qualifies as an additional insured
on the Liberty Policy.
Liberty fails to address Appellants’ argument that the Liberty Endorsement
2
does not include language expressly requiring a direct contract between the named
insured and purported additional insured. Instead, Liberty merely reprises the
analysis put forth in the Decision, relying on case law construing policy language
distinguishable from that of the Liberty Endorsement. Liberty further attempts to
minimize the precedential value of the numerous decisions that have construed
language nearly identical to the Liberty Endorsement as not requiring a direct
contract between the named insured and purported additional insured, while
ignoring the fundamental question that is before the Court and ultimately
determinative of this appeal. That is, from the perspective of an average insured, is
it reasonable to interpret the Liberty Endorsement as requiring only that the named
insured agree in writing to add a party as an additional insured, to confer such
status? The trial court answered this question in the affirmative, along with
numerous other courts of the State of New York, and most recently, the District
Court for the Southern District of New York. Appellants ask that this Court
recognize the soundness of such decisions by reversing the Decision of the
Appellate Division and declaring Gilbane/TDX additional insureds on the Liberty
Policy.
Finally, although the Appellate Division did not address the issue of whether
Gilbane/TDX satisfied the notice conditions of the Liberty Policy, Liberty seeks to
raise the issue as a defense to providing coverage to Gilbane/TDX. As recognized
3
by the trial court, summary judgment in favor of Liberty is improper on such
grounds because: 1) the Liberty Policy does not impose an express obligation to
provide notice of an occurrence or suit upon an additional insured; and 2) questions
of fact exist regarding whether Gilbane/TDX satisfied or was otherwise excused
from the notice conditions contained within the Liberty policy.
For all of these reasons, Appellants submit that the Decision of the Appellate
Division should be reversed, with the trial court’s Order declaring Gilbane/TDX
additional insureds on the Liberty Policy reinstated, and the matter remanded to the
trial court for further proceedings.
ARGUMENT
I. LIBERTY FAILS TO ADDRESS APPELLANTS’ ARGUMENTS
AS TO WHY THE DECISION SHOULD BE REVERSED
Gilbane/TDX advanced arguments in its initial brief, which establish that the
Appellate Division’s interpretation of the Liberty Endorsement is improper and
contrary to: 1) prior decisions construing the same or similar policy language; 2)
the plain meaning of its express terms and well-settled rules of policy
interpretation; and 3) the reasonable expectations of the parties. Liberty fails to
address these arguments in any meaningful fashion, choosing instead to rely on
inapposite case law interpreting policy language that is distinguishable from the
Liberty Endorsement.
A. Case Law Supports Appellants’ Position That the Liberty
4
Endorsement Does Not Require a Direct Contract Between
the Named Insured and Additional Insured
Liberty principally relies upon the Appellate Division’s decisions in AB
Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc., 102 A.D.3d 425, 426
(1st Dep’t 2013), and Linarello v. City Univ. of N.Y., 6 A.D.3d 192 [1st Dep’t
2004]. The language “when you and such…organization have agreed in writing,”
contained in the AB Green and Linarello endorsements, specifically refers back to
the “person or organization for whom you are performing operations” as the party
being included as an insured, and expressly requires a direct contract between the
named insured and that person or organization. The Liberty Endorsement does not,
however, include such express language identifying the party to be included as an
insured, and then expressly require a direct contract between the named insured
and that person or organization. Thus, contrary to Liberty’s arguments and the
holding of the Appellate Division, construing the Liberty Endorsement as
indistinguishable from the endorsements in AB Green and Linarello conflicts with
the plain meaning of the endorsement.
Liberty has also failed to distinguish the holding in Liberty Mut. Fire Ins.
Co. v. Zurich Am. Ins. Co., 2016 U.S. Dist. LEXIS 13604; 2016 WL 452157 (No.
42 Civ. 1:14 07568) (S.D.N.Y. Feb. 4, 2016), where the United States District
Court for the Southern District of New York considered language contained in a
general liability policy issued to NASDI, LLC (“NASDI”) (the “Zurich Policy”) by
5
Zurich American Insurance (“Zurich”). The policy included as an additional
insured, “[a]ny person or organization with whom you have agreed, through
written contract, agreement or permit, executed prior to the loss, to provide
additional insured coverage.” (emphasis added) Id. at *3
In finding that the City was an additional insured on the Zurich Policy, the
District Court stated, “[t]he Court rejects [Zurich’s] argument as an incorrectly
cramped reading of the policy language…[T]he Zurich Policy’s additional insured
clause, by its plain language, extends coverage to any person or organization with
whom the insured [] agreed in a written contract to provide insurance
for…Zurich’s additional insured endorsement is not so restrictive as to limit
coverage to only the person or organization with whom [NASDI], the named
insured, contracted.” Id. at *3. The District Court further stated that, “[w]hile other
courts have reached a contrary interpretation of similar policy language, the Court
declines to follow them because they add a requirement of direct contractual
privity…that does not exist in the policy language.” (Emphasis added) Id.
In Zoological Soc’y of Buffalo, Inc. v. Carvedrock, LLC, Case No. 10-CV-
35-A, 2014 U.S. Dist. LEXIS 103800 (W.D.N.Y July 29,2014), the policy
language granted additional insured status to:
Any person or organization with whom [CarvedRock]
ha[s] agreed, in a written contract, that such person or
organization should be added as an insured on
[CarverdRock’s] policy… (Emphasis added.)
6
The operative language in this provision is the phrase “such person or
organization”, which clearly requires that only the parties to the contract qualify as
additional insureds. Id. at *5. No such limiting language is included in the Liberty
Endorsement.
Similarly, in Best Buy Co., Inc. v. Sage Elec. Contracting, Inc., No.
600781/2006, 2009 N.Y. Misc. LEXIS 4125, at *8 (N.Y. Sup. Ct. Jan. 23, 2009),
the policy stated:
Any person or organization with whom you have entered
into a written contract, agreement or permit requiring you
to provide insurance such as is afforded by the
Commercial General Liability Coverage Form will be an
additional insured. (Emphasis added.)
The language at issue in Best Buy is narrower than in Zoological Soc. Of Buffalo,
and clearly distinguishable from the present language, as it specifies, “with whom
you have entered into a written contract.” Id. Unlike Best Buy, it is undisputed in
the present case that Samson agreed to name Gilbane/TDX, and others, as
additional insureds on the Liberty Policy. (R. 878, 912-917).
Finally, the Appellate Division’s reliance upon Murnane Bldg. Contractors,
Inc. v. Zurich American Ins. Co., 09-16699, 33 Misc.3d 1215(A) (N.Y. Sup. Ct.
Oct. 5, 2011), rev’d on other grounds, 107 A.D.3d 674 (2nd Dep’t 2013), is
similarly misplaced as the trial court improperly relied upon Linarello to support
its holding that a direct written contract was required between the parties.
7
The language of the Liberty Endorsement is the same as the language
addressed in American Home Assur. Co. v. Zurich Ins. Co., 26 Misc. 3d 1223 (A),
2010 NY Slip Op 50237 (U) (Sup. Ct., Kings County 2010) and Plaza
Construction Corp. v. Zurich Am. Ins. Co., 2011 N.Y. Misc. LEXIS 1234, (N.Y.
Sup. Ct. 2011). The Liberty Endorsement does not contain the limiting language
“when you and such person or organization have agreed in writing”, which the
Appellate Division construed in Linarello and AB Green. It does not contain the
limiting language “that such person or organization”, which the court addressed in
Zoological Soc. of Buffalo. It does not contain the limiting language “with whom
you have entered into a written contract”, which the trial court addressed in Best
Buy. The Liberty Endorsement only requires that the Named Insured agreed to add
a party as an additional insured “by written contract”, which does not require direct
contractual privity between the Named Insured and purported additional insured.
B. The Decision Conflicts with the Plain Meaning of the
Liberty Endorsement and Well-Settled Rules of Policy
Interpretation
As recognized by the trial court, the plain meaning of the Liberty
Endorsement requires only that Samson agreed in writing to add Gilbane/TDX as
an additional insured to confer such status, as there is no language expressly
requiring a direct contract between the Named Insured and purported additional
insured. It is undisputed that this condition was satisfied by the terms of the
8
DASNY/Samson Contract, and Gilbane/TDX therefore qualifies as an additional
insured on the Liberty Policy. (R. 639, 878, 912-913).
The Appellate Division held that the Liberty Endorsement “clearly and
unambiguously requires that the named insured execute a contract with the party
seeking coverage as an additional insured.” (R. 972). The language of the Liberty
Endorsement does not, however, include any express condition of direct
contractual privity between the Named Insured and purported additional insured,
and these terms cannot be read into the Liberty Policy as the Appellate Division
has done. In holding that the Liberty Endorsement clearly and unambiguously
requires a direct contract between the Named Insured and purported additional
insured, the Appellate Division reasoned that the interpretation asserted by
Gilbane/TDX “place[s] undue emphasis on the phrase ‘by written contract’ and
completely ignores the inclusion of the words ‘with whom’ as the object of the
verb phrase ‘you agree.’…, [and that] “when ‘whom’ is used as the object of a verb
or preposition, it refers back to the person mentioned previously.” (R. 975).
Contrary to the reasoning of the Appellate Division, inclusion of the words “with
whom” as the object of the verb phrase “you agree”, does not create an express
requirement that a party seeking additional insured coverage enter into a direct
contract with the Named Insured. For example, the language of the Liberty
Endorsement does not state “any person or organization with whom you have
9
agreed by written contract”, or “by written contract with such person or
organization.” In holding that contractual privity is a condition of additional
insured coverage, the Appellate Division, in error, reformed the scope of coverage
afforded under the Liberty Policy by reading such restrictive language into the
Liberty Endorsement. Sperling v. Great American Indem. Co., 7 N.Y.2d 442, 450,
199 N.Y.S.2d 465 (1960).
II. THE LIBERTY ENDORSEMENT IS AMBIGUOUS AND MUST
BE CONSTRUED AGAINST LIBERTY AND IN FAVOR OF
COVERAGE
“Where the language of a policy of insurance is ambiguous and susceptible
of more than one reasonable interpretation, the parties may submit extrinsic
evidence as an aid in construction; but when extrinsic evidence will not resolve the
equivocality of the language of the contract, the issue remains a question of law for
the court.” State of New York v. Home Indem, Co., 66 N.Y.2d 669, 671, 495
N.Y.S.2d 969 (1985).
The presence of such ambiguity in the Liberty Endorsement is evidenced by
the imprecise structure of the language employed and the resulting uncertainty as
to whether the conditional language “by written contract” applies to the party
seeking coverage or the Named Insured alone. Further evidence of such ambiguity
is provided by the numerous conflicting decisions discussed herein, which have
construed the same or similar language contained in the Liberty Endorsement, and
10
found in many cases that a direct contract between the Named Insured and
additional insured was not required, and in others, that direct contractual privity is
required.1 These decisions demonstrate that the language of the Liberty
Endorsement included in the Liberty Policy is “susceptible to more than one
reasonable interpretation,” and therefore ambiguous, and extrinsic evidence may be
considered to further determine the parties' intent (see State of New York, 66
N.Y.2d 669, 671). If extrinsic evidence does not resolve the equivocality of the
language of the contract, the issue remains a question of law for the court. State of
New York v. Home Indem. Co., 66 N.Y.2d 669, 671, 495 N.Y.S.2d 969 (1985).
III. QUESTIONS OF FACT EXIST REGARDING SATISFACTION
OF THE LIBERTY POLICY NOTICE CONDITIONS
Although not addressed by the Appellate Division’s Decision, Liberty
argues that it was error for the trial court to conclude that Gilbane/TDX could rely
on Samson’s notice to Liberty to satisfy the notice conditions of the Liberty Policy.
The trial court properly held that the Liberty Policy does not impose an express
obligation upon an additional insured to provide notice of an occurrence or suit,
and questions of fact exist regarding whether the interests of Gilbane/TDX and
Samson were not adverse in 2003, thereby allowing Gilbane/TDX to rely upon
Samson’s notice of occurrence to Liberty. In addition, questions of fact exist
regarding whether Gilbane/TDX is otherwise excused due to a good faith belief of
1 See Appellants’ Br. at 29-30.
11
non-liability. Accordingly, the Underlying Order of the trial court properly denied
Liberty’s Motion for Summary Judgment and should be reinstated.
A. The Express Terms of the Liberty Policy Do Not Impose an
Independent Notice Obligation Upon Gilbane/TDX
The Liberty Policy clearly distinguishes between a Named Insured and any
party qualifying as an “insured” under Section II of the policy. The only party
identified as a Named Insured in the Declarations is Samson, and therefore, the
words “you” and “your” only refer to Samson and those parties that qualify as
Named Insureds.2
The Notice of Occurrence Condition states, “You must see to it that we
are notified as soon as practicable of an ‘occurrence’…which may result in a
claim.” (R. 229). In light of the definition of “you”, the Notice of Occurrence
Condition expressly applies only to a Named Insured, and does not apply to an
“insured”, nor an additional insured, qualifying as such under Section II – Who Is
An Insured. Gilbane/TDX is not a Named Insured on the Liberty Policy, but
rather an “insured” pursuant to the Liberty Endorsement and Section II – Who Is
An Insured, of the Liberty Policy. As such, the Notice of Occurrence Condition,
which explicitly applies only to “you”, meaning a Named Insured, does not apply
to Gilbane/TDX. Furthermore, given that an additional insured does not purchase
the policy under which it seeks coverage and in most cases, including the
2 There is no claim that Gilbane/TDX is a Named Insured on the LIU Policy.
12
present, does not even possess a copy of the policy, it is only reasonable that
the notice obligations imposed upon an additional insured are not as stringent as
those of a Named Insured. (R.923).
Consequently, the trial court properly held, “[t]here is no express provision
in the Policy requiring an additional insured to give notice to the insurer of either
an occurrence or lawsuit.” (R. 16). The trial court further explained that, “[t]he
Policy, by its plain terms, places the duty to notify Liberty of both an occurrence
and a suit against an insured, on the named insured, not the additional insured.” (R.
18).
B. Questions of Fact Exist Regarding Whether Gilbane/TDX
May Rely Upon the Named Insured’s Notice to Liberty
Liberty further argues that the trial court erred in holding that, Gilbane/TDX
could rely upon Samson’s notice of occurrence. As New York courts have
consistently recognized, however, even though an additional insured may have an
independent obligation to provide notice of an occurrence or suit, notice provided
by a named insured may be relied upon by an additional insured when their
interests are not adverse at the time of notice. New York Telephone Co. v.
Travelers Cas. and Sur. Co. of Am., 280 A.D.2d 268 (1st Dep’t 2001).
In New York Telephone, the First Department held that, “Time Warner’s
forwarding of the summons and complaint in the underlying action to its insurer
Travelers constituted timely notice to Travelers of the occurrence involving New
13
York Telephone, an additional insured under the Travelers policy issued to Time
Warner and the only insured party under that policy against whom the summons
and complaint had been served.” New York Telephone Co., 280 A.D.2d at 268.
Although New York Telephone later asserted claims against Time Warner and its
insurer, the First Department recognized that, “[i]nasmuch as Time Warner’s
interests were not adverse to those of New York Telephone at the time the
summons and complaint were forwarded to Travelers, the notice provided by Time
Warner’s forwarding of the summons and complaint sufficed to defeat the carrier’s
affirmative defense of late notice.” Id. (emphasis added)
New York courts have consistently held that where either the named insured
or additional insured are not named as a defendant, or impleaded into the
underlying action by the other, at the time notice is provided to an insurer, the
interests of the insureds are not adverse and the timely notice of one may be relied
upon by the other. In Rosen v. City of New York, 245 A.D.2d 202 (1st Dep’t
1997), where “the insurer, asserting lack of timely notice, disclaimed coverage for
the additional insureds before the [additional insureds] had asserted any claims
against the primary insured,” the First Department held that notice given by the
primary insured was applicable to the additional insureds, given that their interests
were not adverse at the time. Similarly, in National Union Fire Ins. Co. v. Ins. Co.
of N. Am., 188 A.D.2d 259 (1st Dep’t 1992), the Appellate Division reversed an
14
order of the Supreme Court, New York County, holding that an employee could
rely upon the timely notice of its employer to a mutual insurer, because the
employer and employee were “united in interest, as no cross-claims have been
interposed in the underlying malpractice action.” (emphasis added). In Ambrosio v.
Newburgh Enlarged City Sch. Dist., 5 A.D.3d 410 (2nd Dep’t 2004), the Second
Department affirmed an order of the Supreme Court, Orange County, holding that,
“where the [named insured] was neither named as a defendant nor impleaded in [an
underlying action], timely notice of the occurrence provided by the [named
insured] to the [insurer] a few weeks after the accident is deemed notice of the
occurrence by the [additional insured], because the [named insured] and [additional
insured] were not adverse to each other.”3
Based on the foregoing principles, the trial court properly held that questions
of fact exist regarding whether Gilbane/TDX can rely upon Samson’s notice of
occurrence to Liberty, inasmuch as Gilbane/TDX’s interests were not adverse to
Samson’s at the time of the occurrence. (R. 18). The Supreme Court recognized
that while the interests of Gilbane/TDX and Samson were apparently not adverse
at the time of the occurrence in 2003, Samson filed a cross claim against
Gilbane/TDX sometime thereafter, the date of which was not originally included as
3 But cf. 1700 Broadway Co. v. Greater New York Mut. Ins. Co., 54 A.D.3d 593 (1st Dep’t
2008), where primary and additional insureds’ interests were deemed adverse from the moment
the underlying complaint named them as co-defendants.
15
part of the record, but is identified in Gilbane/TDX’s Amended Complaint as May
9, 2011. (R. 18, 49). Therefore, the interests of Gilbane/TDX were not adverse to
Samson’s until service of the cross claim on May 9, 2011, and to the extent
Samson provided notice of the occurrence to Liberty prior to this date,
Gilbane/TDX can rely upon such notice as an additional insured on the Liberty
Policy.
16
C. Questions of Fact Exist as to Whether Gilbane/TDX is
Excused Due to A Reasonable Belief of Non-Liability
Where an insurance policy requires that notice be given “as soon as
practicable,” notice must be given within a reasonable time under the facts and
circumstances of each case. White v. City of New York, 81 N.Y.2d 955, 957
(1993). While a notice requirement operates as a condition precedent to coverage,
circumstances may exist that will excuse or explain the insured’s delay in giving
notice, such as a reasonable belief in non-liability. White, 81 N.Y.2d at 957.
Whether there existed a good faith belief that the injured party would not seek to
hold the insured liable and whether that belief was reasonable are questions of fact
for the fact-finder. Argentina v. Otsego Mut. Fire Ins. Co., 86 N.Y.2d 748, 750
(1995). Summary judgment on this issue may be granted in favor of the appellant
insurance company only if the evidence, construing all inferences in favor of the
respondent insured establishes as a matter of law that the belief of the respondent
insured that the plaintiffs in the underlying action would not assert claims against it
was unreasonable or in bad faith. SSBSS Realty Corp. v. Public Serv. Mut. Ins.
Co., 253 A.D.2d 583, 584 (1st Dep’t 1998).
As submitted by the affidavit of TDX President, James R. Jones,
Gilbane/TDX served as the Construction Manager “not at-risk” on the Project,
meaning they did not perform or supervise any construction work and did not hold
any direct contracts with the contractors actually performing the work on the
17
Project. Gilbane/TDX’s responsibilities were strictly limited to project
coordination and administration, including the maintenance and tracking of related
Project documents and working as a liaison between the design team and the
contractors retained to complete the Project. (R. 920-922). Because Gilbane/TDX
did not perform or otherwise supervise the work of the contractors out of which the
damage occurred and did not hold any direct contracts for the Project, but instead
merely operated in an administrative capacity, its belief of non-liability for the
damage is reasonable under the circumstances, and at the very least creates a
triable issue of fact.
Furthermore, as a result of the damage, numerous meetings were held
between DASNY and Gilbane/TDX to review related construction schedules and
determine a strategy regarding management of the overall Project going forward.
DASNY never indicated during these meetings that Gilbane/TDX would face any
liability or that claims would be asserted against it for the damage. At no point did
DASNY refuse to make payment to Gilbane/TDX or withhold payments until the
damage was repaired. DASNY instead paid all costs to repair the damage,
including related increases in payment to Gilbane/TDX resulting from delays in the
construction schedule. (R. 922). Finally, the reasonableness of Gilbane/TDX’s
belief of non-liability is most obviously supported by the fact that DASNY has
never asserted any direct claims against Gilbane/TDX. (R. 922).
18
The statements asserted in the Affidavit of James R. Jones demonstrate that
Gilbane/TDX’s belief of non-liability was reasonable under the circumstances, and
present a factual issue as to the timeliness of notice to Liberty. SSBSS Realty
Corp., 253 A.D.2d at 584.
D. The Trial Court Properly Held That Questions of Fact Exist
as to Whether Gilbane/TDX Satisfied the Notice of Suit
Conditions
The Liberty Policy further states in the Duties In The Event Of Occurrence,
Offense, Claim Or Suit provision, that “[i]f a claim is made or ‘suit’ is brought
against any insured, you must…Notify us as soon as practicable.” (R. 229). Like
the Notice of Occurrence Condition, the requirement to notify Liberty as soon as
practicable is specifically imposed upon “you”, which refers only to Named
Insureds under the terms of the Liberty Policy Coverage Form. If the Notice of
Claim Condition is read to apply to any insured under the Liberty Policy, it would
effectively mean that each insured has an obligation to notify Liberty of any
claims asserted against itself as well as any other insured, a finding which is
irrational and unrealistic, and therefore contrary to the law. ERC 16W Ltd.
Partnership v. Xanadu Mezz Holdings, LLC, 95 A.D.3d 498 (1st Dep't 2012).
However, under New York law certain “conditions may be so well
understood as universally entering into insurance contracts, such as the necessity of
notice and proofs of loss given to the insurer within a reasonable time, that the
19
courts will imply them even though the binder be silent.” Ell Dee Clothing Co. v.
Marsh, 247 N.Y. 392, 396, (1928). (R. 19). Assuming Gilbane/TDX, as an
additional insured on the Liberty Policy, had an implied obligation to notify Liberty
of the Third-Party Action within a reasonable amount of time, an issue of material
fact exists as to whether Gilbane/TDX fulfilled that obligation, as both the trial
court and dissent recognized.
Liberty argues that it was error for the trial court to conclude that questions of
fact are presented as to whether the Notice of Suit Condition has been satisfied.
Liberty claims that Gilbane/TDX also failed to satisfy the Duties In The Event Of
Occurrence, Offense, Claim Or Suit provision, which states that “[y]ou and any
other insured must…Immediately send us copies of any demands, summonses or
legal papers received in connection with the claim or “suit”…” (R.229). New York
courts have consistently recognized, however, that an insured’s failure to promptly
forward suit papers is measured under a “failure-to-cooperate” standard, and unlike
a “failure to notify”, disclaimer is only appropriate where an insured is found to
have deliberately done so, the burden of which rests with the insurer to establish.
City of New York v. Cont’l Cas. Co., 27 A.D.3d 28, 31 (1st Dep’t 2005). Sufficient
evidence has been produced to raise a material question of fact as to whether
Gilbane/TDX provided notice of the Third-Party Action within a reasonable time
under all the circumstances, thereby precluding summary judgment. To the extent
20
Liberty relies upon Gilbane/TDX’s failure to forward suit papers as its basis for
disclaimer, Liberty has failed to meet its burden of demonstrating a willful and
deliberate lack of cooperation on the part of Gilbane/TDX.
Provisions such as the Notice of Suit Condition, which require that notice be
given “as soon as practicable,” have been interpreted to require notice within a
reasonable amount of time under all the circumstances. “Where an excuse or
explanation is offered for delay in furnishing notice, the reasonableness of the
delay and the sufficiency of the excuse are matters to be determined at trial.”
Travelers Ins. Co. v. Volmar Const. Co., 300 A.D.2d 40 (1st Dep’t 2002).
Summary judgment on this issue may be granted in favor of the appellant
insurance company only if the evidence, construing all inferences in favor of the
respondent insured, establishes as a matter of law that the delay was unreasonable
or in bad faith. SSBSS Realty Corp., 253 A.D.2d at 584.
The Third-Party Action was filed against Gilbane/TDX on December 15,
2010, almost seven years after the initial occurrence took place. (R. 47, 112-138,
923). As explained in the Affidavit of TDX President, James R. Jones,
Gilbane/TDX provided notice to Liberty as soon as practicable on April 25, 2011.
(R. 923, 925). In order for Gilbane/TDX to notify the proper parties of the Third-
Party Action, a lengthy process had to be undertaken. Because the damage
occurred approximately seven years prior to the Third-Party Action being filed, the
21
Project documents had been placed in storage and needed to be retrieved. Upon
receipt of the voluminous Project documents, Gilbane/TDX needed to review
hundreds of thousands of pages of documents to locate the relevant certificates of
insurance and identify the proper contractors and their insurers that were to be
notified of the Third-Party Action. (R. 923). Despite these circumstances,
Gilbane/TDX was able to provide notice of the Third-Party Action to Liberty
within a reasonable amount of time, by letter dated April 25, 2011. (R. 925).
“Under the circumstances, a factual issue is presented as to the timeliness of
notice,” which precludes summary judgment in favor of Liberty. (R. 19). St. James
Mech., Inc. v. Royal & Sunalliance, 44 A.D.3d 1030 (2nd Dep’t 2007).
CONCLUSION
For the foregoing reasons, Plaintiff-Appellants respectfully request that the
Decision of the Appellate Division be reversed, with the Underlying Order
reinstated and the matter remanded for further proceedings as the Court deems
necessary.
Dated: May 2, 2017
Trumbull, Connecticut
Respectfully submitted,
SAXE DOERNBERGER & VITA, P.C.
By:
Richard W. Brown
Attorneys for Plaintiffs-Appellants,
Gilbane Building Company/TDX
CERTIFICATE OF COMPLIANCE
I hereby certify pursuant to 22 NYCRR § 500.13(c) that the foregoing reply
brief was prepared on a computer.
A proportionally spaced typeface was used, as follows:
Name of typeface: Time New Roman
Point size: 14
Line spacing: Double
The total number of words in the reply brief, inclusive of point headings and
footnotes and exclusive of the table of contents, and the table of cases and
authorities; and any addendum containing material required by § 500.1 (h) is
4,812.
Dated: May 2, 2017
Respectfully submitted,
SAXE DOERNBERGER & VITA, P.C.
By:
Richard W. Brown
Attorneys for Plaintiffs-Appellants,
Gilbane Building Company/TDX
Construction Corp., a Joint Venture,
Gilbane Building Company, and TDX
Corporation
35 Nutmeg Drive, Suite 140
Trumbull, Connecticut 06611
(203) 287-2115