To be Argued by:
GEORGE R. HARDIN
(Time Requested: 30 Minutes)
APL-2017-00001
New York County Clerk’s Index No. 653199/11
Court of Appeals
of the
State of New York
GILBANE BUILDING CO./TDX CONSTRUCTION CORP.,
a Joint Venture, GILBANE BUILDING COMPANY
and 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 INSURANCE COMPANY, ILLINOIS UNION INSURANCE
COMPANY, GREAT AMERICAN INSURANCE COMPANY,
WESTCHESTER FIRE INSURANCE COMPANY, GREENWICH
INSURANCE COMPANY, UNITED NATIONAL CASUALTY INSURANCE
(For Continuation of Caption See Inside Cover)
BRIEF FOR DEFENDANT-RESPONDENT
HARDIN KUNDLA MCKEON
& POLETTO, P.A.
Attorneys for Defendant-Respondent
110 William Street
New York, New York 10038
Tel.: (212) 571-0111
Fax: (212) 571-1117
Date Completed: April 14, 2017
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.
CORPORATE DISCLOSURE STATEMENT
Pursuant to Section 500.1(f) of the Rules of Practice of this Court,
Defendant-Respondent states as follows:
Liberty Insurance Underwriters Inc. is wholly owned by Liberty Mutual
Insurance Company, which is wholly owned by Liberty Mutual Group Inc., which
is wholly owned by LMHC Massachusetts Holding Inc., which is wholly owned by
Liberty Mutual Holding Co. Inc.
ii
STATEMENT OF RELATED CASES
This insurance coverage action concerns certain claims and causes of action
presented in an action titled Dormitory Authority – State of New York et al. v.
Samson Construction Co. et al., Supreme Court of the State of New York, County
of New York, index number 403436/2006. That action is ongoing.
iii
TABLE OF CONTENTS
TABLE OF AUTHORITIES .................................................................................... iv
QUESTION PRESENTED FOR REVIEW .............................................................. 1
PRELIMINARY STATEMENT ............................................................................... 2
COUNTER STATEMENT OF FACTS AND PROCEDURAL HISTORY ............ 6
ADDITIONAL INSURED-BY WRITTEN CONTRACT .......................................7
ARGUMENT ........................................................................................................... 10
Point I. PLAINTIFFS DO NOT QUALIFY AS ADDITIONAL INSUREDS
UNDER THE LIUI POLICY ISSUED TO SAMSON ........................................ 10
A. The Requirement of Privity of Contract Comports With Applicable
Precedent ........................................................................................................... 10
B. The Plain Language of the Endorsement Reflects That Privity of
Contract Is Required ......................................................................................... 19
C. The Reasonable Expectations Of The Parties Must Be Based Upon The
Policy Language ................................................................................................ 24
Point II. IF CONSIDERED BY THIS COURT BECAUSE RAISED IN
THE DISSENT, LIUI MAINTAINS PLAINTIFFS FAILED TO COMPLY
WITH THEIR INHERENT OBLIGATION TO PROVIDE LIUI TIMELY
NOTICE OF THE OCCURRENCE…………………………………...................28
CONCLUSION ........................................................................................................ 32
iv
TABLE OF AUTHORITIES
Cases
16449 CBB, LLC v. Zurich Am. Ins. Co.,
31 Misc. 3d 1212(A), 927 N.Y.S.2d 819, 2011 N.Y. Misc.
LEXIS 1713 at *26 (Sup. Ct. Queens Cty. Apr. 4, 2011)…………………….31
1700 Broadway Co. v. Greater New York Mut. Ins. Co.,
54 A.D.3d 593 (1st Dep't 2008)……………………………………………….30
AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc.,
102 A.D.3d 425 (1st Dep’t 2013) .................................... ………………11,16.17
American Home Assur. Co. v. Zurich Ins. Co.,
26 Misc. 3d 1223(A), 907 N.Y.S.2d 435, 2010 N.Y. Misc.
LEXIS 284 (Sup. Ct. Kings County Feb. 17, 2010) ............................... 16,17,19
Argo Corp. v. Greater N.Y. Mut. Ins. Co., 4 N.Y.3d 332 (2005)…………………29
Best Buy Co., Inc. v. Sage Electrical Contracting,
Index No. 600781/2006, 2009 NY Slip Op 30208(U), 2009 N.Y.
Misc. LEXIS 4125 (Sup. Ct. New York Cty. Jan. 28, 2009) ............................ 14
Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co.,
53 A.D.3d 140 (1st Dep't 2008)…………………………………………....24,26
Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351 (1978) ....................................... 11
City of New York v. Investors Ins. Co. of Am.,
89 A.D.3d 489 (1st Dep't 2011)…................................................................29,30
City of New York v. Nova Cas. Co., 104 A.D.3d 410 (1st Dep’t 2013) ................... 13
Consolidated Edison Co. of N.Y. v Allstate Ins. Co.,
98 N.Y.2d 208 (2002)........................................................................................ 10
Eaves Brooks Costume Co. v. Y.B.H. Realty Corp.,
76 N.Y.2d 220 (1995)………………………………………………………...28
v
Ell Dee Clothing Co. v. Marsh, 247 N.Y. 392 (1928)……………………….........29
Federal Ins. Co. v. International Bus. Mach. Corp.,
18 N.Y.3d 642 (2012)........................................................................................ 10
In re Satori R., 202 A.D.2d 432 (2nd Dep't 1994)……………………………........28
Kassis v. Ohio Cas. Ins. Co., 12 N.Y.3d 595 (2009). .............................................. 26
Kinney v. G.W. Lisk Co., 76 N.Y.2d 215 (1990) ..................................................... 26
Liberty Mut. Fire Ins. Co. v. Zurich Am. Ins. Co.,
Case No. 14-7568, 2016 U.S. Dist. LEXIS 13604
(S.D.N.Y. Feb. 4, 2016) .................................................................................... 19
Linarello v. City Univ. of N.Y., 6 A.D.3d 192 (1st Dep’t 2004) .......................... 12,17
Mayo v. Metropolitan Opera Assoc., 108 A.D.3d 422 (1st Dep’t 2013) ................. 13
Murnane Bldg. Contrs., Inc. v. Zurich Amer. Ins. Co.,
33 Misc.3d 1215(A), 941 N.Y.S.2d 539, 2011 N.Y. Misc.
LEXIS 5128 (Sup. Ct. Suffolk County Oct. 5, 2011), rev’d on
other grounds, 107 A.D.3d 674 (2nd Dep’t 2013) ................................... 13,17,19
Northville Indus. Corp. v. National Union Fire Ins. Co.,
89 N.Y.2d 621 (1997)........................................................................................ 22
Plaza Constr. Corp. v. Zurich Amer. Ins. Co.,
2011 NY Slip Op 30709(U), 2011 N.Y. Misc. LEXIS 1234
(Sup. Ct. New York Cty. Mar. 23, 2011) ........................................... 15,16,17,19
QBE Ins. Corp. v. M&R European Constr. Corp.,
2012 N.Y. Misc. LEXIS 3376 at *15
(Sup. Ct. New York Cty. July 16, 2012………………………………….…...31
Security Mut. Ins. Co. v. Acker-Fitzsimmons Corp., 31 N.Y.2d 436 (1972)……...29
Sperling v. Great Am. Indem. Co., 7 N.Y.2d 442 (1960). ....................................... 25
vi
State of New York v. Home Indem. Co., 66 N.Y.2d 669 (1985) .............................. 24
State v. Home, supra, 66 N.Y.2d 671 (1985) ........................................................... 10
Strauss Painting, Inc. v. Mt. Hawley Ins. Co., 24 N.Y.3d 578 (2014)……………25
Structure Tone v. Burgess Steel Prods. Corp.,
249 A.D.2d 144 (1st Dep't 1998)……………………………………………...30
Teichman v. Community Hospital of W. Suffolk, 87 N.Y.2d 514 (1996) ................ 23
Travelers Ins. Co. v. Volmar Const. Co., Inc., 300 A.D.2d 40 (1st Dep't 2002)…..30
Universal Am. Corp. v. National Union Fire Ins. Co.,
25 N.Y. 3d 675 (2015)....................................................................................... 24
Valley Forge Ins. Co. v. Arch Specialty Ins. Co.,
2016 N.Y. Misc. LEXIS 4357 (Sup. Ct. New York Cty. Nov. 22, 2016) ........ 26
White v. Continental Cas. Co., 9 N.Y. 3d 264 N.E.2d 1019,
848 N.Y.S.2d 603 (2007) .................................................................................. 18
Zoological Society 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) ....................................................................... 17,18,19
Zoological Society of Buffalo, Inc. v. Carvedrock, LLC,
Case No. 10-CV-35-A, 2014 U.S. Dist. LEXIS 105359
(W.D.N.Y. May 21, 2014) ...................................................................... 17,18,19
Other Authorities
https://www.merriam-webster.com/dictionary/for .................................................. 23
https://www.merriam-webster.com/dictionary/with ................................................ 23
QUESTION PRESENTED FOR REVIEW
1. Whether an insurance policy endorsement that includes as an
insured “any person or organization with whom you have agreed
to add as an additional insured by written contract,” requires a
direct written contract between the Named Insured and a party
seeking coverage as an additional insured?
ANSWER: Yes. The First Department correctly held that the plain language
of the endorsement requires a written contract between the named insured
and the entity purporting to be an additional insured. This ruling accords
with other courts interpreting this and similar language, and respects the
ability of an insurer to limit coverage and its risk exposure to entities directly
contracting with the named insured, rather than allowing a contractor to
extend coverage to anyone it names in a trade contract or to base coverage
on an evaluation of the purported purposes of trade contracts.
2
PRELIMINARY STATEMENT
Plaintiffs-Appellants, Gilbane Building Company/TDX Construction
Corp., a Joint Venture (“Joint Venture”), Gilbane Building Company and
TDX Construction Corporation (collectively “Plaintiffs”), in attacking the
decision of the Appellate Division, First Department, engage in the
“grammatical gymnastics” recognized by the majority, and invite this Court
to rewrite the Defendant-Respondent’s, Liberty Insurance Underwriters,
Inc.’s (“LIUI”) policy to accommodate a contractor’s offer to extend its
coverage to entities with which it had no contractual business relationship.
The LIUI endorsement, entitled “ADDITIONAL INSURED – BY
WRITTEN CONTRACT” (capitalization in policy), when read in context
and given its plain and ordinary meaning, provides additional insured status
only to a “person or organization with whom you [the policyholder] have
agreed to add as an additional insured …” The endorsement goes on to say
that agreement must be “by written contract.” No amount of wordplay can
change the plain meaning and import of this statement, namely that
additional insured status will be extended only to the person or organization
with whom the policyholder has agreed by written contract to add as an
additional insured.
3
It is undisputed that Plaintiffs did not enter into any written contract
with LIUI’s named insured, Samson Construction Company, Inc.
(“Samson”). The LIUI policy unambiguously limits additional insured
status to entities “with whom” Samson had agreed to add as an additional
insured by written contract. The First Department correctly held that
Plaintiffs do not qualify under the plain language of the endorsement.
Contrary to Plaintiffs’ argument, the endorsement does not call for any
inquiry into the substance of what Samson may have agreed to do for third
parties to its trade contract. If LIUI had wished to make such concerns
relevant, different policy language would have been used. If such coverage
were called for under Samson’s trade agreement, Samson and its broker
could have easily submitted such a request to the LIUI underwriter,
identifying the entities to be insured and describing the nature of their
operations and their role in the project, such that an evaluation of the risk
exposure could be made, an appropriate premium adjustment addressed, and
an endorsement issued.
Far from the upending of construction industry custom, forecasted by
Plaintiffs and the dissent, this approach has been a staple of construction
industry insurance custom and practice for decades. If a contractor wishes to
have the unfettered discretion to extend its coverage to any entity it wishes
4
to name in a trade contract, without an underwriter’s assessment of the risk,
it should submit its request for such an endorsement to the underwriter when
applying for the policy.
Respectfully, Plaintiffs and the dissent make much of the fact that
Samson’s broker issued a certificate of insurance reflecting Plaintiffs were
additional insureds, but contrary to the dissent’s view, the broker is the agent
of the policyholder, and not the insurance company issuing the policy, and
the certificate itself states it does not alter the policy terms.
Lastly, LIUI’s late notice defense was not addressed by the majority
in light of its ruling, but was raised and addressed by the dissent, who
concluded the policy contained no express requirement that a putative
additional insured seeking coverage must provide timely and adequate notice
of occurrence to an insurer, and that Samson’s notice of an occurrence was
an adequate substitute for Plaintiffs. Respectfully, it has long been
established that imbued in every liability insurance policy is the independent
obligation of each individual insured to give timely and adequate notice of
an occurrence to an insurer from which they seek the benefit of policy
coverage, even where a policy is silent on the subject. Plaintiffs’ notice of
the occurrence to LIUI was late and without excuse, so even if they were
5
insured under the LIUI policy (which they are not), they are not entitled to
coverage as a matter of law.
Accordingly, the First Department’s Order was properly made, and
should be affirmed.
6
COUNTER STATEMENT OF FACTS AND
PROCEDURAL HISTORY
The Joint Venture was retained by the Dormitory Authority of the
State of New York (“DASNY”), the owner of the project, to provide
construction management services in connection with the construction of a
new forensic biology center next to Bellevue Hospital. (A.667-714)1
Samson entered into a separate written contract with DASNY to perform
services as a foundation and excavation contractor in connection with this
project. (A. 821-910)
The only signatories to the Samson-DASNY contract were Samson
and DASNY. (A. 826) Thus, there is no contract between Samson and
Plaintiffs requiring Samson to procure insurance coverage for Plaintiffs.
The Samson-DASNY contract stated that Samson was to procure
commercial general liability insurance with an endorsement naming as
additional insureds:
Dormitory Authority of the State of New York, The State of New
York, the Construction Manager (if applicable) and other entities
specified on the sample Certificate of Insurance provided by the
Owner.
(A. 878)
1 A# indicates the document page number in the Appendix Record on Appeal.
7
LIUI issued policy EGL-NY-199518-012 to Samson for the policy
period November 12, 2002 to November 12, 2003 (the “Policy”). (A. 217-
278) The Policy contains Endorsement 21, titled “ADDITIONAL INSURED
– BY WRITTEN CONTRACT,” that provides as follows:
ADDITIONAL INSURED-BY WRITTEN CONTRACT
WHO IS AN INSURED (Section II) is amended to include as an
insured any person or organization with whom you have agreed to add
as an additional insured by written contract but only with respect to
liability arising out of your operations or premises owned by or rented
by you.
(A. 274)
On September 26, 2003 Plaintiffs issued a Change Order
memorandum for emergency work to respond to the improper shoring and
stabilization of the adjacent building. (A. 629-634) The Joint Venture
considered itself a “Construction Manager not at-risk”, reflecting a different
risk profile than construction contractors such as Samson. (A. 922) In 2006,
DASNY commenced suit against Samson and others seeking damages as a
result of the alleged improper shoring and excavation work that damaged its
adjacent building. (A. 117-118) A third-party action was commenced against
Plaintiffs in December 2010. (A. 112-137) Plaintiffs first notified LIUI of
the occurrence, claim, and suit almost five months later, in April 2011. (A.
112-137, 216, 614)
8
LIUI moved for summary judgment in the Supreme Court based on its
policy language. (A. 25) In a Decision and Order dated May 30, 2014 (A.
10) and served with Notice of Entry on July 21, 2014 (A. 21), the Supreme
Court denied LIUI’s motion, and declared and adjudged that the Joint
Venture qualified as an additional insured under the Policy. (A. 10-20)
Supreme Court stated that the LIUI endorsement required “only a written
contract to which Samson is a party,” and that it did “not require that Liberty
be a party to such a contract.” (A. 15) Supreme Court did not resolve any
other coverage issues in its decision.2
LIUI filed and served a Notice of Appeal on July 21, 2014. (A. 8)
The First Department reversed Supreme Court’s order, granted LIUI’s
motion, vacated the declaration in favor of the Joint Venture, and directed
entry of judgment declaring that the Joint Venture was not an additional
insured. The First Department held that the LIUI Policy endorsement
“clearly and unambiguously requires that the named insured execute a
contract with the party seeking coverage as an additional insured.” (A. 972)
The First Department observed that Plaintiffs’ proffered interpretation places
“undue emphasis on the phrase ‘by written contract’ and completely
2 For instance, Supreme Court stated that it was “not possible” to determine as a matter
of law whether or not Plaintiffs had furnished LIUI with timely notice of the occurrence,
claim, and suit at issue. (A. 18) Because the First Department determined that the Joint
Venture was not an insured, the First Department did not address any other coverage
questions in its ruling. (A. 981)
9
ignore[s] the inclusion of the words ‘with whom’ as the object of the verb
phrase ‘you agree.’” (A. 975) The First Department noted that Plaintiffs
essentially were asking that the endorsement be read to afford coverage “not
only to those ‘with whom’ Samson agreed, but also to those ‘for whom’
Samson agreed to provide coverage.” (A. 976)
Plaintiffs moved in the First Department for reargument, or in the
alternative for leave to appeal to this Court. (A. 961) The First Department
denied the motion for reargument, but granted leave to appeal with respect to
the following certified question: “Was the order of this Court, which
reversed the Order of the Supreme Court, properly made?” (A. 961-962)
10
ARGUMENT
POINT I
PLAINTIFFS DO NOT QUALIFY AS ADDITIONAL
INSUREDS UNDER THE LIUI POLICY ISSUED TO
SAMSON
A. The Requirement of Privity of Contract Comports With
Applicable Precedent
The LIUI Policy affords status as an additional insured only to
persons or organizations “with whom” Samson agreed to add as an
additional insured by written contract. (A. 274) It is undisputed that there is
no written contract between Samson and Plaintiffs requiring Samson to
procure insurance identifying Plaintiffs as additional insureds.
This Court has established a number of general rules of insurance
policy interpretation that guide the outcome here. The Court determines
“the rights and obligations of parties under insurance contracts based on the
specific language of the policies.” State of New York v. Home Indem. Co., 66
N.Y.2d 669, 671 (1985). A policy should be interpreted in a manner that
gives meaning and effect to all of its terms. Consolidated Edison Co. of N.Y.
v Allstate Ins. Co., 98 N.Y.2d 208, 221-22 (2002). The fact that a policy
provision could have been worded differently does not render the provision
ambiguous. Federal Ins. Co. v. International Bus. Mach. Corp., 18 N.Y.3d
642, 650 (2012). Similarly, the fact that different courts may have arrived at
11
different conclusions in construing insurance policy language does not
render the language ambiguous. Breed v. Insurance Co. of N. Am., 46
N.Y.2d 351, 355 (1978). This Court has emphasized that a split in
decisional authority does not render a policy ambiguous. To warrant a
finding of ambiguity requires the court to assess, as a matter of law, whether
reasonable people may reasonably differ as to the meaning of the policy. Id.
The First Department has consistently applied these principles to
conclude that when an insurer issues a policy requiring a written contract
between the named insured and a second entity, as a pre-condition to
qualification as an additional insured, that limited coverage grant is to be
enforced as written. For instance, in AB Green Gansevoort, LLC v. Peter
Scalamandre & Sons, Inc., 102 A.D.3d 425 (1st Dep’t 2013), a concrete
supplier procured a policy providing that an organization qualified as an
additional insured “when you and such … organization have agreed in
writing in a contract or agreement that such … organization be added as an
additional insured on your policy.” Id. at 426 (ellipses in original). The
project’s property owner sought coverage under the policy as an additional
insured, but had not directly contracted with the named insured supplier.
Just as Plaintiffs here, the property owner asserted that the supplier’s
contract with a subcontractor incorporated terms requiring the subcontractor
12
to name the owner as an additional insured. The First Department held that
the “plain meaning” of the policy required a written contract between the
supplier and the entity seeking additional insured coverage. Id. Thus, it was
irrelevant to construction of the policy whether or not an additional insured
requirement in one trade contract were incorporated into another trade
contract, because this would require “reading terms into the policy that do
not exist. The policy does not provide that there only be some writing, but
rather that there be a written contract between the named insured and the
organization seeking coverage.” Id. at 427.
Similarly, in Linarello v. City Univ. of N.Y., 6 A.D.3d 192, 195 (1st
Dep’t 2004), the First Department construed similar language and concluded
the construction manager was not an additional insured, despite a
requirement in the named insured’s trade contract with the State Dormitory
Authority, because the construction manager had no written contract with
the named insured. Id. at 195. The First Department went on to explain that
even if the construction manager were deemed to be a third party beneficiary
of the Dormitory Authority contract, it would simply mean it would have
standing to sue the contractor for breach of the contract’s insurance
provision. It would not mean the policy should be “rewritten” to name the
construction manager as an additional insured. 6 A.D.3d at 195; see also
13
Mayo v. Metropolitan Opera Assoc., 108 A.D.3d 422 (1st Dep’t 2013)
(same); City of New York v. Nova Cas. Co., 104 A.D.3d 410 (1st Dep’t 2013)
(terms of additional insurance provision require named insured and
organization seeking coverage to have agreed in writing that insured will add
the organization as additional insured, and the “record contains no such
freestanding agreement between the City and either [insured];” terms of
prime contract requiring contractor to add City as additional insured were
insufficient to create that obligation).
Supreme Courts have applied these principles of policy construction
to “with whom” additional insured endorsements, such as the one in the
LIUI policy, to find that the endorsements require a contract between the
named insured and the entity to be added as an additional insured. In
Murnane Bldg. Contrs., Inc. v. Zurich Amer. Ins. Co., 33 Misc.3d 1215(A),
941 N.Y.S.2d 539, 2011 N.Y. Misc. LEXIS 5128 (Sup. Ct. Suffolk County
Oct. 5, 2011), rev’d on other grounds, 107 A.D.3d 674 (2nd Dep’t 2013), the
court construed an additional insured endorsement that included as an
insured: “Any person or organization with whom you have agreed, through
written contract, agreement or permit, executed prior to the loss, to provide
primary additional insured coverage.” Plaintiff Murnane, the general
contractor, contracted with a subcontractor (Luck Brothers) and the contract
14
required Murnane and the project owner, Wal-Mart Stores East, to be added
as additional insureds under Luck’s policy issued by Zurich. The court
found that Murnane was entitled to additional insured status, but Wal-Mart
was not because it had no written contract with the named insured, Luck.
The court explained “[t]he language in the subject policy does not provide
insurance coverage for anyone for whom the insured is required to obtain
additional insured coverage. Rather, the policy clearly restricts coverage to
those with whom the insured has a written contract.” 2011 N.Y. Misc.
LEXIS 5128 at *11-12. The court found the language “clear and
unambiguous” in excluding additional insured coverage to those not in
privity with Luck. Id.
In Best Buy Co., Inc. v. Sage Electrical Contracting, Index No.
600781/2006, 2009 NY Slip Op 30208(U), 2009 N.Y. Misc. LEXIS 4125
(Sup. Ct. New York Cty. Jan. 28, 2009), a contract between a general
contractor and subcontractor required the subcontractor to name the general
contractor as an additional insured on its policies. The policy issued to the
subcontractor afforded additional insured coverage to persons or
organizations “with whom you have entered into a written contract,
agreement or permit requiring you to provide insurance.” 2009 N.Y. Misc.
LEXIS 4125 at *8. The property lessee and the managing agent asserted
15
that they also were entitled to coverage under the subcontractor’s policy,
arguing that the subcontract incorporated provisions of other agreements
requiring the procurement of coverage in favor of those entities. The court
rejected this argument, ruling that any insurance procurement requirements
in trade contracts did not obviate the requirement in the policy that the
subcontractor was required to have entered a written agreement with the
entity to be insured. Id. at *38.
As Plaintiffs argue in their brief, in two instances, Supreme Courts
have construed “with whom” endorsements only to require any written
contract with the named insured that specifies entities to be added. In Plaza
Constr. Corp. v. Zurich Amer. Ins. Co., 2011 NY Slip Op 30709(U), 2011
N.Y. Misc. LEXIS 1234 (Sup. Ct. New York Cty. Mar. 23, 2011), a contract
between a general contractor and a scaffolding subcontractor required the
subcontractor to obtain insurance naming both the general contractor and the
property owner as additional insureds. The subcontractor’s policy afforded
additional insured coverage to persons or organizations “with whom you
have agreed, through written contract, agreement or permit to provide” such
coverage. Id. at *4. The court concluded that the policy required only that
the named insured agree in a written contract to provide coverage for any
entity to be added. Id. at *8-9. The court did not explain why the words
16
“with whom” did not affect its conclusion. In addition, Plaza at least
arguably is distinguishable to the extent that the policy provision could be
read to allow for coverage as a result of any “agreement”, and not only a
“written contract” as is the case with LIUI’s Policy.
In American Home Assur. Co. v. Zurich Ins. Co., 26 Misc. 3d
1223(A), 907 N.Y.S.2d 435, 2010 N.Y. Misc. LEXIS 284 (Sup. Ct. Kings
County Feb. 17, 2010), a contract between an electrical contractor and a
managing agent provided that the contractor was to obtain coverage naming
the managing agent and a general partner of the owner as additional
insureds. The contractor’s policy provided additional insured coverage to “any
person or organization with whom you have agreed in a written contract to
provide insurance as is afforded under this policy.” Id. at *7. The court
concluded that the policy required only that the named insured agreed in a
written contract to provide coverage for the entity to be added. Id. at *10-
11. As in Plaza Constr., the court did not explain why the words “with
whom” should not guide its conclusion.3
In contrast to Plaza Constr. and American Home v. Zurich, The
United States District Court for the Western District of New York recently
3 Plaintiffs’ contention that the First Department adopted this analysis in AB Green,
supra, is meritless. As the First Department noted in its decision here, nothing in AB
Green suggested that the First Department would not evaluate the specific terms of a
policy endorsement when squarely presented, and that is exactly what the First
Department did here. (A. 977-978)
17
undertook a detailed and thorough analysis of additional insured language
quite similar to that in the LIUI Policy and concluded that the language was
unambiguous and did not afford additional insured coverage in the absence
of a written contract between the named insured and the putative additional
insured. Zoological Society of Buffalo, Inc. v. Carvedrock, LLC, Case No.
10-CV-35-A, 2014 U.S. Dist. LEXIS 105359 (W.D.N.Y. May 21, 2014);
Zoological Society 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 at
issue in Zoological Society provided additional insured status for an
organization “with whom you have agreed, in a written contract” to add as
an additional insured. 2014 U.S. Dist. LEXIS 105359 at *3. The Magistrate
Judge considered the decisions of the First Department in AB Green and
Linarello, and the various Supreme Court decisions in Plaza Constr.,
American Home v. Zurich, Murnane, and Best Buy, all of which addressed
“with whom” additional insured endorsements. Id. at *7-13. The Magistrate
Judge agreed with the courts in Murnane and Best Buy, following AB Green
and Linarello, that the endorsement “clearly and unambiguously requires
that the named insured execute a contract with the party seeking coverage as
an additional insured.” Id. at *13.
18
The District Court Judge adopted the Report and Recommendations of
the Magistrate Judge, and found that “those cases which require that there be
a contract between the named insured and the putative insured more
accurately interpret the endorsement.” 2014 U.S. Dist. LEXIS 103800 at *4.
The District Court explained why this conclusion was most consistent with
the policy language and applicable New York law:
The endorsement in this case provides that additional insureds include
only those “with whom” [the named insured] has entered into “a
written contract.” The [putative insured] urges the Court to focus on
the phrase “in a written contract.” However, the Court cannot read this
clause in isolation from the remainder of [the] endorsement. The
endorsement as a whole plainly requires not only that there be a
“written contract,” but that that “written contract” be between [the
named insured] and the putative insured. If the phrase “with whom
[the named insured] ha[s] agreed” contained a different preposition —
if, for example, the word “for” were substituted for the word “with”
— then the [putative insured] might have a stronger argument.
However, the Court must interpret the endorsement as it is written.
See White v. Continental Cas. Co., 9 N.Y. 3d 264, 267, 878 N.E.2d
1019, 848 N.Y.S.2d 603 (2007) (“As with any contract, unambiguous
provisions of an insurance contract must be given their plain and
ordinary meaning.”).
2014 U.S. Dist. LEXIS 103800 at *4-5. This reading of the “with whom”
language correctly construes the grammatical sentence structure and is
logically persuasive. As explained by the Zoological Society court,
Plaintiffs are essentially asking this Court to rewrite the LIUI endorsement
to extend coverage to any entity “you have agreed to add,” or “for whom
you have agreed to add,” but this is not what the endorsement says.
19
Plaintiffs’ reliance on Liberty Mut. Fire Ins. Co. v. Zurich Am. Ins.
Co., Case No. 14-7568, 2016 U.S. Dist. LEXIS 13604 (S.D.N.Y. Feb. 4,
2016), is unavailing. In that case, a subcontract required the subcontractor to
procure insurance naming the general contractor and owner as additional
insureds. The subcontractor’s policy provided certain additional insured
coverage to persons or organizations “with whom you have agreed, through
written contract, agreement or permit, executed prior to the loss, to provide
additional insured coverage.” Id. at *3. The court concluded that the policy
afforded coverage for the owner, relying on the Plaza Constr. and American
Home v. Zurich cases. The court rejected as unpersuasive the decisions in
Murnane and Zoological Society, but did not specifically address the
detailed assessment in those cases of similar policy provisions.
Respectfully, the careful analysis of the policy language in Murnane and
Zoological Society is much more persuasive.
B. The Plain Language of the Endorsement Reflects That
Privity of Contract Is Required
The LIUI endorsement entitled “ADDITIONAL INSURED-BY
WRITTEN CONTRACT” provides:
ADDITIONAL INSURED-BY WRITTEN CONTRACT
WHO IS AN INSURED (Section II) is amended to include as
an insured any person or organization with whom you have
agreed to add as an additional insured by written contract but
20
only with respect to liability arising out of your operations or
premises owned by or rented to you.
(A.274) (emphasis supplied).
Grammatically, this language clearly expresses who will be included as an
insured, namely, the organization “with whom you have agreed … by
written contract …” The phrase “to add as an additional insured” describes
what is being agreed to, but does not modify or describe who is to be
included as an insured. Nothing changes the clear expression that “WHO IS
AN INSURED (Section II) is amended to include as an insured” the
“organization with whom you have agreed … by written contract” to add as
an additional insured. There is no ambiguity associated with this language
describing who is to be afforded additional insured status and the case law
construing similar language, discussed above, so holds.
A parsing of the salient provisions of the LIUI Policy endorsement
illustrates why the endorsement requires that the named insured must have
agreed in a written contract with the putative additional insured to add that
contracting entity to Samson’s policy. The parsed sentence reads:
“Who is an insured is amended to include as an insured ...”:
To include Who? - “any person or organization with whom you [Samson]
have agreed ... by written contract....”
21
What was “agreed” “by written contract”? - “to add as an additional insured”
[that organization with whom you have contracted].
The phrase “to add as an additional insured” describes what must be
agreed to in the contract for insured status to apply. The sentence structure
surrounding this phrase makes clear the proposed insured must be the entity
“with whom” Samson “agreed ... by written contract” to add as an additional
insured.
Plaintiffs engage in a strained and convoluted critique of the wording
of the endorsement, the sum of which is that Plaintiffs contend the phrase
“by written contract” should be construed to modify only “to add”. But
Plaintiffs’ suggested alternative construction makes no sense. Clearly, “by
written contract” denotes the type of agreement Samson was required to
enter with the proposed additional insured. Ironically enough, the
hypothetical sentence Plaintiffs present, “Jerry purchased the horse by mail,”
proves the point. (Pbr14) 4 In that sentence, “by mail” relates to the type of
purchase – not the horse. Here, “by written contract” refers to the form of
agreement required with the proposed additional insured – not the subject
matter of the agreement, which is to add the entity contracting with Samson
as an additional insured.
4 Pbr# refers to the page number in Plaintiffs’ Brief.
22
The alternative wording suggested by Gilbane, which it concedes
would fully support the Appellate Division’s decision and LIUI’s position, is
a distinction without a difference. (Pbr15) Whether stated as in LIUI’s
endorsement (“Who is an insured is amended to include as an insured any
person or organization with whom you have agreed to add as an additional
insured by written contract ….”), or as wishfully rewritten by Plaintiffs (“…
any person or organization with whom you have agreed by written contract
to add as an additional insured …” (Pbr15), the “with whom you have
agreed … by written contract …” still identifies the entity to be insured, and
“to add as an additional insured” still describes the type of agreement that
must be entered, i.e. an agreement to add the other contracting party as an
additional insured on your policy.
The fallacy in Plaintiffs’ argument is elucidated when they urge the
argument of the dissent that the word “with” was allegedly “unnecessary”
and should be removed. As the First Department majority opinion correctly
observed, Plaintiffs essentially are seeking to substitute “whom,” or “for
whom,” for “with whom” in the LIUI Policy endorsement. This, of course,
would contravene the interpretative principle that each word in the policy
should be given meaning. Northville Indus. Corp. v. National Union Fire
Ins. Co., 89 N.Y.2d 621, 632-33 (1997) (citation omitted).
23
It is axiomatic that unambiguous terms of an insurance contract
should be given their plain and ordinary meaning – and “courts may not
make or vary the contract of insurance to accomplish their notions of
abstract justice or moral obligation.” Teichman v. Community Hospital of W.
Suffolk, 87 N.Y.2d 514, 520 (1996). The word “with” should be interpreted
in accordance with its plain meaning. The word “with”, when used as a
function word, denotes a participant in an action or transaction. See
https://www.merriam-webster.com/dictionary/with (last searched Mar. 29,
2017). By contrast, the word “for”, when used as a function word, denotes a
purpose or a goal. See https://www.merriam-webster.com/dictionary/for
(last searched Mar. 29, 2017). By using the word “with” instead of “for” (or
no word at all), the LIUI endorsement plainly makes relevant only the
participants to the written contract with the named insured, not whether or
not the contract had the purpose of insuring any non-participant to the
contract.
Plaintiffs acknowledge that an endorsement applying additional
insured coverage to entities “with whom you have agreed by written
contract” to add as additional insureds unambiguously would require privity
of contract between the named insured and the entity to be added. (Pbr. 15)
A policy endorsement certainly could be written in this manner. But the
24
placement of the “by written contract” requirement one phrase later in the
endorsement does not render the endorsement ambiguous, or any less
entitled to enforcement per its terms. Federal Ins. Co. v. International Bus.
Mach., supra, 18 N.Y.3d at 650.
C. The Reasonable Expectations Of The Parties Must Be
Based Upon The Policy Language
Plaintiffs point to underlying trade contract documents as indicative
that their proposed reading of the LIUI Policy accords with their own
reasonable expectations. However, this Court has stressed that a
determination of the reasonable expectations of an insured is made by
focusing on the policy language, read in accordance with common speech.
Universal Am. Corp. v. National Union Fire Ins. Co., 25 N.Y. 3d 675, 680
(2015). Where, as here, the policy language is unambiguous, it is the
specific language of the policies, not extrinsic materials such as trade
contract documents, that determines the rights and obligations of parties
under the policy. State v. Home, supra, 66 N.Y.2d at 671; Bovis Lend Lease
LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 145 (1st Dep't 2008).
Plainitffs’ reliance on trade contract documents as indicative of purported
intent is unavailing. As Plaintiffs acknowledge elsewhere in their brief, this
Court concerns itself with the parties’ intent “only to the extent that they
evidenced what they intended by what they wrote” in the policy. Sperling v.
25
Great Am. Indem. Co., 7 N.Y.2d 442, 450 (1960). None of the documents to
which Plaintiffs refer reflect any communications to or from LIUI,5 and
therefore none of the documents could even conceivably bear on any mutual
intent between insurer and insured with respect to the policy terms.
The opinion expressed in the First Department dissent about the
potential impact on the “construction industry” of enforcing the LIUI policy
as written is also unfounded. Policy provisions restricting additional insured
status to entities actually contracting with the named insured have been
enforced in New York for over ten years, if not longer. See Linarello, supra.
A construction contractor who wishes to ensure that the insurer of its
subcontractor procures insurance for specified entities in addition to the
contractor itself, is perfectly capable of doing so. Certainly, a contractor
must do more than simply name a host of entities it wishes to insure in a
trade contract – or to rely on a certificate of insurance sent by a
subcontractor’s broker that states on its face that it “does not confer rights to
the certificate holder” and that it does not “affirmatively or negatively
amend, extend or alter the coverage afforded” by an insurer. (A. 916)
5 To the extent that the First Department dissent implies that the certificate of insurance
sent by Samson’s broker should be deemed a communication by an “agent” of LIUI, the
dissent is mistaken. As this court has repeatedly recognized, insurance brokers are agents
of their policyholders – not insurers. See, e.g., Strauss Painting, Inc. v. Mt. Hawley Ins.
Co., 24 N.Y.3d 578, 592 (2014).
26
If a subcontractor enters a contract requiring it to procure coverage for
entities other than those with whom it contracts, the subcontractor can
submit an express request, through its broker, that specific entities be added
as additional insureds. In this way, an underwriter can assess the risk
exposure presented before undertaking to insure entities that have no binding
contractual business relationship with the named insured. It is incumbent
upon the subcontractor or its broker to review its policy and address any
insufficiencies. The subcontractor may face exposure for failure to procure
insurance if it does not comply with trade contract obligations. Kinney v.
G.W. Lisk Co., 76 N.Y.2d 215 (1990).
The ability of construction entities to obtain policies affording insured
status to entities with whom they did not contract is reflected by the variety
of insurance policy endorsements that extend such coverage. See, e.g.,
Kassis v. Ohio Cas. Ins. Co., 12 N.Y.3d 595, 599 (2009) (policy affording
additional insured status to “any person or organization whom [the named
insured is] required to name as an additional insured on this policy under a
written contract or agreement”; Bovis, supra, 53 A.D.3d at 146-47 (policy
affording additional insured status to persons or organizations “for whom
you have agreed in writing prior to any 'occurrence' or 'offense' to provide
insurance such as is afforded by this policy”; Valley Forge Ins. Co. v. Arch
27
Specialty Ins. Co., 2016 N.Y. Misc. LEXIS 4357 (Sup. Ct. New York Cty.
Nov. 22, 2016) (policy affording additional insured status to “those persons
or organizations who are required under a written contract with you … to be
named as an additional insured”).
Thus, contractors and subcontractors are fully empowered to take the
steps necessary to obtain coverage consistent with their desires. If they do
not do so, there is no cause for this Court to rewrite an unambiguous policy
to provide gratis coverage beyond its terms.
28
POINT II
IF CONSIDERED BY THIS COURT BECAUSE RAISED
IN THE DISSENT, LIUI MAINTAINS PLAINTIFFS
FAILED TO COMPLY WITH THEIR INHERENT
OBLIGATION TO PROVIDE LIUI TIMELY NOTICE OF
THE OCCCURRENCE
This Court has the power to affirm an Order of the Appellate Division
for reasons additional to those expressed in the Appellate Division’s opinion,
where those grounds were advocated in the courts below. Eaves Brooks
Costume Co. v. Y.B.H. Realty Corp., 76 N.Y.2d 220, 225 (1995); In re
Satori R., 202 A.D.2d 432, 433 (2nd Dep’t 1994). In this matter, LIUI is
entitled to a ruling that the First Department decision was properly made on
the additional ground, raised by LIUI below, that Plaintiffs failed to give
LIUI timely notice of the occurrence that ultimately gave rise to Plaintiffs’
coverage suit.6
Supreme Court and the First Department dissent observed that the
LIUI policy contains a provision requiring a named insured provide notice as
soon as practicable of an occurrence potentially giving rise to a claim, but
there was no policy provision regarding notice of an occurrence by an
additional insured. However, the necessity for timely notice is an inherent
6 LIUI also maintains that Plaintiffs’ notice of claim and suit were untimely. Supreme
Court concluded that issues of fact precluded summary judgment on these questions. The
First Department majority did not consider these questions, while the dissent concurred
with Supreme Court that fact issues precluded summary judgment.
29
condition of any insurance contract, regardless of whether or not the policy
includes an express notice provision. Ell Dee Clothing Co. v. Marsh, 247
N.Y. 392, 396 (1928). This principle has been applied to establish an
inherent requirement that an additional insured convey timely notice to the
insurer of an occurrence that may potentially give rise to a claim. City of
New York v. Investors Ins. Co. of Am., 89 A.D.3d 489, 489 (1st Dep’t 2011).
There is no genuine dispute that Plaintiffs knew no later than 2003
that project work had damaged the adjacent building. Plaintiffs themselves
issued a Change Order memorandum at that time for emergency work to
respond to the improper shoring and to stabilize the adjacent building. There
also is no dispute that Plaintiffs failed to furnish any notice to LIUI until
April 2011, some 7 ½ years later. Unless Plaintiffs satisfy their burden of
proof that they were excused from providing earlier notice, coverage is
vitiated, regardless of whether or not LIUI was prejudiced by the lack of
notice. Security Mut. Ins. Co. v. Acker-Fitzsimmons Corp., 31 N.Y.2d 436,
440 (1972); Argo Corp. v. Greater N.Y. Mut. Ins. Co., 4 N.Y.3d 332, 340
(2005).
No valid excuse exists for Plaintiffs’ untimely notice of the
occurrence. Plaintiffs cannot substitute any notice of the occurrence that
was furnished to LIUI by Samson, because each insured under a policy has
30
an independent obligation to furnish timely notice of an occurrence. See,
e.g. City of New York v. Investors, supra, 89 A.D.3d at 489; Travelers Ins.
Co. v. Volmar Const. Co., Inc., 300 A.D.2d 40, 43 (1st Dep’t 2002);
Structure Tone v. Burgess Steel Prods. Corp., 249 A.D.2d 144, 145 (1st
Dep’t 1998). There also is no basis to conclude that Plaintiffs had an
identity of interest with Samson until Plaintiffs were sued in 2010. Plaintiffs
always viewed themselves as a “Construction Manager not at-risk” with
responsibilities limited to project coordination and administration, and
emphasized their lack of contractual privity with Samson. Thus, Plaintiffs
always had the incentive and intent to transfer any potential exposure for a
claim from themselves to Samson. The fact that, when Plaintiffs were sued,
they instituted a claim against Samson illustrates that Plaintiffs and Samson
never had an identity of interest with respect to the occurrence giving rise to
the DASNY claim and suit. 1700 Broadway Co. v. Greater New York Mut.
Ins. Co., 54 A.D.3d 593, 594 (1st Dep’t 2008). Plaintiffs’ knowledge of the
adjacent building damage and their involvement in repair work in 2003, also
belies any assertion that they were excused from furnishing notice of the
occurrence because they did not believe a claim would be asserted against
them. Courts routinely have held that an insured can reasonably anticipate a
claim, as a matter of law, where the insured is aware of damage to adjoining
31
property from excavation activities and has performed repairs. See, e.g.,
QBE Ins. Corp. v M&R European Constr. Corp., 2012 N.Y. Misc. LEXIS
3376 at *15-16 (Sup. Ct. New York Cty. July 16, 2012); 16449 CBB, LLC v
Zurich Am. Ins. Co., 31 Misc. 3d 1212(A), 927 N.Y.S.2d 819, 2011 N.Y.
Misc. LEXIS 1713 at *26-27 (Sup. Ct. Queens Cty. Apr. 4, 2011).
Accordingly, Plaintiffs’ independent obligation to timely notify LIUI
of the occurrence, and their failure to do so until years later, was untimely as
a matter of law and constitutes an additional ground for the ruling that
coverage did not exist.
CONCLUSION
For all of the foregoing reasons, LIUI respectfully requests that the
question presented by the First Department be answered in the affirmative,
and that the Order of the First Department be affirmed, whereby Lilli's
motion for summary judgment is granted, and the matter remanded to
Supreme Court for a declaration that the Plaintiffs are not additional insureds
under the LIUI Policy, along with such other and further relief as this Court
may deem just and proper.
Dated: New York, New York
April14, 2017
2561947v6
Respectfully submitted,
Hardin, Kund la, McKeon & Poletto, P.A.
B~~~
Attorneys for Defendant-Respondent,
Liberty Insurance Underwriters
110 William Street, 241h Floor
New York, NY 10038
(212) 571-0111
32
NEW YORK STATE COURT OF APPEALS
CERTIFICATE OF COMPLIANCE
I hereby certify pursuant to 22 NYCRR PART 500.1(j) that the foregoing brief was
prepared on a computer using Microsoft Word 2010.
Type. A proportionally spaced typeface was used, as follows:
Name of typeface: Times New Roman
Point size: 14
Line spacing: Double
Word Count. The total number of words in this brief, inclusive of point headings
and footnotes and exclusive of pages containing the table of contents, table of
citations, proof of service, certificate of compliance, corporate disclosure
statement, questions presented, statement of related cases, or any authorized
addendum containing statutes, rules, regulations, etc., is 6,318 words.
Dated: April 14, 2017
George R. Hardin, Esq.
Hardin, Kundla, McKeon & Poletto, P.A.
Attorneys for Defendant-Respondent,
Liberty Insurance Underwriters
110 William Street
New York, New York 10038
(212) 571-0111
2572362v1