Erie Insurance Exchange, Appellant,v.J.M. Pereira & Sons, Inc., et al., Respondents.BriefN.Y.March 20, 2018To be Argued by: DAN D. KOHANE, ESQ. (Time Requested: 15 Minutes) Appellate Division Docket No. CA 16-00324 Monroe County Clerk’s Index No. 6973-2014 New York Supreme Court Appellate Division—Fourth Department ERIE INSURANCE EXCHANGE, Plaintiff-Appellant, – against – J.M. PEREIRA & SONS, INC., RPC, INC. a/k/a RUBBER POLYMER CORPORATION, RICHARDO VEGA, and ROBERT MARCHESE, as the Administrator of the ESTATES of ANTONIA TAPIA and GILBERTO VEGA-SANCHEZ, Defendants-Respondents. REPLY BRIEF FOR PLAINTIFF-APPELLANT HURWITZ & FINE, P.C. Attorneys for Plaintiff-Appellant Erie Insurance Exchange 424 Main Street 1300 Liberty Building Buffalo, New York 14202 (716) 849-8900 Of Counsel: Dan D. Kohane, Esq. TABLE OF CONTENTS TABLE OF CONTENTS i TABLE OF AUTHORITIES iii REPLY PRELIMINARY STATEMENT 1 REPLY ARGUMENT 2 POINT I 5 THE RECORD BEFORE THIS COURT IS DEVOID OF AN “INSURED CONTRACT,” AS THAT TERM IS USED IN THE BCL POLICY. A. The Third-Party Complaints are Devoid of a Claim for Contractual Indemnity 5 B. Defendants Previously Denied the Existence of an Agreement or Contract Between PEREIRA and RPC 5 C. The Alleged Agreement Does Not Constitute an “Insured Contract” 7 POINT II 11 NO VALID UNDERLYING INSURANCE EXISTS FOR THE EMPLOYER’S LIABILITY RISKS A. There is No Coverage Under the SWIF Policy 12 B. The BCL Policy’s “Follow Form” Language is not Ambiguous 16 C. RPC’s and PEREIRA'S Reasonable Expectations are Irrelevant and do not Create Coverage Where the Policy Unambiguously Excludes Coverage . 19 D. Even if the Court Where to Consider PEREIRA’S Reasonable Expectations, These Alleged Expectations are not alleged to be the Result of ERIE’S Conduct 20 i POINT III 23 SWIF IS NOT A NECESSARY PART TO THIS ACTION POINT IV 26 PEREIRA SHOULD NOT BE GRANTED ANY AFFIRMATIVE RELIEF WHERE IT NEITHER MOVED FOR SUMMARY JUDMENT NOR APPEALED THE TRIAL COURT’S ORDER CONCLUSION 27 ii TABLE OF AUTHORITIES Am. Western Home Ins. Co. v. Donnelly Distrib., Inc., 2013 U.S. App. LEXIS 8503, at **8-9 [3d Cir. Apr. 26, 2013] 13 Azizi v. Erie Ins. Co., 2011 Phila Ct. Com PI LEXIS 319 21 Brooks v. Colton, 760 A2d 393 [Pa. Super. 2000] 9 David Christa Constr., Inc. v. American Home Assur. Co., 41 AD3d 1211 [4th Dept. 2007] 24, 25 Frain v. Keystone Ins. Co., 640 A2d 1352 [Pa. Super. 1994] Furino v. O'Sullivan, 137 AD3d 1208 [2nd Dept. 2016] 20 27 Hanover Insurance Company v. State Workers’ Ins. Fund of Com., (35 A3d 849 [Pa Commw Ct 2012]) 24 Hecht v. City of New York, 60 NY2d 57 [1984] Hertz Corp. v. Smith, 657 A2d 1316 [Pa. Super. 1995] Jacobs Constructors, Inc. v. NPS Energy Servs., 264 F3d 365 [3rd Cir. 2001] Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A2d 100 [Pa. 1999] . Mixon v. TBV, Inc., 76 AD3d 144 [2nd Dept. 2010] Neil v. Allstate Ins. Co., 549 A.2d 1304 [Pa. Super. 1988] Reliance Insurance Co. v. Moessner, 121 F3d 895 [3d Cir. 1997] . Simpson v. Intermet Corp., 213 Fed.Appx. 390 [6th Cir. 2007] . Spring-Ford Area Sch. Dist. v. Genesis Ins. Co., 158 F Supp 2d 476 [ED Pa 2001] Staten Island Hospital v. Alliance Brokerage Comp., 137 AD2d 674 [2nd Dept. 1998] ...24 Tonkovic v. State Farm Mut. Auto. Ins. Co., 521 A2d 920 [Pa. 1987] Tuscarora Wayne Mut. Ins. Co. v. Kadlubosky, 889 A.2d 557 [Pa. Super. 2005] Tremco, Inc. v. Mfrs. Assoc. Ins. Co., 832 A2d 1120 [Pa. Super. 2003] Weisman v. Green Tree Ins. Co., 670 A2d 160 [Pa. Super. 1996] Wrobelv. LaWare, 229 AD2d 861 [3rd Dept. 1996] 26 8 10 19 27 14 19 2 24 19 15 9 18 25 iii Statutes Pennsylvania Workers’ Compensation Law Section 305.2. Pennsylvania Workers’ Compensation Law 21 25 CPLR5501 26 CPLR5513 26 CPLR5515 26 iv REPLY PRELIMINARY STATEMENT The unambiguous language of the Business Catastrophe Liability Policy (“the BCL Policy”) issued by Plaintiff-Appellant, ERIE INSURANCE EXCHANGE (“ERIE”), to Defendant-Respondent, J.M. Pereira & Sons, Inc. (“PEREIRA”) precludes coverage on account of bodily injury to employees of the insured working in the course of their employment (the “Employer’s Liability exclusion”). There is no dispute that the underlying claimants were working in the course of their employment with PEREIRA at the time of the incident. The dispute in this case centers instead on two exceptions to the Employer’s Liability exclusion. As relevant here, the exclusion does not apply where there is an “insured contract”, defined as a contractual obligation to assume the tort liability of another party, or where there is “valid underlying insurance”, in which case the BCL Policy will provide coverage in accordance with the terms and limitation of that underlying coverage, upon its exhaustion. In an effort to convince this Court that the underlying claims were excepted from the Employer’s Liability exclusion, PEREIRA and Defendant- Respondent, RPC, Inc. a/k/a Rubber Polymer Corporation (“RPC”) assert, in direct conflict with prior discovery responses, that they entered into an oral agreement whereby the former agreed to name the latter as an additional insured on a policy 1 of insurance. They submit that his agreement qualifies as an “insured contract” as that term is defined in the BCL Policy. It does not. An obligation to provide insurance is not an obligation to assume tort liability and does not qualify as an “insured contract.” Moreover, there is no valid underlying insurance for this claim. The Employers Liability Insurance provided by the Pennsylvania State Workers Compensation Fund (“SWIF”), to which the BCL Policy is excess over, is geographically limited to work in the State of Pennsylvania. The work at issue in the underlying claims occurred in the State of New York; in turn, it falls outside of the employers’ liability coverage, and renders the exception to the Employers Liability exclusion inapplicable. Accordingly, where there is no “insured contract” and the terms and conditions of the SWIF policy preclude coverage for this claim, the exception to the Employer’s Liability exclusion does not apply. REPLY ARGUMENT An umbrella policy, such as the one at issue, must be enforced so as to give effect to its plain language. Where the policy is a standalone policy, effect must be given to its definitions and exclusions (Simpson v. Intermet Corp., 213 Fed.Appx. 390 [6th Cir. 2007]). 2 The clear, unambiguous language of the BCL Policy excludes coverage for employer’s liability unless such claim falls within one of the articulated exceptions. For convenience, as cited previously, the Employer’s Liability exclusion (Exclusion g) states, in relevant part: Exclusions This insurance does not apply to: *** Employer’s Liability “Bodily injury” to: 1) An “employee” of the insured arising out of and in the course of: a) Employment by the insured; or b) Performing duties related to the conduct of the insured’s business; or 2) The spouse, child, parent, brother or sister of that “employee” as a consequence of Paragraph 1 ) above. g- This exclusion applies whether the insured may be liable as an employer or in any other capacity, and to any obligation to share damages with or repay someone else who must pay damages because of the injury. This exclusion does not apply to liability assumed bv the insured under an “insured contract”. 3 With respect to injury arising out of a “covered auto”, this exclusion does not apply to “bodily injury” to domestic “employees” not entitled to workers’ compensation benefits. For the purposes of this insurance, a domestic “employee” is a person engaged in household or domestic work performed principally in connection with a residence premises. This exclusion does not apply to the extent that valid “underlying insurance” for the employer’s liability risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury”. Coverage provided will follow the provisions, exclusions and limitations of the “underlying insurance” unless otherwise directed by this insurance. (emphasis supplied). *** R. 245. PEREIRA and RPC do not dispute that Ricardo Vega, Antonio Tapia and Gilberto Vega-Sanchez were working in the course of their employment for PEREIRA at the time of the loss; rather, they take the position that two of the exceptions to the Employer’s Liability exclusion contained in the BCL Policy issued by ERIE apply, or at a minimum ambiguity exists. 4 POINT I THE RECORD BEFORE THIS COURT IS DEVOID OF AN “INSURED CONTRACT,” AS THAT TERM IS USED IN THE BCL POLICY PEREIRA and RPC contend that PEREIRA assumed the tort liability of RPC under an “insured contract.” This is incorrect. The Third-Party Complaints are Devoid of a Claim for Contractual Indemnity A. Initially, there is no claim by RPC against PEREIRA in the Third- Party Actions for contractual indemnity. RPC’s attempt to deny this fact is undermined by a simple review of the fifth cause of action excerpted on page 12 of RPC’s brief. None of the six paragraphs allege the existence of a contract let alone an “insured contract.” In fact, none of the paragraphs even use the words “contract” or “agreement.” B. Defendants Previously Denied the Existence of an Agreement or Contract Between PEREIRA and RPC Second, prior to opposing ERIE’S motion for summary judgment, RPC and PEREIRA responded to discovery demands and formally admitted that there was no a contract or agreement in place between PEREIRA and RPC relating to the subject work at 1168 East 31 Street, Brooklyn, New York. R. 112. 5 Likewise, when asked to produce a contract between the parties, RPC formally responded that no such contract existed. R. 116. Now, RPC and PEREIRA abandon their discovery responses and submit that there was, in fact an agreement or contract in place between PEREIRA and RPC and that the agreement constitutes an “insured contract” under the terms of the BCL Policy. Specifically, RPC alleges that in 1993, PEREIRA became a certified applicator of RPC products, including RUB-R-WALL. As part of an agreement to permit PEREIRA to become a certified applicator of RPC products, PEREIRA was required to list RPC as an additional insured on any insurance policy. RPC further alleges that “[t]his requirement set forth in the agreement allowing Pereira to be an RPC certified applicator constitutes an insured contract under the BCL Policy, because it pertains to Pereira’s business and, under the agreement, relates to Pereira’s assumption of tort liability for bodily injury.” To explain the seemingly inconsistent responses to ERIE’S discovery demands, RPC and PEREIRA submit that their responses are not relevant because the requests only dealt with “contracts relating to work being done at that specific location [where the loss occurred].” Besides being inconsistent with their formal discovery responses, this argument is illogical. Either the purported “agreement” relates to the relevant 6 work and, in turn, as RPC and PEREIRA submit, constitutes an “insured contract” making the Employer’s Liability exclusion inapplicable relative to the underlying claims, or it does not, in which case its presence is completely irrelevant. One cannot in good faith say that this agreement was not disclosed because it did not relate to work at the relevant location; yet in the next breathe, submit that it applies to the subject location and coverage should be afforded for the underlying claims because of it. Either it relates to the relevant location or it does not. Moreover, RPC and PEREIRA’s claim that ERIE just asked the wrong questions and actually knew its true position citing discovery responses which it submitted three years prior, in a different action, pending in a different state, in which our office had no involvement, does little to cure the inconsistently. Thus, as RPC and PEREIRA have taken the position that no contract existed relative to this work in responses to ERIE’S discovery demands in this action, the court should hold them to it. C. The Alleged Agreement Does Not Constitute an “Insured Contract” With that said, even if the court does consider RPC and PEREIRA’s assertion that the alleged agreement was in place between them, the purported agreement does not qualify as an “insured contract” under the terms of the BCL 7 Policy. An “insured contract” is not any agreement between the parties. The BCL Policy defines “insured contract” to include various types of agreements, including, as relevant here, subpart “g”: That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another part to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in absence of any contract or agreement. R. 254. As a general precept, an “insured contract” refers to a contractual duty of indemnification that is owed when the named insured assumes, by contract, the duty to indemnify a third-party for the latter’s tortious conduct (see, e.g., Hertz Corp. v. Smith, 657 A2d 1316, 1319 [Pa. Super. 1995] [“The purpose of insured contract coverage, therefore, is to provide benefits for tort liability that an insured contractually assumes, not liability that is based on a breach of contract”]). RPC and PEREIRA’s so-called contract does not contain an indemnity agreement. It is not an “insured contract”. The Pennsylvania courts have so held: a contract is an “insured contract,” and thus excepted from the operation of a contractual liability exclusion, 8 where the contract between the parties requires one to assume liability for the tort claims of the other arising out of the latter’s negligent conduct (see, e.g., Tremco, Inc. v. Mfrs. Assoc. Ins. Co., 832 A2d 1120, 1122 [Pa. Super. 2003]; but see Brooks v. Colton, 760 A2d 393 [Pa. Super. 2000] [where agreement did not expressly bind a township to assume liability for the defendant employee’s torts, there was no “insured contract”]). We note that the Affidavit of Matthew D. Veazey annexes no written contract and surely none with an indemnity agreement. R. 386-388. Rather, there is only a reference, in Paragraph 6, to an agreement “whereby RPC would certify Pereira as a certified applicator of RPC products, including RUB-R-WALL, and Pereira contractually agreed to include RPC as an additional insured on any and all insurance policies entered into by Pereira” (emphasis supplied). R. 387. Absent from this assertion is any indication that the purported agreement included a hold harmless or indemnification agreement. This is consistent with a review of the unsigned letter to “All Applicators,” attached to Mr. Veazey’s Affidavit as Exhibit A, which exclusively states that RPC must be named as an additional insured on a policy of insurance; no reference to PEREIRA agreeing to hold RPC harmless. R. 389. 9 Similarly, in the Affidavit of Jose Carlos Pereira, sworn to July 31, 2015, he attests that “[i]n connection with the agreement between Pereira and RPC to have Pereira use the products of RPC, Pereira agreed to have RPC become an additional insured on its insurance policies” (emphasis supplied). R. 331. An obligation to provide insurance coverage is not the same thing as an agreement under which one assumes the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Here, no “insured contract” has been placed before the court and, pursuant to the affidavits submitted by Defendants, PEREIRA and RPC never contemplated the former holding the latter harmless for any injuries arising out of the use of RPC’s product (see generally Jacobs Constructors, Inc. v. NPS Energy Servs., 264 F3d 365 [3rd Cir. 2001]). The trial court wrongly held that there was a question of fact as to the existence of an “insured contract.” R. 58. Any liability PEREIRA may have to RPC in the underlying action does not result from the contents of the alleged “agreement.” Thus, in the absence of a hold harmless agreement in a contract entered into between PEREIRA and RPC, there is no “insured contract” as that term is used in the BCL Policy, and the exception to the Employer’s Liability exclusion does not apply. 10 Accordingly, where Respondents have denied the presence of an agreement or contract relating to the work at 1166 East 31st Street, Brooklyn, New York, and where, even in opposition, Respondents only claim the presence of an agreement to provide additional insured status, the exception to the Employer’s Liability exclusion for liability assumed under an “insured contract” is simply not triggered, and Respondents have failed to raise a question of fact precluding summary judgment. No further discovery will alter this conclusion. POINT II NO VALID UNDERLYING INSURANCE EXISTS FOR THE EMPLOYER S LIABILITY RISKS Respondents next contend that ambiguity exists with respect to the exception, which states that the Employer’s Liability exclusion does not apply “to the extent that valid ‘underlying insurance’ for the employer’s liability risks described above exists or would have existed but for the exhaustion of underlying limits for ‘bodily injury’”. This provision then goes on to state that “[cjoverage provided will follow the provisions, exclusions and limitations of the ‘underlying insurance’ unless otherwise directed by this insurance.” In other words, if there is coverage for the subject employer’s liability risk under an underlying policy of 11 insurance, the BCL Policy will likewise apply. There is nothing ambiguous about this provision. A. There is No Coverage Under the SWIF Policy Here, there is no dispute that SWIF has denied coverage. The Employer’s Liability Policy issued by SWIF provides coverage for “bodily injury” that arises “out of and in the course of the injured employee’s employment” by the insured.” R. 268. However, the SWIF Policy explicitly limits the coverage for employer’s liability: it provides that the injured employee’s employment “must be necessary or incidental to your work in a state or territory listed in Item 3A” of the Information Page of the Employer’s Liability Policy. R. 263, 268. The Employer’s Liability Policy lists only Pennsylvania in Item 3A. R. 263. In addition, Part 3B states that the coverage set forth in Section Two, which includes the Employers’ Liability coverage, “applies only to work in the state of Pennsylvania.” R. 263. In PEREIRA’s Respondent’s Brief, it suggests that because it has its offices in Pennsylvania, any work its employees do in any state is “incidental” to its work in Pennsylvania, and, therefore, covered under the SWIF Policy; in the alternative, PEREIRA suggests that this provision is ambiguous. Such a 12 construction of the clear, unambiguous language of the SWIF Policy is exactly the kind of “torturing” that the courts prohibit. It is undisputed that the work being conducted by the underlying claimants was in New York State, and that it was PEREIRA itself that was directing this work in New York State. Merely because the corporate office of PEREIRA is in Pennsylvania and PEREIRA benefited financially from the underlying claimants’ work at the construction site in New York does not mean that their work was “necessary or incidental” to PEREIRA’s work in the Commonwealth of Pennsylvania ( see e.g., Am. Western Home Ins. Co. v. Donnelly Distrib., Inc., 2013 U.S. App. LEXIS 8503, at **8-9 [3d Cir. Apr. 26, 2013]). To the contrary, the only reasonable interpretation of the phrase PEREIRA seeks to torture into providing coverage is that the underlying claimants’ work was necessary and incidental to the project for which PEREIRA was employing them: specifically, that in New York. In seeking to create an ambiguity where there is none, PEREIRA also twists and contorts the term “work,” yet fails to provide any case law whatsoever to support its dubious contention that “work” should be defined as “work in the sense of business activity.” Given the terms of the SWIF Policy, the only 13 reasonable construction of the word “work” in this context is the construction work being performed at the job site in New York State. Indeed, by employing the interpretation suggested by PEREIRA, an argument could be made that any work done in any state yields a financial benefit to PEREIRA, and is, thus, “incidental” to its business. Such a construction would effectively create a guarantee of coverage by rendering superfluous the portion of the clause restricting coverage to specified geographic regions; this is entirely inconsistent with the clear language of the policy seeking to limit coverage to specified geographic regions ( see Neil v. Allstate Ins. Co., 549 A.2d 1304, 1309 [Pa. Super. 1988] [The argument that an insured’s reasonable expectations have been frustrated has been rejected where the provisions of a particular insurance policy are clear and unambiguous”]). The U.S. Court of Appeals for the Third Circuit Court rejected an argument similar to that made by PEREIRA here. In Donnelly, American Western filed a declaratory judgment action seeking a judicial determination as to whether it had an obligation to defend Donnelly in a suit filed by a woman who slipped on the plastic ties used to bind Donnelly’s product and was injured (Donnelly, 2013 U.S. App. LEXIS 8503, at **2-3). The incident occurred at 5353 Saul Street (Id. at *3). The American Western policy provided coverage for bodily injuries 14 ‘“arising out of ... [t]he ownership, maintenance or use’ of 1301-05 N. Howard Street, Philadelphia, Pennsylvania 19122 (‘Howard Street Premises’) and operations ‘necessary or incidental’ to those premises” (Id. at *2). In support of its claim of coverage, Donnelly argued that “because the injury was caused by the plastic ties that bind Donnelly’s papers, which are connected to the paper distribution activities that are conducted at least in part out of the Howard Street Premises pick-up point,” there was coverage under the American Western Policy despite the fact that the alleged injuries occurred at a location other than that insured under the policy (Id. at **5-6). The Third Circuit rejected this argument, holding that such a broad reading “in effect means that any accident, occurring anywhere, that may be somehow connected to Donnelly’s paper distribution business is covered by the Policy simply because the Howard Street Premises are used as a pick up point in that business and are mentioned explicitly in the Policy’s Premises Provision” (Id. at *6). According to the Third Circuit, merely because the activity alleged in the bodily injury action was incidental to business, it was not necessary to the insured’s operations in the particular location specified in the complaint (Id. at **8-9). Thus, there was no coverage (see also Tuscarora Wayne Mut. Ins. Co. v. Kadlubosky, 889 A.2d 557, [Pa. Super. 2005] [holding that there was no coverage 15 under a policy providing coverage for claims “arising out of’ a particular address where the insured was sued for injuries caused by his dogs, which had escaped from a property other than that listed in the policy; according to the court, there was no causal connection between the injuries alleged and the ownership, maintenance, or use of the insured property]). As in Donnelly, PEREIRA’s interpretation of the geographic limitations in the SWIF Policy is entirely too broad, and strains the policy language to cover claims it was clearly not intended to cover. Moreover, there is no evidence, other than PEREIRA’s speculation, that the project in New York State was “necessary” or “incidental” to PEREIRA’s operations in Pennsylvania. As the SWIF Policy was not intended to cover PEREIRA’s business operations generally, PEREIRA’s tortured interpretation of the SWIF Policy and its opposition to ERIE’S Motion for Summary Judgment based on that interpretation must be rejected. B. The BCL Policy’s “Follow Form” Language is not Ambiguous Further, as the exception to the Employer’s Liability exclusion in the BCL Policy is “follow form” to the SWIF Policy, there is likewise no coverage under the BCL Policy. In opposition, Respondents seek to convince the court that ambiguity exists by inappropriately broadening the “follow form” language. 16 The “follow form” provision with which RPC takes issue applies only with respect to the Employer’s Liability exclusion to coverage (Exclusion g), as it is clearly set forth in, and limited to, that exclusion. It is not the entire BCL Policy that “invoke[s] the exclusions” of the SW1F Policy, but rather the provisions of the Employer’s Liability exclusion; thus, there may be coverage for numerous risks under the BCL Policy that may not be covered by the SWIF Policy, provided that these risks are not excluded by the Employer’s Liability exclusion. In this way, the BCL Policy is not a guarantee of coverage in all instances in which an underlying insurance policy does not provide coverage, but rather only in those instances not clearly and specifically excluded. Thus, RPC is incorrect when it states that the BCL Policy “provides the insured with expansive coverage and a duty to defend, against any suit above and beyond coverage provided by any underlying insurance.” RPC’s Respondent’s Brief, p. 19. For these reasons, the BCL Policy’s use of the “follow form” language is not ambiguous, and RPC’s arguments to the contrary are based on a misreading of the BCL Policy. Further, while Respondents argue that the BCL Policy is ambiguous because it is subject to more than one interpretation, they do not offer any other interpretation that is contrary to the interpretation advanced by ERIE. Instead, they 17 seek to convince this court that the very structure of every insurance policy is ambiguous. Respondents direct this court’s attention to the grant of coverage in the BCL Policy which defines the coverage territory to include “anywhere in the world...”, and then to the Employer’s Liability exclusion, which limits this coverage, in certain situations, consistent with the SWIF Policy, to work in Pennsylvania. From a practical perspective, the general structure of every insurance policy is to define the general risk (e.g. loss because of “bodily injury” or “property damage”) and then dictate through the exclusions what portion of that general risk is removed. Moreover, it is a fundamental principle that policy terms should be given their ordinary meaning, and courts “should try to ‘read policy provisions to avoid ambiguities, if possible, and not torture language to create them’” ( Weisman v. Green Tree Ins. Co., 670 A2d 160, 161 [Pa. Super. 1996]). An ambiguity does not exist merely because the parties disagree as to the construction of a particular policy provision (Id). In this case, the BCL Policy contains clear, unambiguous language stating that Employer’s Liability coverage under the BCL Policy is subject to the terms and limitations of the underlying SWIF Policy. 18 RPC’s and PEREIRA’s Reasonable Expectations are Irrelevant and do not Create Coverage Where the Policy Unambiguously Excludes Coverage C. In addition, the BCL Policy is not rendered ambiguous based on Respondents’ alleged “reasonable expectations.” As an initial matter, the “reasonable expectations” of RPC and PEREIRA are irrelevant in this case, as the “reasonable expectations” doctrine does not apply where the insured is a commercial entity (see e.g. Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A2d 100, 109 n.8 [Pa. 1999] [citing Collister v. Nationwide Life Ins. Co., 388 A2d 1346 [Pa. 1978] and Tonkovic v. State Farm Mut. Auto. Ins. Co., 521 A2d 920 [Pa. 1987]). Because RPC and PEREIRA are sophisticated commercial insureds, their reasonable expectations cannot be employed to overcome the clear and unambiguous language in the BCL Policy (see Reliance Insurance Co. v. Moessner, 121 F3d 895, 905 [3d Cir. 1997] [recognizing that, as a general matter, “sophisticated insureds may exercise more bargaining power vis-a-vis the insurers, and therefore be in less need of protection from the courts than other insureds”]). Moreover, the “reasonable expectations” of RPC and PEREIRA are also irrelevant because the BCL Policy’s language is clear, unambiguous, and enforceable. Under Pennsylvania law, where the language of a contract— such as 19 an insurance policy— is clear and unambiguous, the Court must give effect to that language as reflecting the expectations of the contracting parties (see e.g., Frain v. Keystone Ins. Co„ 640 A2d 1352, 1354 [Pa. Super. 1994] [“While reasonable expectations of the insured are the focal points in interpreting the contract language of insurance policies ... an insured may not complain that his or her reasonable expectations were frustrated by policy limitations which are clear and unambiguous”]). Because the BCL Policy’s language is clear and unambiguous, RPC cannot now argue that its purported “reasonable expectations” were frustrated by this language. Arguably, RPC’s purported “reasonable expectations” are also wholly irrelevant to this matter because only the reasonable expectations of the parties to the Policy, PEREIRA and ERIE, are relevant. RPC was not involved in bargaining for the contract, and thus derived no benefit, expected or otherwise, from that original bargain. Thus, RPC’s purported “reasonable expectations” have no bearing on the interpretation of the Erie-Pereira insurance contract. D. Even if the Court Where to Consider PEREIRA’s Reasonable Expectations, These Alleged Expectations are not alleged to be the Result of ERIE’S Conduct Respondents submit that they relied on certain Certificates of Insurance and based on these believed that PEREIRA had Employer’s Liability 20 coverage for work out outside of Pennsylvania. This claim is flawed. First, a certificate of insurance is not part of the policy— if it states that there is coverage but the policy does not, the policy controls ( Azizi v. Erie Ins. Co., 2011 Phila Ct. Com PI LEXIS 319 [A certificate of insurance does not stop the insurer from denying coverage]). Second, absent from the record is a certificate of insurance issued to RPC referencing a policy in effect at the time of the underlying incident. Third, none of the certificates were issued by ERIE. The certificates were almost exclusively issued by an insurance agent called Body-Bomeman Associates, Inc. While RPC and PEREIRA seek to connect the actions of PEREIRA’S own insurance agent with ERIE, there is no support in the record for this claim. In fact, in Paragraph 12 to the affidavit of Jose Carlos Pereira, he attests that the “normal practice was faced with such a request is to request a certificate of insurance from the agent through which Pereira acquires its insurance.” R. 330. Third, the only certificate actually issued by an insurer, SWIF, was for a different policy period and the certificate holder was identified as “Joseph Fusco,” not RPC. R. 350. While PEREIRA partially excerpts language from that certificate stating coverage includes “Pennsylvania employees whose duties require them to go beyond the territorial limits of the commonwealth.” It fails to 21 cite the entire sentence which goes onto read “as provided by section 305.2 of Pennsylvania Workers Compensation Act as amended,” making it clear that this language only relates to Workers’ Compensation Coverage, not Employee Liability Coverage. A comment as to the scope of Part A, Workers’ Compensation Coverage has no impact on the separate coverage under Part B, Employer Liability Coverage. While PEREIRA claims that it was lulled by ERIE into believing that it had coverage for the underlying claims, this is contradicted by the coverage letters issued by ERIE to PEREIRA. Immediately after PEREIRA placed ERIE on notice of the underlying lawsuits, by letter dated September 15, 2008, ERIE informed PEREIRA that it was reserving its right to disclaim coverage. R. 289. It advised that PEREIRA’s employees were in the course of their business and their injuries arose from performing duties related to their employment with PEREIRA, and, as such, the employer’s liability exclusion, among others, would apply. R. 289-293. ERIE’S separate acknowledgement of an obligation to pay property damage claims on behalf of PEREIRA, which are covered under the Ultraflex Policy and BCL Policy, does not create coverage for claims seeking recovery for 22 bodily injury sustained by PEREIRA’s employees. Accordingly, Respondents did not have a reasonable expectation of coverage for the underlying claims. POINT III SWIF IS NOT A NECESSARY PART TO THIS ACTION SWIF is not a necessary party to this action. PEREIRA is attempting to place ERIE in a situation in which there is no forum that can decide this case. PEREIRA claims that SWIF is a necessary party knowing that ERIE does not have a claim against SWIF and has no mechanism for bringing suit against SWIF. To adopt PEREIRA’s argument is to find that there is no jurisdiction in which this matter can be heard. This is not speculative. As outlined in ERIE’S Appellant’s Brief, it previously filed this action in the Court of Common Pleas, Bucks County, Pennsylvania. In opposition to ERIE’S motion for summary judgment in that matter, PEREIRA submitted to the court that ERIE failed to join the underlying claimants and SWIF, who were indispensable parties to the action. The court denied ERIE’S motion for summary judgment citing the failure to join indispensible parties. ERIE then refiled in New York as Pennsylvania did not have jurisdiction over the underlying claimants, and an action could not be brought 23 against the SWIF in the Board of Claims due to an absence of a claim by ERIE against the SWIF. PEREIRA cites to Staten Island Hospital v. Alliance Brokerage Comp., 137 AD2d 674, 677 (2nd Dept. 1998). However, this decision is not analogous since unlike the parties discussed there, Pennsylvania courts have held that a claim for coverage under a SWIF Policy is under a contract with the Commonwealth of Pennsylvania (see Hanover Insurance Company v. State Workers’ Ins. Fund of Com., “SWIF” (35 A3d 849 [Pa Commw Ct 2012]). Thus, should this court deny ERIE’S motion for summary judgment on the same basis as did the court in Pennsylvania, there is no forum left in which ERIE can seek relief as it has no claim against SWIF and cannot, in such a situation, file suit in the Board of Claims. Moreover, such an action is entirely unnecessary (see Spring-Ford Area Sch. Dist. v. Genesis Ins. Co., 158 F Supp 2d 476, 483-84 [ED Pa 2001] [holding that “a party is only ‘necessary’ if it has a legally protected interest, and not merely a financial interest, in the action”]). A finding that SWIF Policy is or is not ambiguous will have no preclusive effect on SWIF. The case law relied up on by PEREIRA is distinguishable from the facts herein. PERIERA cites to David Christa Constr., Inc. v. American Home Assur. Co., 41 AD3d 1211 (4th Dept. 24 2007) for the proposition “because the primary carrier was not joined to the action, it was held the declaratory judgment action ‘cannot serve any legitimate purpose.’” A review of the decision in David Christa reveals that it has no impact on this case. In David Christa, the issue was priority between two policies. The court recognized that it could not direct an insurer who was not a party to the action to assume a primary payment obligation. That is not the situation here. ERIE is merely taking the position that its policy, in part, follows the terms and conditions of another policy. Unlike in David Christa, ERIE is not looking for the court to enforce any action on the SWIF. Also, unlike the decision in Wrobel v. LaWare, 229 AD2d 861 (3rd Dept. 1996), ERIE is not looking to enforce some obligation on the SWIF through the inclusion of its insured only in this action. Finally, PEREIRA’s contention that there should have been coverage under the SWIF Policy because it “reasonably expected” such coverage is a quarrel with SWIF, not with ERIE. And, even if such a claim was relevant for purposes, a review of the record, as noted above, reveals a single certificate of insurance issued by SWIF. This certificate involved a different policy period and was presented to Joseph Fusco (not RPC) presumably for a different job. Furthermore, all the certificate says is that the coverage is in compliance with Pennsylvania Workers’ Compensation Law. Such a statement is irrelevant for our purposes. 25 Accordingly, the interest of SWIF regarding coverage under its Policy is only incidental to the issues raised in this declaratory judgment action, and a declaratory judgment can clearly be issued without violating the due process rights of the SWIF. SWIF is not a necessary party to this action. POINT IV PEREIRA SHOULD NOT BE GRANTED ANY AFFIRMATIVE RELIEF WHERE IT NEITHER MOVED FOR SUMMARY JUDGMENT NOR APPEALED THE TRIAL COURT’S ORDER Lastly, PEREIRA asks this Court to grant it affirmative relief due to alleged ambiguity within the BCL Policy. This relief is requested despite PEREIRA’s failure to either cross-move for summary judgment or appeal the trial court’s decision. In the leading case of Hecht v. City of New York, 60 NY2d 57 (1984), the Court of Appeals held that an appellate court cannot grant relief to a nonappealing party unless it is necessary to do so to afford complete relief to the party who did appeal, opining that: “The power of an appellate court to review a judgment is subject to an appeal being timely taken (see CPLR 5513, 5515; .... And an appellate court’s scope of review with respect to an appellant, once an appeal has been timely taken, is generally limited to those parts of the judgment that have been appealed and that aggrieve the appealing party (see CPLR 5501, subd. [a]; 5511; see, also, .... The corollary to this rule is that an appellate court’s reversal or modification of a judgment as to an appealing party 26 will not inure to the benefit of a nonappealing coparty .... unless the judgment was rendered against parties having a united and inseverable interest in the judgment's subject matter, which itself permits no inconsistent application among the parties .... (internal citations omitted). {Mixon v. TBV, Inc., 76 AD3d 144, 154-155 [2nd Dept. 2010]; see also Furino v. O’Sullivan, 137 AD3d 1208, 1211 [2nd Dept. 2016]). Here, ERIE, the Appellant, seeks a declaration that it is under no obligation to defend or indemnity PEREIRA in connection with the underlying claims. ERIE has appealed the trial court’s determination that a question of fact exists which precludes summary judgment. There is no question that ERIE and PEREIRA are not in any respect united in interest. Moreover, a request for the exact opposite relief, is not the type of relief referenced by the court in Hecht as an exception to the general rule (i.e., necessary to afford complete relief to the party who did appeal). Accordingly, the Court should decline PEREIRA’s invitation to search the record and grant it summary judgment. CONCLUSION The BCL Policy excludes coverage for damages on account of the injuries to PEREIRA’s employees. The exceptions to the exclusion of coverage do not apply. In that its Policy does not afford coverage for the losses for which 27 damages are sought in the Underlying Actions and Third-Party Actions, ERIE is entitled to a declaration that, as a matter of law, it is not obligated to provide a defense or indemnity to PEREIRA in connection with the Underlying Actions or the Third-Party Actions pursuant to the terms of the BCL Policy. ERIE respectfully prays that the Order appealed from be reversed and judgment entered in its favor. DATED: Buffalo, New York June 27, 2016 Respectfully submitted, HURW1TZ & FLNE, P.C. By: Dan D. Kohane, Esq. Attorneys for Plaintiff ERIE INSURANCE EXCHANGE 424 Main Street Suite 1300 Buffalo, New York 14202 (716) 849-8900 28