Zurich Am. Ins. Co.v.Illinois Natl. Ins. Co.

Supreme Court of the State of New York, New York CountyDec 23, 2010
105533/09 (N.Y. Misc. 2010)
105533/092010 N.Y. Slip Op. 52327


Decided December 23, 2010.

Melito Adolfsen, P.C., New York, New York, By: Steven I. Lewbel, Esq., Ignatius John Melito, Esq., Attorneys for the Plaintiff.

Zarillo, P.C., Illinois National Insurance Company, New York, New York, Bevan, Mosca, Guiditta Zarillo, P.C., Watchung, New Jersey, By: Anthony J. Zarillo, Jr., Esq., Jason P. Gratt, Esq., The McDonough Law Firm, LLP, Attorneys for the Defendant Urban Foundation, New York, New York, By: Howard S. Jacobowitz, Esq., Attorneys for Defendant.

In this action seeking a declaration of insurance coverage, defendant Illinois National Insurance Corporation (Illinois National) moves, pursuant to CPLR 3212, for summary judgment dismissing the claims as against it. Plaintiffs Zurich American Insurance Company (Zurich) and Moretrench American Corporation (Moretrench)(together, plaintiffs) cross-move for summary judgment on their first and third causes of action, for a declaration that Illinois National is obligated to defend Moretrench in an underlying property damage action.

The property damage claim arose out of a construction project (project) on land located on 450 West 16th Street, New York, New York. The property was owned by Related Companies, L.P. (Related). Related contracted with Plaza Construction Corporation (Plaza) for Plaza to be the general contractor for the project. Plaza, in turn, hired defendant Urban Foundation/Engineering, LLC (Urban) to perform, among other things, excavation work on the project. Urban then subcontracted part of the work, described as "dewatering," to Moretrench.

On or about August 18, 2006, the owner of the building adjacent to the project, 437 West 16th Street LLC (437 West), reported that significant property damage had occurred to its property, including the formation of major cracks in the foundation, due, allegedly, to the activities on the project, specifically, the excavation work. In 2008, 437 West commenced an action in this court against Related and others, including Plaza, Urban and Moretrench, entitled 437 West 16th Street LLC v The Related Companies, L.P., Index No. 600591/08 (the underlying action), to recover for the damage to its property.

Prior to the commencement of the project, Illinois National issued an "owner controlled insurance policy" (OCIP), policy no. 175-92-75 (Policy), to Related, for the period January 10, 2006 to January 10, 2007. The Policy included as named insureds

[a]ll contractors and/or subcontractors and/or subconsultants for whom the owner or the owner's agent are responsible to arrange insurance to the extent of their respective rights and interests.

Coverage afforded by this policy is automatically extended to contractors, who are issued a Workers' Compensation policy under the [OCIP]. All other contractors not issued a Workers' Compensation policy must be endorsed onto the policy to be afforded coverage under this policy.

Gratt Aff. in Support, Ex. 2.

Under the Policy, "contractor" is defined as:

contractors who have executed a written agreement pertaining to said Contractors' performance of work at the Project Site, have been enrolled in the insurance program, and who perform operations at the Project Site in connection with the Project.


Although, allegedly, Moretrench commenced working on the Project sometime in early summer 2006, Moretrench did not receive a written contract from Urban until September 18, 2006. On September 14, 2006, Moretrench filled out a "Form-3 Application" (Form-3) for OCIP insurance coverage with Illinois National, by submitting the form to AON, Illinois National's agent. Jason Gratt Aff. in Support of Motion, Ex. 3. Therefore, the operative date of both the Urban subcontract and Form-3, enrolling Moretrench in the OCIP program, post-date the date upon which 437 West claimed that the damages occurred.

Illinois National has agreed to defend and indemnify Related, Plaza and Urban in the underlying action, but has refused coverage to Moretrench, on the ground that Moretrench was not a "contractor" as that term is defined in the Policy, having failed both to obtain a written subcontract from Urban, and to enroll in the OCIP program, prior to the loss. Illinois National maintains that enrollment before the actual loss is a condition precedent to coverage.

Moretrench, in response, argues that there is nothing in the Policy which required that Moretrench be actually enrolled in the OCIP Policy prior to the loss, and that the delay in filing the proper paperwork is without import, as such delays were common on the Project. Moretrench, in fact, calls the execution of Form-3 a "mere formality" (Moretrench Memo, at 11). By the time of its reply, Moretrench is calling the clauses defining when a party is a contractor for purposes of OCIP coverage "amorphous" (Reply, at 3), and argues that such ambiguity must be read in its favor.

Moretrench also insists that, based on internal communications among Illinois National personnel, Illinois National has conceded that Moretrench was properly enrolled in the OCIP program, so as to cover Moretrench for the loss.

Finally, Moretrench argues that Illinois National should be equitably estopped from denying coverage to Moretrench.

"The proponent of a motion for summary judgment must demonstrate that there are no material issues of fact in dispute, and that it is entitled to judgment as a matter of law." Dallas-Stephenson v Waisman , 39 AD3d 303 , 306 (1st Dept 2007), citing Winegrad v New York University Medical Center, 64 NY2d 851, 853 (1985). Upon proffer of evidence establishing a prima facie case by the movant, "the party opposing a motion for summary judgment bears the burden of produc[ing] evidentiary proof in admissible form sufficient to require a trial of material questions of fact.'" People v Grasso , 50 AD3d 535 , 545 (1st Dept 2008), quoting Zuckerman v City of New York, 49 NY2d 557, 562 (1980).

If there is any doubt as to the existence of a triable issue of fact, summary judgment must be denied. Rotuba Extruders v Ceppos, 46 NY2d 223 (1978); Gross v Amalgamated Housing Corporation, 298 AD2d 224 (1st Dept 2002).

The interpretation of unambiguous contracts is a matter of law for the court's determination. 805 Third Avenue Corp. v M.W. Realty Associates, 58 NY2d 447 (1983); Fetner v Fetner, 293 AD2d 645 (2d Dept 2002). It is settled that "when parties set down their agreement in a clear, complete document, their writing should . . . be enforced according to its terms.'" South Road Associates, LLC v International Business Machines Corporation, 4 NY3d 272, 277 (2005), quoting Vermont Teddy Bear Company v 538 Madison Realty Company , 1 NY3d 470 , 475 (2004). "[T]he cardinal rule" of the interpretation of contracts is that "where the language of the contract is clear and unambiguous, the parties' intent is to be gleaned from the language of the agreement and whatever may be reasonably implied therefrom [internal quotation marks and citation omitted]'" Reiss v Financial Performance Corporation, 279 AD2d 13, 29 (1st Dept 2000), affd as mod 97 NY2d 195 (2001); see also Dudick v Gulyas , 4 AD3d 604 (3d Dept 2004).

The same precepts of contract interpretation apply to contracts of insurance ( see Greater New York Mutual Insurance Company v United States Underwriters Insurance Company, 36 AD3d 441 [1st Dept 2007]), and the court "is not free to make or vary the contract of insurance to accomplish its notions of abstract justice or moral obligation.'" 2619 Realty, LLC v Fidelity and Guaranty Insurance Company, 303 AD2d 299, 300 (1st Dept 2003), quoting Breed v Insurance Company of North America, 46 NY2d 351, 355 (1978); see also Teichman v Community Hospital of Western Suffolk, 87 NY2d 514 (1996). However, if ambiguity arises, "any doubt as to the existence of coverage must be resolved in favor of the insured and against the insurance carrier as drafter of the agreement." 2619 Realty, LLC v Fidelity and Guaranty Insurance Company, 303 AD2d at 300.

It is evident that there is nothing ambiguous or "amorphous" in the Policy language which clearly requires, as a condition precedent, both that a contractor be bound by a written construction contract, and that it also be enrolled in the OCIP program, before it is covered under the Policy. Indeed nothing in the Policy grants the unusual right to Moretrench to be protected by insurance before it has been covered thereby.

Moretrench argues that, to make such a finding, the words "prior to an accident" would have to appear in the definition of "contractor," to define when the contractor has to be enrolled in order to be covered. Reply of Moretrench, at 3. Moretrench characterizes such language as indicating a "temporal" or "benchmark" event not present in the Policy. However, a reading of the Policy language that would allow a party to be covered for an insured loss even if the party did not become enrolled in the OCIP program for months, or even years, after the loss, is unreasonable, and I decline to read it into the Policy.

Moretrench argues that Illinois National showed that it was aware that it would be providing coverage to Moretrench, despite no knowledge of Moretrench's specific existence, because Illinois National had accepted a large premium from Related in expectation of covering all of the contractors who would be participating in the project. It avers that the Urban agreement fully confirms that Moretrench was to be covered under the OCIP program, and that Moretrench deducted the cost of such insurance from its bid accordingly, indicating its reasonable belief that coverage existed.

None of these facts serves to alter the unambiguous requirement in the Policy that parties be bound by a written construction agreement, and enrolled in the OCIP program, before coverage would ensue. These requirements do not add temporal or benchmark events that do not exist in the Policy. The language is clear: no enrollment, no coverage.

Moretrench seeks to equitably estop Illinois National from denying coverage. "[I]n order to prevail on the theory of equitable estoppel, the party seeking estoppel must demonstrate a lack of knowledge of the true facts; reliance upon the conduct of the party estopped; and a prejudicial change in position.'" Burrowes v Combs , 25 AD3d 370 , 372 (1st Dept 2006), quoting River Seafoods, Inc. v JPMorgan Chase Bank , 19 AD3d 120 , 122 (1st Dept 2005).

Moretrench cannot establish that Illinois National should be equitably estopped from denying coverage to Moretrench. Moretrench cites to no activity on Illinois National's part which could have misled Moretrench into believing that it was covered under the OCIP program prior to enrollment. There was no reliance on any actions taken by Illinois National. Any activity on Urban's part which might have served to so mislead Moretrench has no bearing on Illinois National's obligation to provide coverage to Moretrench.

I also fail to see how internal communications among Illinois National's employees, made years after Moretrench signed the applicable documents, concerning whether or not Moretrench was enrolled at the time of the damages, aids Moretrench's position. Illinois National has consistently denied that Moretrench was enrolled at the applicable time, and these internal communications cannot be viewed as "concessions," as does Moretrench. Moretrench has not been prejudiced by any internal communications.

I have considered Moretrench's remaining arguments, and found them to be without merit.

Accordingly, it is

ORDERED that the motion brought by defendant Illinois National Insurance Corporation for summary judgment dismissing the complaint as against it is granted, and the complaint is severed and dismissed as to this defendant, with costs and disbursements to this defendant upon a submission to the Clerk of this Court of an appropriate bill of costs; and it is further

ORDERED that the Clerk is directed to enter judgment accordingly; and it is further

ORDERED that the cross motion brought by plaintiffs Zurich American Insurance Company and Moretrench American Corporation for summary judgment on their first and third causes of action is denied; and it is further

ADJUDGED and DECLARED that defendant Illinois National Insurance Company is not obligated to defend and indemnify plaintiff Moretrench American Corporation in the underlying action 437 West 16th Street LLC v The Related Companies, L.P., Index No. 600591/08, currently pending in this court; and it is further

ORDERED that the remainder of the action shall continue.