Employee Injury Exclusion Upheld, Again

CGL – EMPLOYEE INJURY EXCLUSION
Burlington Ins. Co. v. Galindo & Ferreira Corp. Co.
(Sup. Ct., Queens Co., decided 6/9/2008)

Utica First Insurance Company sells a commercial liability policy in New York that contains an "Exclusion of Injury to Employees, Contractors, and Employees of Contractors", which reads:

This insurance does not apply to: (I) bodily injury to any employee of any insured, to any contractor hired or retained by or for any insured or to any employee of such contractor, if such claim for bodily injury arises out of and in the course of his/her employment or retention of such contractor by or for any insured, for which any insured may become liable in any capacity.

Galindo Contruction Company bought one of those Utica First policies, although it later alleged in this action that, despite this express exclusion, it "purchased the policy upon a reasonable belief that the policy provided, inter alia, a defense or indemnification of subcontractors alleging work-related injuries."

Property owner Galindo & Ferreira Corp. hired Galindo Construction Corp. and Galindo General Construction to serve as the general contractor and construction manager, respectively, on a project involving the erection of two new buildings on property on Roosevelt Avenue in Queens. Galindo Construction Corp. subcontracted concrete work to Concrete Builders Corp. and other work to Kandos Construction, which was also insured by Utica First.

During the construction project, several employees of Concrete Builders Corp. died or were seriously injured when the roof on one of the new buildings collapsed. Twelve days later, a wrongful death and personal injury action against Galindo & Ferreira Corp. and others followed.

Ten days after receiving notice of the accident, Utica First disclaimed coverage to Galindo Construction Corp. based on the policy's employee injury exclusion. Burlington Insurance Company was the property owner's CGL insurer and brought this DJ action against all contractors and subcontractor who had worked on the project and against their insurers, seeking, among other things, a declaration that Utica First owed defense and indemnification coverage to general contractor Galindo Construction Corp. and subcontractor Kandos.

Aside from the procedural nuances of this case (no default judgment granted on Utica First's late responses to Galindo Construction's cross claims; CPLR Rule 3211 motion to dismiss converted to a 3212 motion for summary judgment), Queens County Supreme Court Justice Augustus Agate upheld Utica First's employee injury exclusion and granted Utica First's motion as to both Galindo Construction and Kandos, holding:

The policy issued to Kandos Construction did not take effect until after the date of the accident. The policy issued to Galindo Construction Corp. did not cover the accident in which the subcontractor's workers sustained injury. "To negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case***." (citations omitted) The policy issued by defendant Utica to defendant Galindo Construction Corp. unambiguously excluded coverage for employees of subcontractors such as Concrete Builders Corp. injured while working on the project. *** First, a party cannot have the determination of a summary judgment motion postponed upon the mere speculation and hope that discovery will reveal facts supporting a cause of action or defense. (citations omitted) Second, Galindo's arguments against the validity of the employee exclusion clause based on ambiguity, unconscionability, etc. have no merit, and the court notes that employee exclusion clauses have been upheld and applied on numerous occasions. (See, e.g., Makan Exports, Inc. v U.S. Underwriters Ins. Co., 43 AD3d 883; Sixty Sutton Corp. v Illinois Union Ins. Co., 34 AD3d 386; Bassuk Bros., Inc. v Utica First Ins. Co., 1 AD3d 470; Hayner Hoyt Corp. v Utica First Ins. Co., 306 AD2d 806; Lake Carmel Fire Dept., Inc. v Utica First Ins. Co., 2 Misc 3d 1004[A][Table] Westlaw No. 11870/03 [Text]; U.S. Underwriters Ins. Co. v 614 Constr. Corp., 142 F Supp 2d 491, affd 23 Fed Appx 92.)