Thursday, September 3, 2009

New York Supreme Dismisses All Claims for Coverage Against Employer's CGL Insurer Following Insured's Confession of Judgment in Favor of Owner

Cipriani USA, Inc. v. Utica First Ins. Co.
(Sup. Ct., New York Co., decided 8/18/2009)

For those involved in construction accident, contractor-subcontractor, CGL and additional insured coverage matters, this decision is worth reading from beginning to end.  New York County Supreme Court Justice Carol Edmead does an excellent job outlining the parties' arguments and analyzing the salient coverage issues.

Cipriani hired Indigo Blue Group, Utica First's named insured under a CGL policy, to perform work at Cipriani's premises pursuant to a contract, dated June 11, 2003.  In October 2003 an employee of Indigo was injured during that work and sued Cipriani, which in turn impleaded Indigo for contractual indemnification.  In February 2004, Utica First issued separate letters to Indigo and Cipriani, denying coverage to each based on various policy exclusions.  In October of 2007, Indigo consented to the settlement of the underlying lawsuit for $75,000 and to judgment over in Cirpiani's favor for contractual indemnification in the amount of $88,462.64, which included attorneys' fees.  Indigo then assigned and transferred all rights, title and interest to Cipriani for all claims, demands and causes of action which Indigo had against Utica First, Gary G. Emmanual Brokerage, Inc. and Morstan Agency, Inc. in consideration of Cipriani's payment of the settlement.  Cipriani then brought this action against Utica First, the agent and the broker for payment of Indigo's confession of judgment.

Utica First moved pursuant to CPLR 3211(a)(1) [documentary evidence] and (7) [fails to state cause of action] to dismiss the complaint and all cross claims against it and requested that since there were no question of material fact, the court treat the motion as one for summary judgment pursuant to CPLR 3211(c) and declare, pursuant to CPLR § 3001, that Utica First had no obligation to defend or indemnify either Cipriani or Indigo in relation to the underlying action.

In GRANTING Utica First's motion and declaring that it was not obligated to defend or indemnify either Cipriani or Indigo in relation to the underlying action, Justice Edmead held:
►  Utica First had made an adequate showing of documentary evidence to merit relief under CPLR 3211(a)(1);

►  by virtue of Indigo's post-confession of judgment assignment of its rights against Utica First and its agent and broker, Cipriani did have legal standing to maintain this action;

►  the policy's blanket additional insured provision was not triggered and did not afford independent liability coverage to Cipriani because the contract between Cipriani and Indigo explicitly did "not require the Contractor to include the Owner, Architect or other persons or entities as additional insureds on the Contractor's Liability insurance"; contract language that merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured;

►  even if Cipriani were deemed an additional insured, the policy's employee injury exclusion and contractual liability exclusion unambiguously applied to negate liability coverage in favor of Cipriani and Indigo;

►  the employee injury exclusion in Indigo's policy with Utica First is not against public policy;

►  the certificate of insurance issued to Cipriani did not raise a question of fact because "a certificate of insurance purporting to afford a party coverage, which on its face states that it is issued for informational purposes only, cannot by itself establish coverage";

►  the indemnity clause in Indigo’s contract with Cipriani likewise did not create coverage under Indigo's policy with Utica First; 

►  Utica First's alleged failure to file its employee injury exclusion with the New York State Insurance Department for approval did not create an issue of fact because "the failure of plaintiff to file an endorsement with the Insurance Department for approval 'does not, by itself, void the policy clause, but rather carries its own penalties for non-filing. Further, such clause is void only if the substantive provisions of the clause are inconsistent with other statutes or regulations' (National Union Fire Ins. Co. of Pittsburgh, Pa. v Ambassador Group, 157 AD2d 293,556 NYS2d 549 [lst Dept 1990]). Here, there is no showing that the Exclusions are inconsistent with other statutes or regulations"; and

►  there was no indication that additional discovery would raise an issue as to Utica First's liability under the policy.

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