Questions of Fact Found to Preclude Summary Judgment For or Against Condo Board Member on CGL Coverage For Injuring Condo's Security Guard in Fight

CGL "INSURED" – EMPLOYMENT-RELATED PRACTICES EXCLUSION
Kelleher v. Admiral Indem. Co.
(Sup. Ct., New York Co., decided 7/28/2010)

So if you're a member of the board of directors of your condominium and you get into a bit of a tussle with the security guard of your building while returning from Christmas shopping with packages in hand and family in tow, will the condo's CGL policy respond to defend and indemnify you in relation to the guard's inevitable personal injury suit against you?

Maybe. 

On Christmas Eve, 2005, Denis Kelleher, who was a member of the board of directors of the Northmoore Condominiums, returned to the Northmoore accompanied by his wife and two young children.  As he approached the building, Kelleher observed through the glass lobby doors Abraham Baawuah (“Baawuah”), an employee of an independent security contractor, sitting behind the lobby desk and speaking on the telephone.  Kelleher and his wife were carrying their children and Christmas packages and were unable to easily open the doors to the building.  Baawuah did not assist the Kelleher family in entering the lobby. After entering the building, Kelleher "rebuked" Baawuah for not having opened the lobby doors.  Thereafter, Kelleher and Baawuah began arguing over whether opening the doors was part of Baawuah’s duties.

During that argument, Kelleher announced that he was going to call the board president to report Baawuah.  While Kelleher was dialing his cellular phone, Baawuah approached Kelleher, slapped his cellular phone from his hand, grabbed Kelleher by the coat, and pulled him toward the front doors.  Kelleher allegedly responded by pushing Baawuah away from him in self-defense, and Baawuah fell to the ground between the two entrance doors.  Kelleher called the police who, after responding to the call, initially suggested that Kelleher and Baawuah drop the matter.  However, the police later returned to the Northmoore and arrested Kelleher, charging him with criminal assault.  The criminal charge was later dismissed.

Less than a month later (of course), Baawuah filed an action against Kelleher in Bronx County Supreme Court, alleging causes of action for intentional assault and battery, intentional infliction of emotional distress, and negligence.  That action was subsequently settled.

Kelleher gave notice to the condo's CGL insurer, Admiral, of the underlying action and requested that Admiral defend and indemnify him.  Kelleher based his request for coverage on his contention that he qualified as an "insured" under the policy, which provided:

WHO IS AN INSURED

(l)  If you are designated in the Declarations as:

(d)  An organization other than a partnership, a joint venture or limited liability company, you are an insured. Your “executive officers” and directors are insureds, only with respect to their duties as your officers or directors.

Kelleher argued that he qualified as an insured because he was operating within the scope of his duties as a Northmoore board member by reporting Baawuah’s failure to perform doorman service to the board president.

In response to Kelleher's request for coverage, Admiral denied coverage on several grounds, including the asserted applicability of the policy's Employment-Related Practices Exclusion (ERPE), which provided in relevant part:

This insurance does not apply to:

“Bodily Injury” to:

(1) A person arising out of any:

(a)  Refusal to employ that person;

(b)  Termination of that person’s employment; or

(c)  Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person[.]

* * * * * .

This exclusion applies:

(1)  Whether the insured may be liable as an employer or in any other capacity (emphasis added)[.]

Kelleher commenced this declaratory judgment action to compel Admiral to defend and indemnify him in the underlying personal injury action, alleging that because he was acting within the scope of his duties as a member of the condo's board of directors, Admiral was required to provide him with coverage under the condo's CGL policy.  Admiral moved for summary judgment, contending:  (1) the ERPE applied to negate coverage because the bodily injury to Baawuah arose from Kelleher’s discipline of Baawuah during the course of Baawuah’s employment at the Northmoore; (2) the clause in the ERPE stating that coverage is excluded whether the insured is liable “as an employer or in any other capacity” indicates that the injured party need not be an employee of the insured in order for coverage of the incident to be excluded under the policy; and (3) as a threshold matter, Kelleher did not qualify as an "insured" under the policy because he was not acting within the scope of his duties as a board member when the altercation occurred.  Kelleher cross-moved for partial summary.

In denying both parties' motions for summary judgment, New York County Supreme Court Justice Saliann Scarpulla ruled that although Baawuah’s injuries arose from the type of employment-related practice contemplated by the ERPE, the ERPE weas ambiguous as to whether it applied to independent contractors:

Although Admiral has established that Baawuah’s injury arose from the type of employment-related practices described in the ERPE, it has not shown that the ERPE clearly and unambiguously applies even if the injured party was not a current, former, or potential employee of the insured.  Here, the term “person” (rather than “employee”) is used in the ERPE to describe the injured individual, but “person” is not expressly defined to include independent contractors.  Both the title of the ERPE and the list of practices enumerated therein - actions commonly associated with those of an employer interacting with an employee - suggest that it is reasonable to interpret the ERPE as being inapplicable to injuries suffered by independent contractors.  

In so holding, the court noted that the policy's BI to employees exclusion also used the "or in any other capacity" language, but clearly applied only to employees of the insured:

Admiral acknowledged in its motion papers that the “Employer’s Liability” exclusion pertained only to injuries to employees of the insured, despite the exclusion’s “or in any other capacity” language. Yet, Admiral also argued that the “or in any other capacity” clause in the ERPE should be interpreted, as a matter of law, in the exact opposite manner, i.e., to encompass non-employees.   

 Justice Scarpulla also denied plaintiff's cross motion for summary judgment:

Here, there are remaining factual determinations to be made that preclude summary disposition of the applicability of the ERPE and require denial of Kelleher’s motion for partial summary judgment.  In particular, Baawuah’s occupational status with respect to the Northmoore is an unresolved issue affecting whether the ERPE applies.  It is undisputed that Baawuah was an employee of an independent security contractor, but there is an issue of fact as to the authority the Northmoore exercised with respect to Baawuah’s employment at the condominium.  Admiral asserts that Baawuah was an “indirect employee” of the Northmoore; the April 4, 2006 letter disclaiming coverage to Kelleher posits that Baawuah might have been a “special employee.” Such a determination could place Baawuah within the narrow interpretation of the ERPE posited by Kelleher. * * *  Kelleher’s argument with Baawuah and his attempt to report Baawuah’s actions to the board president suggest that the Northmoore may have maintained a degree of influence over Baawuah’s employment status.  The parties did not fully brief this issue and submitted insufficient evidence on these motions with respect to Baawuah’s occupational relationship to the Northmoore.  Moreover, because “a person’s categorization as a special employee is usually a question of fact,” Thompson, 78 N.Y.2d at 557, the resolution of this issue is inappropriate for determination as a matter of law.

Finally, with respect to the question of whether Kelleher qualified as an "insured" in the first place under the policy, the court ruled that plaintiff had not affirmatively established that he was an insured:

“The party claiming insurance coverage bears the burden of proving entitlement, and is not entitled to coverage if not named as an insured or an additional insured on the face of the policy.” Nat’l Abatement Corp. v. Nat’l Union Fire Ins. Co., 33 A.D.3d 570, 571 (1st Dep’t 2006) (internal citations omitted).  Here, Kelleher asserts that he is covered as an insured under the Policy because he was acting within the scope of his duties as a member of the Northmoore board of directors.  However, Kelleher has not submitted any by-laws, corporate documents, or an affidavit showing that Kelleher’s duties as a board member encompassed either rebuking Baawuah or reporting Baawuah’s alleged dereliction to the board president.  Because of the lack of admissible evidence as to Kelleher’s board duties, there is a question of fact as to whether Kelleher qualified as an insured under the Policy. See generally Sekulow, 193 A.D.2d at 396.