Bronx Supreme Reluctantly Declines to Invalidate the Coverage-Negating Employee Injury, Roofing Work and Contractual Liability Exclusions

CGL – ADDITIONAL INSURED – EMPLOYEE INJURY EXCLUSION – ROOFING WORK EXCLUSION – CONTRACTUAL LIABILITY EXCLUSION – DUTY TO DEFEND
720-730 Fort Wash. Ave. Owners Corp. v. Utica First Ins. Co.
(Sup. Ct., Bronx Co., decided 11/4/2009)

Plaintiff owned a property on which a subcontractor's employee was injured during construction.  Plaintiff had contracted with DNA Contracting, which had hired the injured party's employer, subcontractor Rauman Construction Company, to do the masonry and roof replacement work. DNA's contract with Rauman required that Rauman purchase CGL and name DNA and plaintiff as additional named insureds. Rauman purchased insurance from Utica First which named those entities as additional insureds, but the policy contained three exclusions at issue:  (1) an "employee" exclusion, (2) an exclusion for "roofing work", and (3) an exclusion for any liabilities assumed under contract or agreement.

The "employee exclusion" provided:

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, liable in any capacity;

(ii) any obligation of any insured to indemnify or contribute with another because of damage arising out of the bodily injury; or

(iii) bodily injury sustained by the spouse, child, parent, brother or sister of an employee of any insured, or of a contractor, or of an employee of a contractor of any insured as a consequence of the bodily injury to such employee, contractor or employee of such contractor, arising out of and in the course of such employment or retention by or for any insured.

The "roofing work" exclusion stated:

It is hereby understood and agreed that such insurance as is afforded by coverage L-bodily injury, property damage coverage and coverage N-products/completed work coverage does not apply to bodily injury, property damage, products or completed work arising out of any roofing operations, which involve any replacement roof or recovering of the existing roof.

The exclusion for liabilities assumed under contract or agreement read:

1. "We" do not pay for "bodily injury", "property damage", "personal injury", or "advertising injury" liability which is assumed by the "insured" under a contract or an agreement.

This exclusion does not apply to:

a. Liability that an "insured" would have had in the absence of the contract or agreement; or

b. "Bodily injury or property damage" covered under the contractual liability coverage, provided that the "bodily injury" or "property damage" occurs after the effective date of the contract or agreement.

The injured employee commenced a personal injury action against plaintiff, alleging causes of action for violations of §§ 200, 240 and 241 of New York's Labor Law, as well as a cause of action for common law negligence.  Plaintiff tendered that action to Utica First for defense and indemnification, and Utica First disclaimed coverage based on the employee injury, roofing work and contractual liability exclusions.  DNA's CGL insurer, Liberty International Underwriters, assumed plaintiff's defense and commenced this declaratory judgment action, in plaintiff's name, against Utica First for coverage under Rauman's policy.

Prior to the completion of discovery, Utica First moved for summary judgment based on the employee and roofing work exclusions.  Plaintiff opposed the motion based on its arguments that: (1) the Utica First policy was illusory and should be held to be against public policy since it does not provide any of the insureds with the usual construction site coverage required under plaintiff's agreement with DNA and Rauman;  (2) discovery has not yet been completed;  (3) questions of fact remained as to whether or not Rauman's employee was, in fact, working in the course of his roofing duties with Rauman at the time of the accident that caused his injuries; and (4) Utica First must defend under the policy even if it need not indemnify, since the duty to defend is greater than the duty to indemnify.

In response to plaintiff's opposition, Utica First argued that since plaintiff had admitted that Rauman's employee was working in the course of his employment with Rauman, and performing roofing operations, no further discovery was necessary since both the "employee" and "roofing" exclusions applied.   As to plaintiff's argument that the Utica First policy was violative of public policy, Utica First argued that exclusions are necessary to precisely define the scope of coverage.  Lastly, Utica contended that, although the duty to defend is broader than the duty to indemnify, it does not attach, when, as here the complaint and claims are so totally baseless.

Noting that plaintiff was not contending that the three exclusions at issue were vague, ambiguous or inapplicable, Bronx County Supreme Court Justice Paul Victor identified the sole issues for determination to be whether those three exclusions are violative of public policy, and whether, despite the language of those exclusions, Utica First might still be obligated to defend the plaintiff.  The court answered those questions with a no, and a no. 

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

CGL – BLANKET ADDITIONAL INSURED ENDORSEMENT – EMPLOYEE INJURY EXCLUSION – CONTRACTUAL LIABILITY EXCLUSION – CERTIFICATE OF INSURANCE – FILING AND PRE-APPROVAL OF POLICY PROVISIONS
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.

Contractual Indemnification Granted Against Vehicle Lessee

AUTO – SUBROGATION – CONTRACTUAL INDEMNITY – COMMON LAW INDEMNIFICATION – VEHICLE & TRAFFIC LAW § 388
DaimlerChrysler Ins. Co. v. Roubeni
(Sup.Ct., NY Co., decided 5/7/2008)

Mr. Roubeni leased a new 2003 Mercedes-Benz E500. The lease contained a provision assigning the lease to DCFS Trust. It also contained a contractual indemnity provision, which read as follows:

If you are subjected to any claims, losses, injuries, expenses or costs related to the use, maintenance, or condition of the vehicle, I will pay all of your resulting costs and expenses, including attorneys' fees.

As required by the lease, Mr. Roubeni obtained a $100,000/$300,000 auto liability policy, naming DCFS as an additional insured. DCFS was also named as an additional insured under an excess policy issued by the plaintiff, DaimlerChrysler Insurance Company (DCIC), which policy provided that, in the event of payment under the policy, DCIC would be subrogated to all of its insured's rights of recovery.

While driving his new E500, Mr. Roubeni was in an accident with Ms. Hogan, who later sued him for personal injuries. DCFS's liability was predicated solely on New York Vehicle & Traffic Law § 388, which makes owners of New York-registered motor vehicles indirectly liable for injuries or damages negligently caused by permissive operators.

At some point during the litigation, the personal injury action was settled on the record for $790,000. Mr. Roubeni's insurer paid $100,000 and DCIC paid the $690,000 balance. The settlement agreement included an allocution in which Mr. Roubeni personally acknowledged the reasonableness of the settlement and that he understood that DCIC reserved its right to sue him for indemnification.

And so DCIC did, and the parties moved and cross-moved for summary judgment.

Justice Walter B. Tolub granted summary judgment to DCIC on its contractual indemnification claim only, noting:

A lessor of a motor vehicle can obtain contractual indemnification from the lessee where the agreement obligates the lessee to indemnify the lessor with respect to all claims arising out of the lessee's use of the vehicle, and the lessee is involved in an accident giving rise to such a claim while operating the leased vehicle (citation omitted). In contractual indemnification the one seeking indemnity need only establish that it was free from any negligence and was held liable solely pursuant to a statute.

In denying common law indemnification to DCIC, however, the court noted that unlike contractual indemnity, to prevail on a common law indemnification claim, a person seeking such indemnification must show the additional element of the lessor's negligence. In the underlying action, there had been no finding or admission of negligence by Mr. Roubeni.

One has to wonder how DCFS and/or DCIC wheedled Mr. Roubeni into personally acknowlegding the reasonableness of the $790,000 settlement on the record. Certainly Mr. Roubeni's own defense counsel could not (or should not) have recommended that he do so. By the same token, however, there's nothing Mr. Roubeni or his defense counsel ostensibly could have done to prevent DCIC from kicking in the $690,000 balance on behalf of DCFS to settle the underlying action.

The contractual indemnity provision is not an exemplar of draftmanship. Did someone think to argue that although it begins by referring to the possibility of the lessor being subject to "claims, losses, injuries, expenses or costs" (A, B, C, D and E), it obligates the indemnitor only to pay "resulting costs and expenses, including attorneys' fees." (D and E, and E1) What happened to claims, losses and injuries? Or if the lessor had wanted to be indemnified for costs and expenses resulting from claims, losses and injuries, the provision could have left out costs and expenses in the conditional phrase. That's a $690,000 contra proferentem argument Mr. Roubeni hopefully did not miss making.