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.

5 Month Delay in Disclaiming Found Untimely As a Matter of Law

CGL – ADDITIONAL INSURED – INSURANCE LAW § 3420(D) – UNTIMELY DISCLAIMER
Rael Automatic Sprinkler Co., Inc. v. Schaefer Agency(2nd Dept., decided 6/17/2008)

On December 11, 2001, an employee of Rael Automatic Sprinkler Company was injured from a fall while installing sprinklers at the Metropolitan Museum of Art. MMA was insured by Gulf Insurance Company, and Rael was insured by Clarendon National Insurance Company. Although Rael had requested blanket contractual liability coverage, the Clarendon policy contained an exclusion from coverage where the obligation to pay damages arose by the "assumption of liability in a contract or agreement," unless the agreement constituted an "insured contract". The policy also excluded coverage for Rael's employees if bodily injury sustained by those employees arose "out of and in the course of employment by the insured".In May 2002, the Rael employee commenced a personal injury action against MMA and the general contractor. On May 16, 2002, Gulf requested that Rael and Clarendon defend and indemnify MMA. On August 8, 2002, Clarendon disclaimed coverage to MMA and the general contractor on the ground that those defendants were never added as additional insureds under Rael's policy. On August 16, 2002, Clarendon disclaimed coverage based upon the contractual liability exclusion and the employer's liability exclusion.Ther personal injury action settled with Rael and its insurance broker, Schaefer Agency, each contributing $250,000. Rael then brought this action against Schaefer for its alleged failure to procure blanket contractual liability coverage, and Schaefer impleaded Clarendon, among others. In AFFIRMING the Nassau County Supreme Court's order granting Schaefer's cross motion for summary judgment against Clarendon, declaring that it was obligated to defend and indemnify Rael in the underlying action, the Second Department held:

Since Clarendon's disclaimer was based on policy exclusions, Clarendon was required to provide Rael with timely notice of its disclaimer under Insurance Law § 3420(d) (citations omitted). In response to a request for interrogatories, Clarendon indicated that it began investigating the grounds for disclaiming coverage as early as March 5, 2002. On May 22, 2002, Clarendon's insurance administrator received a letter from Gulf Insurance Group, requesting that it defend and indemnify MMA. In view of the foregoing, Clarendon's disclaimer in August 2002 was untimely as a matter of law (citations omitted), and it is obligated to defend and indemnify Rael.