Jay DiFulvio & Assocs. v. State

2024 NY Slip Op 51078(U)

Jay DiFulvio & Associates, Inc., Claimant, v. The State of New York,^[1] Defendant.

Claim No. 136506

Court of Claims

August 14, 2024

Unpublished Opinion

For Claimant: COSTELLO, COONEY & FEARON, PLLC By: ERIN K SKUCE, ESQ.

For Defendant: HURWITZ FINE P.C. By: KATHERINE A. FLEMING, ESQ.

HON RUTH SHILLINGFORD, Judge of the Court of Claims

Claimant JAY DIFULVIO & ASSOCIATES, INC. (hereinafter "DiFulvio" or "Claimant") commenced this claim seeking indemnification from New York State Insurance Fund (hereinafter "SIF") to satisfy a judgment entered against it in an underlying third-party claim. Claimant moves (M-99641) and Defendant cross-moves (CM-99932) for summary judgment. For the following reasons Claimant's motion is denied and Defendant's cross-motion is granted.

BACKGROUND

The claim, filed on June 22, 2021, alleges that Defendant through its agency SIF failed to indemnify DiFulvio against a judgment entered in the Onondaga County Supreme Court on an underlying third-party claim. Claimant seeks an order declaring that SIF has a duty to indemnify and satisfy a judgment entered against it as a result of personal injuries sustained by Matthew Fisher (hereinafter "Fisher") on August 30, 2010 (Claimant's Exhibit A, NYSCEF Doc. No 29). Issue was joined with the filing of Defendant's Verified Answer on January 20, 2022 (Claimant's Exhibit B, NYSCEF Doc. No. 30). Discovery was completed and the Note of Issue was filed on May 5, 2023. The instant motions follow.

FACTS

The parties have stipulated to the following facts (see Stipulated Facts, NYSCEF Doc. No. 27):

On August 30, 2010, Fisher was working at a construction site known as Pizza Villa, situated at 409 Tulip Street, Liverpool, New York. Fisher suffered injuries after falling about ten feet down from the lower roof at the site. At the time of the accident, Claimant held a Workers' Compensation and Employers' Liability Insurance policy (hereinafter "The Policy"), issued by SIF. The Policy's effective date was from April 3, 2010 through April 3, 2011. SIF's "Employer's Liability Coverage contained within the policy is unlimited" (id. at ¶9). SIF "was notified of the underlying accident involving Matthew Fisher via Employer's Report of Work-Related Injury/Illness form C-2 filed with the Workers' Compensation Board on September 1, 2010" (id. at ¶14). SIF never "dispute[d] in the Workers' Compensation forum that Matthew Fisher was an employee of DiFulvio and did not controvert the Workers' Compensation claim" (id. at ¶15). "A March 17, 2011, notice of decision established the Workers' Compensation claim with DiFulvio as employer and Matthew Fisher as employee" (id. at ¶16). SIF paid medical treatment as well as indemnity benefits totaling $162,470.86.

Fisher initiated legal action under Labor Law §240(1) against Joseph Scordo, d/b/a Pizza Villa, the owner and sole proprietor of the construction site (hereinafter "Scordo") (Matthew Fisher v Joseph Scordo d/b/a Pizza Villa, Index No. 2010-7388) (id. at ¶20)("the Main Action"). Paragraphs 7 and 8 of the Amended Complaint in this action alleged that Mr. Fisher was employed by Claimant. Subsequently, Fisher moved for partial summary judgment on the issue of liability, which was granted on July 15, 2013 (id. at ¶21).

Scordo initiated a third-party action against Claimant, seeking common law indemnification and contribution (Matthew Fisher v Joseph Scordo d/b/a Pizza Villa v Jay DiFulvio & Associates, Inc. 2010-7388A) (id. at ¶23)(hereinafter "the Underlying Action"). SIF "agreed to provide [Claimant] defense and indemnification in the Underlying Action subject to a reservation of rights letter dated February 27, 2014" signed by one of SIF's attorneys (id. at ¶29). "By statute, the New York State Insurance Fund is only authorized by law to provide Workers' Compensation and Employer's Liability Coverage" (id. at ¶30).

With the consent of all the parties in the Main Action, the matter proceeded to Arbitration on the issue of damages only on August 30, 2016, resulting in a decision on December 6, 2016, awarding Fisher $810,488.96 (id. at ¶¶31-34). Scordo's liability carrier satisfied the arbitration award upon receipt of a Release and Settlement Agreement (id. at ¶35). SIF asserted a lien against the arbitration award for $162,470.62 and the parties settled on $105,284.62 in full satisfaction of the lien.

The third-party action continued and two of SIF's attorney's monitored the Underlying Action on behalf of SIF. By Order dated February 26, 2018, the Court determined Fisher was an independent contractor, not an employee at the time of his accident (id. at ¶43). Scordo then moved for summary judgment in the Underlying Action, seeking full common-law indemnification against Claimant, which was granted on May 16, 2019 (id. at ¶¶44-45). Scordo was awarded $29,683.00 for attorneys' fees, $30,736.56 for expenses, and $810,488.96 plus $176,281.35 in statutory interest, totaling $1,047,189.87.

SIF "defense of DiFulvio continued through the conclusion of the Underlying Action and Final Judgment... [SIF] did not issue a denial of coverage to [Claimant] at any time relative to the Underlying Action... [SIF] did not disclaim the obligation to indemnify [Claimant] at any time relative to the Underlying Action... [SIF] did not commence a Declaratory Judgment action against [Claimant] in relation to the issue of coverage in the Underlying Action... [Finally, SIF] did not withdraw its defense of [Claimant] in the Underlying Action" (id. at ¶¶47-51). SIF has declined to satisfy the underlying judgment.

In determining that Fisher was an independent contractor and not an employee, Justice Paris held:

Despite how Third-Party Defendant (Claimant herein) and Fisher treated themselves, their intent for all legal purposes was to categorize or label Fisher as an independent contractor. This intent, in the Court's opinion, based on the record before it, was to circumvent, avoid and possibly defraud various governmental, tax and insurance obligations. Indeed, Mr. DiFulvio's invocation of his right under the Fifth Amendment and refusing to answer certain pertinent questions pertaining to these deductions confirms that opinion. Irrespective of how Fisher was thought of by Third-Party Defendant, he was designated by Third-Party Defendant as an independent contractor, as both testified to in their respective sworn deposition testimony.

***

Based on the record before the Court, the Court finds and determines that at the time of the accident, August 30, 2010, Fisher was an independent contractor as evidenced by the deposition testimony of both Fisher and Difulvio; that he was an independent contractor, that Fisher worked other jobs; that no withholding for tax, Social Security, Medicare or disability, et cetera, was deducted from his paychecks; that no W-2, except for 2008, was given by Third-Party Defendant; that no 1099s were issued by Third-Party Defendant to Mr. Fisher; that Fisher had his own tools for the work he performed on this job; that Fisher's tax returns show a Schedule C for Fisher Construction and amounts not separated for any specific payors; that Fisher was shown on Difulvio's books as "sub labor" and reimbursed for auto expenses; that there was limited control or direction over his work by Difulvio, as Fisher, according to deposition testimony, knew what to do; that the New York State Insurance Fund determined that Fisher was an independent contractor under Difulvio's Workers' Compensation policy/employer liability policy as verified by Mr. Difulvio

(Defendant's Exhibit E, NYSCEF Doc. No. 55 at 3-6).

DISCUSSION

In its motion and as clarified in its reply, Claimant asserts its entitlement to summary judgment based on the doctrine of latent ambiguity in the policy arising from the failure to define the terms "employee" and "must arise out of and in the course of the injured employee's employment by you" (Claimant's Memorandum of Law at 8). Specifically, as Claimant amplifies in its Reply Memorandum of Law, in this case, the Workers' Compensation Coverage and Employers' Liability Coverage are contained in the same policy and were not separately priced. Thus, it maintains that "... considering the language contained within the Employers' Liability coverage Part Two, which is inextricably linked to the Workers' Compensation Insurance Part One, which states 'A.1. The bodily injury must arise out of and in the course of the injured employees employment by you,' coupled with the agreement to pay sums that Difulvio legally must pay including damages, '4. Because of bodily injury to your employee that arises out of and in the course of employment, claimed against you in a capacity other than as employer,' a reasonable businessperson would have thought himself covered in the situation herein" (Claimant's Reply Memorandum of Law at 4-5).

Claimant then urges that "... whereas here, the Workers' Compensation Board had primary jurisdiction and issued its decision on the issue of employment, which is final and conclusive upon the State Fund, the extrinsic circumstances i.e., a finding by the board that Fisher was an employee of DiFulvio and that his injuries arose out of and in the course of employment, creates a latent ambiguity within the policy or an unclear intention or expression that is open to more than one interpretation by an ordinary businessperson" (id. at 5-6).

In opposition to Claimant's motion and in support of its Cross-Motion for Summary Judgment, Defendant counters that it is entitled to summary judgment because "NYSIF has no obligation to indemnify DiFulvio because Fisher's injuries sustained while working as an independent contractor do not fall within the Policy's unambiguous grant of...