Old Republic Gen. Ins. Corp. v. Century Sur. Co.

OLD REPUBLIC GENERAL INSURANCE CORP., Individuallyand a/s/o MCGOWAN BUILDERS, INC., Plaintiff, v. CENTURY SURETY COMPANY, Defendant.

17 Civ. 3415 (PGG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

September 12, 2018

ORDER

This is an insurance coverage dispute arising out of a personal injury lawsuit pending against McGowan Builders, Inc. The lawsuit is captioned Newton v. Nan Shan Local Development Corp., Index No. 503352/2014 (N.Y. Sup. Ct., Kings County) (Cmplt. (Dkt. No. 1-1)), and arises from injuries that Bassaine Newton - an employee of A&V Steel LLC - allegedly suffered at a construction site at which McGowan was the general contractor and A&V was the subcontractor. (Id. ¶¶ 9, 12)

Plaintiff Old Republic General Insurance Corp. insured McGowan under a general liability policy, and contends that Defendant Century Surety Company - which insured A&V under an excess liability policy that allegedly covered McGowan as an additional insured - has a duty to defend and indemnify McGowan in Newton. (Id. ¶¶ 6-7, 16-17, 24) Old Republic brings a claim for breach of contract, and seeks a declaratory judgment that it is entitled to indemnity under Century's policy. (Id. ¶¶ 26-37) Old Republic also seeks to estop Century from disclaiming coverage. (Id. ¶¶ 38-42)

Century has moved for judgment on the pleadings (Def. Mot. (Dkt. No. 17)), arguing that its excess liability policy contains an "Action Over Exclusion" that "unambiguously precludes coverage . . . in connection with the Newton [a]ction." (Def. Br. (Dkt. No. 19) at 2) For the reasons stated below, Century's motion will be granted.

BACKGROUND

Old Republic issued a general liability insurance policy to McGowan for the period between August 12, 2013 and August 12, 2014. (Cmplt. (Dkt. No. 1-1) ¶ 6; see also Maguire Decl., Ex. F (Old Republic policy) (Dkt. No. 23-6)) In April 2014, McGowan was serving as the general contractor on a construction project located at 133-14 41st Avenue, Queens, New York (the "Premises"). (Cmplt. (Dkt. No. 1-1) ¶¶ 10, 12) A&V was a subcontractor on this project, performing steel erection work. (Id. ¶ 12) On April 11, 2014, A&V employee Bassaine Newton was injured at the Premises when a steel beam slipped off of a dolly and struck his foot. (Id. ¶ 9) On April 17, 2014, Newton filed a lawsuit in Kings County Supreme Court against Nan Shan Local Development Corp. - the owner of the Premises - and McGowan, seeking damages for his alleged injury. (Id. ¶¶ 10-11) In the Newton action, Newton claims that he was injured while performing work for A&V. (Answer, Ex. B (Newton Complaint) (Dkt. No. 7-3) at 4)

A&V is not named as a defendant in the Newton action. Pursuant to the subcontract between McGowan and A&V (the "Subcontract"), however, A&V is required to defend and indemnify McGowan for any damages or actions arising out of A&V's work at the Premises. (Cmplt. (Dkt. No. 1-1) ¶ 14; see also Maguire Decl, Ex. H (A&V Subcontract) (Dkt. No. 23-8) at 7) The Subcontract also requires A&V to obtain primary and excess liability insurance to cover its work at the Premises, and to name McGowan as an additional insured onthese insurance policies.¹ (Cmplt. (Dkt. No. 1-1) ¶¶ 14-15; see also Maguire Decl, Ex. H (A&V Subcontract) (Dkt. No. 23-8) at 7, 18-21)

A&V obtained a general liability policy from Endurance American Specialty Insurance Co. (the "Endurance policy"), and an excess liability policy from Century (the "Century policy"). (Cmplt. (Dkt. No. 1-1) ¶¶ 16-17; Maguire Decl., Ex. G (Endurance policy) (Dkt. No. 23-7); Bradley Decl., Ex. 3 (Century policy) (Dkt. No. 18-6)) These policies provide coverage for the period between April 30, 2013 and April 30, 2014. (Maguire Decl., Ex. G (Endurance policy) (Dkt. No. 23-7) at 3; Bradley Decl., Ex. 3 (Century policy) (Dkt. No. 18-6) at 4) The named insured in both the Endurance policy and the Century policy is A&V Steel LLC. (Maguire Decl., Ex. G (Endurance policy) (Dkt. No. 23-7) at 3; Bradley Decl., Ex. 3 (Century policy) (Dkt. No. 18-6) at 4)

As to additional insureds, the Endurance policy states:

[t]he following are included as additional insureds: Any entity by written contract . . . to be named as an insured is an insured[,] but only with respect to liability arising out of your premises, "your work" for the additional insured, or acts or omissions of the additional insured, in connection with their general supervision of "your work," . . . [e]xcept [that] all insuring agreements, exclusions and conditions of this policy apply to such additional insured(s).

(Maguire Decl., Ex. G (Endurance policy) (Dkt. No. 23-7) at 56) As to additional insureds, the Century policy states:

[a]ny additional insured under any policy of "controlling underlying insurance" will automatically be an additional insured under this insurance. . . . Additional insured coverage provided by this insurance will not be broader than coverage provided by the "controlling underlying insurance."

(Bradley Decl., Ex. 3 (Century policy) (Dkt. No. 18-6) at 12)

Pursuant to these policies, in a July 8, 2014 letter to Endurance and Century, Old Republic claims administrator Gallagher Bassett tendered the defense and indemnification of McGowan and Nan Shan in the Newton action. (Cmplt. (Dkt. No. 1-1) ¶ 24; see also Maguire Decl., Ex. A (July 8, 2014 Pltf. Ltr.) (Dkt. No. 23-1)) The July 8, 2014 letter to Endurance and Century reads as follows:

Re:

Our Claim No.: 002979-048836-gb-01

Insured: McGowan Builders

Job Location: Nan Shan Project

Your Claim No.: Please advise

Your Insured: A&V Steel, LLC

Your Policy # CBC100010025601 4-30-13 to 4-30-14 (Primary)

CCP 814297 - 8-22-13 to 8-22-14 (Excess)

Claimant: Bassain Newton

Date of Loss: 4-14-14

Dear Gentlemen:

As the third party administrator for Old Republic General Insurance, and their insured, McGowan Builders ("McGowan"), Gallagher Basset Services[] is putting you on notice of the above matter.

We received a summons and complaint entitled "Bassaine Newton and Sashana Newton v. Nan Shan Local Development Corp. and McGowan Builders, Inc. The plaintiff alleges he was injured while working on the job site. The plaintiff was attempting to move a steel beam with a dolly and the dolly tipped over causing the beam to fall on his left foot.

McGowan has advised that they contracted with A&V Steel LLC to complete work on the project. As part of the contract, A&V Steel LLC was contractuallyobligated to defend and indemnify McGowan and all indemnified parties for A&V Steel LLC negligence. In addition, A&V Steel LLC was to list McGowan and Nan Shan as additional insured under their policy with Endurance American Specialty Insurance Co. As such, we are tendering the defense and indemnification of McGowan and Nan Shan to A&V Steel LLC and their carrier, Endurance American Specialty Insurance.

Please confirm receipt of this letter as well as your intent to handle this matter on behalf of McGowan and all other indemnified parties pursuant to your contractual obligation. We are also putting the excess carrier on notice, with Century Surety Company.

If we are caused to incur any legal costs or expenses as a result of your refusal to comply with the contractual agreement in effect between our mutual insured's we will pursue full restitution of costs incurred via declaratory action, if necessary.

Please feel free to contact me. I can be reached at 973-644-5901.

(Maguire Decl., Ex. A (July 8, 2014 Pltf. Ltr.) (Dkt. No. 23-1))²

In an August 5, 2014 letter to Gallagher Bassett, Century denies that it has an obligation to provide a defense and indemnity to McGowan. (Cmplt. (Dkt. No. 1-1) ¶ 25; see also Maguire Decl., Ex. C (Aug. 5, 2014 Def. Ltr. (Dkt. No. 23-3)) Century's letter begins by acknowledging that Gallagher Bassett's July 14, 2014 is a tender:

On or about July 14, 2014, we received a copy of your July 8, 2014 letter in which you tender the defense and indemnification of McGowan Builders, Inc. and Nan Shan Local Development Corp. (collectively, "McGowan") to Endurance American Specialty Insurance Company ("Endurance") and to Century pursuant to McGowan's contract with A&V Steel, LLC ("A&V") and as an Additional Insured under the Endurance and Century policies.

(Maguire Decl., Ex. C (Aug. 5, 2014 Def. Ltr. (Dkt. No. 23-3) at 2) Century then goes to assert that McGowan is not an Additional Insured on the Century policy and that, in any event, "there are coverage issues" under the Century policy:

Please be advised that there is no specific Additional Insured Endorsement for McGowan or any other party on the Century policy. Whether McGowan qualifies as an Additional Insured will depend on the determination of the underlying carrier, Endurance. To date, we have not received a written coverage determination from Endurance. . . .

[Moreover,] [c]overage under the Century policy is subject to the policy provisions, limitations and exclusions contained in the Endurance policy. If there is no coverage under the Endurance policy, there will be no coverage under the Century policy. Notwithstanding the coverage that may be provided by Endurance, there are coverage issues presented by [the Century] Excess policy.

(Maguire Decl., Ex. C (Aug. 5, 2014 Def. Ltr. (Dkt. No. 23-3) at 2-3)

Century's August 5, 2014 letter then lists "issues and/or policy provisions that preclude, limit or exclude coverage" under the Century Policy, including the "Action Over Exclusion." (Id. at 3-7) The Action Over Exclusion provides that the Century Policy does not cover "injury or damage" to "[a]n 'employee' of the named insured arising out of and in the course of: (a) Employment by the Named Insured; or (b) Performing duties related to the conduct of the named insured's business." (Id.; see also Bradley Decl., Ex. 3 (Century policy) (Dkt. No. 18-6) at 38) As noted above, the named insured under the Century policy is A&V Steel LLC.

Century's August 5, 2014 letter further notes that the Action Over Exclusion applies "(1) Whether the named insured may be liable as...