Phila. Indem. Ins. Co. v. Streb, Inc.

487 F.Supp.3d 174

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff,

v.STREB, INC., Defendant.

19 Civ. 366 (KPF)

United States District Court, S.D. New York.

Signed September 16, 2020

Adam Ross Durst, Michael Thomas Glascott, Goldberg Segalla, LLP, Buffalo, NY, for Plaintiff.

John Harold Kazanjian, Beveridge & Diamond, P.C., New York, NY, Jessica L. Kyle, Beveridge & Diamond P.C., Baltimore, MD, for Defendant.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

As it had for years, Plaintiff Philadelphia Indemnity Insurance Company ("PIIC") issued a commercial general liability policy and an umbrella liability policy (collectively, the "PIIC Policies") in February 2018 to Defendant Streb, Inc., a performing arts company. Thereafter, on December 12, 2018, Streb was named in a personal injury lawsuit, captioned Shana Guins v. Streb, Inc. (N.Y. Sup. Ct. Bronx County, Index No. 34004/2018E) (the "Guins action"). In the Guins action, a student at Streb, Shana Guins, alleges that she was gravely injured during an acrobatics class at Streb's facility. Plaintiff initiated this suit on January 15, 2019, seeking a declaratory judgment that it is not obligated to defend or to indemnify Streb in connection with the Guins action.

The PIIC Policies contain one noteworthy exclusion, which bars coverage for claims "arising out of the use of any aerial equipment including but not limited to the use of a trapeze or trampoline." Citing this exclusion, Plaintiff disclaims coverage for the Guins action because Ms. Guins was injured while attempting a forward tumble from a trampoline. Defendant responds that Plaintiff has interpreted this exclusion too broadly, and that Plaintiff owes a duty to defend, even if its duty to indemnify does not reach the Guins action.

The parties have cross-moved for summary judgment on the question of Plaintiff's duty to defend, and Plaintiff has moved for summary judgment on the question of its duty to indemnify. For the reasons detailed below, the Court denies Defendant's motion for partial summary judgment on Plaintiff's duty to defend, grants Plaintiff's motion for summary judgment on its duty to defend and its duty to indemnify, and denies Plaintiff's ancillary motion to exclude the testimony of Defendant's proffered expert, Melanie K. Hall.¹

BACKGROUND²

A. Factual Background

1. Defendant's Insurance Policies

Defendant Streb is a not-for-profit dance and performance company located in Brooklyn, New York, that provides instruction in acrobatics for adults and children. (Def. 56.1 ¶¶ 1-2). Plaintiff has provided Defendant's commercial general liability and umbrella insurance coverage for at least ten years. (Liles Decl. ¶ 10). Defendant purchased a commercial general liability policy from Plaintiff, Policy No. PHPK1779111 (the "CGL Policy"), for the period February 15, 2018, to February 15, 2019, and a follow-form umbrella policy, Policy No. PHUB618211 (the "Umbrella Policy,"), covering the same policy period. (Def. 56.1 ¶¶ 3, 7). The CGL Policy contains a limit of liability of $1 million per occurrence, and the Umbrella Policy is subject to a limit of $4 million per occurrence in excess of the CGL Policy. (Id. at ¶¶ 6, 10).

The CGL Policy provides that Plaintiff:

will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" ... to which this insurance applies. [PIIC] will have the right and duty to defend the insured against any "suit" seeking those damages even if the allegations of the "suit" are groundless, false, or fraudulent. However, [PIIC] will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" ... to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result.

(Def. 56.1 ¶ 4). "Bodily injury," "occurrence," and "suit" are defined as follows:

3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time[.]

* * *

13. "Occurrence" means an accident including continuous or repeated exposure to substantially the same general harmful conditions.

* * *

18. "Suit" means a civil proceeding in which damages because of "bodily injury," "property damage" or "personal and advertising injury" to which this insurance applies are alleged[.]

(Id. at ¶ 5). Coverage under the CGL Policy is limited by one relevant exclusion, the "Designated Ongoing Operations Exclusion" (the "Exclusion"), pursuant to which Plaintiff excludes coverage for the following:

Any claims arising out of the use of any aerial equipment including but not limited to the use of a trapeze or trampoline. Excluding performers who dive off stage and/or participate in human pyramids.

(Pl. 56.1 ¶ 7).

The Umbrella Policy issued by Plaintiff contains a "General Liability Follow Form Endorsement" that provides, in relevant part:

The terms and conditions of the "underlying insurance" are made a part of this policy except with respect to:

[i] Any contrary provision contained in this policy; or

[ii] Any provision in this policy for which a similar provision is not contained in "underlying insurance."

With respect to the exceptions stated above, the provisions of this policy will apply.

(Pl. 56.1 ¶ 9). The Umbrella Policy defines "underlying insurance" as "any policies of insurance listed in the Declarations under the Schedule of Underlying Insurance." (Id. at ¶ 10). The Schedule of Underlying Insurance, in turn, identifies the CGL Policy. (Id. at ¶ 11).

In 2014 or 2015, after being told by Defendant's insurance broker that Plaintiff would no longer be providing coverage for "anything involving equipment," Defendant's finance manager, Henry Liles, procured insurance coverage from Certain Underwriters at Lloyd's ("Lloyd's") under Certificate Number LAP0372 17040027 (the "Lloyd's Policy") on Streb's behalf. (Pl. 56.1 ¶¶ 13, 15-16; see also Liles Dep. 46:20-47:1, 58:23-59:13, 88:10-19). The Lloyd's Policy includes coverage for claims arising from trampolines. (Pl. 56.1 ¶ 18). The Lloyd's Policy is subject to an eroding limit of $50,000 per person; included within that $50,000 limit are Defendant's "Claim Expenses," including "[a]ll fees, costs and expenses charged by any lawyer or other service provider designated by [the insurer] to represent [Defendant]," as well as "other fees, costs, and expenses ... resulting from the investigation, adjustment, defense, and appeal of a Claim." (Id. at ¶ 19).

2. The Guins Action

On April 2, 2018, Shana Guins was tragically injured while participating in an acrobatics class at Defendant's facility. (Pl. 56.1 ¶¶ 20, 24). Specifically, Ms. Guins was severely injured while attempting forward tumbling from a small trampoline (the "Injury"). (Id. at ¶¶ 21-29). The day of the accident, Defendant completed an "Accident/Injury/Incident Report Form" (the "Injury Report") to document the Injury. (Id. at ¶ 24). In the Injury Report, the instructor of the acrobatics class and a student in the class, both of whom witnessed the Injury, stated that Ms. Guins was injured while attempting a "dive roll" or "front roll" from the "trampoline" or "mini trampoline." (Id. at ¶¶ 23-25). In deposition testimony in the underlying case, Ms. Guins testified that as a part of the acrobatics class, she was to perform forward tumbling from a trampoline; when it was her turn, she walked up to the trampoline, hopped on it with both legs, bounced once, and tumbled forward, landing from the trampoline on her neck and back, causing severe injuries. (Id. at ¶¶ 21-22).

By letter dated June 19, 2018, counsel for Ms. Guins requested that Defendant preserve evidence and information relating to the Injury, including that Defendant "secure and safeguard all ... policies relating to instruction for the use of trampolines at [Defendant's] premises." (Pl. 56.1 ¶ 31; Durst Decl., Ex. 6). After receiving and reviewing the June 19, 2018 letter and the Injury Report, Defendant's insurance broker, Bob Middleton, advised Mr. Liles that the claim should be forwarded to Lloyd's, and not Plaintiff PIIC, because "this [claim] involves a mini-trampoline" and Defendant's "other carrier" (i.e. , Lloyd's) "handles equipment claims." (Pl. 56.1 ¶¶ 35-37). Thereafter, Mr. Middleton notified Lloyd's, who purportedly advised Mr. Middleton that it would contact Ms. Guins's counsel to offer to pay the full $50,000 limit under the Lloyd's Policy in an effort to settle the claim on behalf of Defendant. (Id. ¶¶ 38, 40; see also Durst Decl., Ex. 8). Thereafter, in October 2018, Mr. Liles inquired into whether Defendant's other policies, including the PIIC Policies, would cover the Injury. (Pl. 56.1 ¶ 41; see also Liles Decl., Ex. 1). In the resulting email exchange, Mr. Middleton advised Mr. Liles that the CGL Policy "has an exclusion for mini-Tramps specifically for this type of injury," referring to the Exclusion. (Pl. 56.1 ¶¶ 42-43). Mr. Liles responded to ask if the PIIC Policy could be interpreted such that a mini-tramp is not "aerial equipment." (Liles Decl., Ex. 1).

Ms. Guins filed suit against Defendant Streb in New York State Supreme Court, Bronx County, on December 12, 2018, alleging in her complaint that "[o]n April 2, 2018, at approximately 6:00-7:00 p.m. [Ms. Guins] was attempting to do a forward flip while participating in an acrobatic class at STREB, INC. when she felt a crack in her neck," sustaining serious injury. (Def. 56.1 ¶¶ 15, 17; Pl. 56.1 ¶ 45). Ms. Guins further alleged that Defendant was negligent for, inter alia , "failing to provide proper equipment," but the complaint did not specifically mention that Ms. Guins sustained her injury while using a trampoline. (Bentley Decl., Ex. 6 (the "Guins Complaint")).

Defendant was served with the Guins Complaint on December 17, 2018 (Bentley Decl., Ex. 10), and Plaintiff was placed on notice of the Injury and the lawsuit on December 19, 2018, when Mr. Middleton forwarded the Guins Complaint to it. (...