State Nat'l Ins. Co. v. Mt. Hawley Ins. Co.

STATE NATIONAL INSURANCE COMPANY, Individually and as Subrogee on behalf of96 WYTHE ACQUISITION, LLC and DIMYON DEVELOPMENT CORP., Plaintiff, v. MT. HAWLEY INSURANCE COMPANY, Defendant.

19-CV-06625 (PK)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

March 29, 2021

OPINION & ORDER

Peggy Kuo, United States Magistrate Judge:

Plaintiff State National Insurance Company ("SNIC"), individually and as subrogee on behalf of 96 Wythe Acquisition, LLC and Dimyon Development Corp., brought this declaratory judgment and breach of contract action against Defendant Mt. Hawley Insurance Company ("Mt. Hawley"). (Compl., Dkt. 1.) The parties have cross-moved for summary judgment. ("Plaintiff's Motion for Summary Judgment," Dkt. 21; "Mt. Hawley Insurance Company's Motion for Summary Judgment," Dkt. 22.) For the reasons stated below, Mt. Hawley's motion is granted, and SNIC's motion is denied.

BACKGROUND

I. Factual Background

The following facts are taken from Plaintiff's Rule 56.1 Statement of Material Facts ("Pl. 56.1," Dkt. 21-1), Defendant's Rule 56.1 Counterstatement of Material Facts ("Def. Counter 56.1," Dkt. 25), Defendants Rule 56.1 Statement of Material Facts ("Def. 56.1," Dkt. 23), Plaintiff's Rule 56.1 Counterstatement of Material Facts ("Pl. Counter 56.1," Dkt. 23), and the exhibits to those Statements.

A. The Project and Subcontract

96 Wythe Acquisition, LLC ("Wythe"), the owner of a premises at 96 Wythe Avenue, Brooklyn, New York, contracted with Dimyon Development Corp. ("Dimyon") to act as the general contractor in constructing an eight-story hotel at that location (the "Project"). (Pl. 56.1 ¶¶ 1-2; Def. 56.1 ¶¶ 1-3.) Dimyon entered into a subcontract dated August 6, 2015 (the "Subcontract," Dkt. 21-3)¹ with an entity doing business as Fire Seal to perform interior insulation work on the Project. (Pl. 56.1 ¶ 3.; Def. Counter 56.1 ¶¶ 3-4.) Fire Seal is the dba name for Spray Foam Group USA, Inc., dba A1 Spray Foam Insulation ("Spray Foam" or the "Subcontractor"). (See Dkt. 21-16 at 2, 5 (listing the dba names for Spray Foam)²; Pl. 56.1 ¶ 3.)

The Subcontract required the Subcontractor to name Wythe and Dimyon as "additional insureds" on the Subcontractor's insurance policies:

The Subcontractor's insurance shall include contractual liability coverage and additional insured coverage for both ongoing and completed operations for the benefit of the Developer and anyone else the Developer is required to name (as set forth in the annexed Exhibit "B") ... The insurance required to be carried by the Subcontractor and any Sub-subcontractors shall be PRIMARY AND NON-CONTRIBUTORY. This specifically includes the Umbrella or Excess policy as it follows form over the General Liability policy. With respect to each type of insurance specified hereunder, the Developer's insurances shall be excess to Subcontractor's insurance.

(Subcontract at 3; Pl. 56.1 ¶ 4.) Dimyon is the "Developer" under the contract. (Subcontract at 1.) No Exhibit B is annexed to the contract, but there is a "Subcontract Agreement Rider" that names Dimyon and Wythe as "Additional Insureds." (Subcontract at 16-17.)

The Subcontract also contains a broad indemnification clause that required the Subcontractor "[t]o the fullest extent permitted by law" to indemnify Wythe and Dimyon. (Subcontract at 2, 16-17.)

The Subcontract required the Subcontractor to maintain insurance coverages, including $5,000,000 (per occurrence and in aggregate) in Commercial General Liability, $1,000,000 (inaggregate) in Workers Compensation and Disability Benefit insurance, and $5,000,000 (per occurrence and in aggregate) in Excess or Umbrella Liability insurance. (Subcontract at 4.) The Subcontract further required the Subcontractor to provide Dimyon with certificates of insurance showing that Dimyon was an additional insured under those mandated coverages. (Subcontract at 3-4.) The certificate was required to include an "endorsement or policy form providing that the General Liability and Excess/Umbrella policies are primary and will not seek contribution from Developer." (Subcontract at 4.)

B. The Underlying Action

On May 10, 2016, Aronds Milord was allegedly injured after falling from a ladder while working for Spray Foam on the Project. (Pl. 56.1 at 4 ¶ 9³; Def. 56.1 ¶¶ 8-9; Pl. Counter 56.1 ¶ 9.) On May 25, 2016, Milord brought an action against Dimyon and Wythe in Supreme Court, Kings County under New York Labor Law §§ 200, 240(1), 240(2), 240(3), 241(6) and common law negligence, in a case captioned Milord v. 96 Wythe Acquisition, LLC et al. (the "Milord Action").⁴ (Dkt. 21-4; Dkt. 21-20 at 2; Pl. 56.1 at 4 ¶ 10; Def. 56.1 ¶ 10.)

On November 9, 2016, Wythe and Dimyon filed a third-party complaint against Spray Foam Group USA, Inc. and Spray Foam Group, LLC for contractual indemnification and negligence (the "Third-Party Action," and collectively with the Milord Action, the "Underlying Action."). (Pl. 56.1 ¶ 14; Def. 56.1 ¶ 12; Dkt. 21-6.)

C. The Insurance Policies

1. The SNIC Policy

SNIC issued a Commercial General Liability ("CGL") insurance policy with a $1,000,000 per-occurrence limit to Wythe and Dimyon for a policy period of September 28, 2012 through September 6, 2016 (the "SNIC Policy"). (Pl. 56.1 ¶¶ 27-28; Def. 56.1 ¶¶ 13-15; the SNIC Policy, Dkt. 21-17.) The SNIC Policy identifies itself as a primary insurance, specifying,

a. Primary Insurance

This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary.

....

b. Excess Insurance

This insurance is excess over:

...

(2) Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.

(SNIC Policy at 16.⁵)

2. The Admiral Policy

Admiral Insurance Company ("Admiral") issued a CGL policy to Spray Foam with a $1,000,000 per-occurrence limit for the period of March 13, 2016 through March 13, 2017. (Pl. 56.1 ¶¶ 18-19; Def. 56.1 ¶¶ 17-18; the Admiral Policy, Dkt. 21-16.)⁶

The "Common Policy Declarations" of the Admiral Policy indicate that Spray Foam is the Named Insured. (Admiral Policy at 5.⁷) The Admiral Policy also includes an endorsement "Additional Insured—Owners, Lessees or Contractors—Scheduled Person or Organization," that modifies the "Who Is An Insured" section of the Admiral Policy to include additional insured persons andorganizations. (Def. 56.1 ¶ 19; Admiral Policy at 18-19, 26-27.) This endorsement, directed at Spray Foam as the named insured, reads:

Section II - Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf;

in the performance of your ongoing operations for the additional insured(s) at the location(s) designated [in the endorsement].

(Admiral Policy at 26; Def. 56.1 ¶ 19.) The Schedule adds as additional insured

Any person or organization that is an owner of real property or personal property on which you are performing ongoing operations, or a contractor on whose behalf you are performing ongoing operations, but only if coverage as an additional insured is required by a written contract or written agreement that is an "insured contract", and provided the "bodily injury" or "property damage" first occurs ... subsequent to the execution of the contract or agreement.

(Admiral Policy at 26; Def. 56.1 ¶ 20.)

3. The Mt. Hawley Policy

Mt. Hawley issued a "Commercial Excess Liability Policy" with a $2,000,000 per-occurrence limit to Spray Foam for the period from April 7, 2016 to March 13, 2017. (Pl. 56.1 ¶¶ 22-23; Def. 56.1 ¶¶ 21-23; the Mt. Hawley Policy, Dkt. 21-18 at 5, 9⁸.)

In the section titled "Coverage," the Mt. Hawley Policy states, "Subject to the other provisions of this policy, we will pay on behalf of the insured the insured's ultimate net loss if such loss results from an occurrence insured by the underlying insurance." (Mt. Hawley Policy at 9; Def. 56.1 ¶ 24.) "Ultimate net loss" is defined as

all sums actually paid, or which the insured is legally obligated to pay, as damages in settlement or satisfaction of claims or suits for which insurance is afforded under thispolicy, reduced by all recoveries or salvage.

(Mt. Hawley Policy at 10; Def. 56.1 ¶ 25.) "Underlying insurance" is defined as "the policy or policies of insurance in the Schedule of Underlying Insurance." (Mt. Hawley Policy at 10; Def. 56.1 ¶ 25.) The "Schedule of Underlying Insurance" includes the Admiral Policy. (Mt. Hawley Policy at 8; Def. 56.1 ¶ 27.)

The Mt. Hawley Policy provides coverage "only in excess of the underlying insurance [and] only after the underlying insurance has been exhausted by payment of the limits of liability of such insurance..." (Mt. Hawley Policy at 9; see also Def. 56.1 ¶ 23-24.) The Mt. Hawley Policy states, "This policy, except where provisions to the contrary appear herein, is subject to all of the conditions, agreements, exclusions, definitions and limitations of and shall follow the underlying insurance in all respects." (Mt. Hawley Policy at 9; Def. 56.1 ¶¶ 23-24.)

The Mt. Hawley Policy also has an "Other Insurance" provision, which states:

If other insurance, whether collectible or not, is available to the insured covering a loss also covered by this policy, other than insurance that is specifically excess to the insurance afforded by this policy, the insurance afforded by this policy shall be in excess of, and shall not contribute with, such other insurance. This provision applies to, but is not limited to, insurance available to any insured as an additional insured under primary or excess policies.

(Mt. Hawley Policy at 14-15.)

The Mt. Hawley Policy includes an "Additional...