U.S. Specialty Ins. Co. v. Harleysville Worcester Ins. Co.

U.S. SPECIALTY INSURANCE COMPANY, Plaintiff, v. HARLEYSVILLE WORCESTER INSURANCE COMPANY, Defendant.

Civil Action No. 20 Civ. 7691 (SLC)

United States District Court, S.D. New York

September 3, 2021

OPINION AND ORDER

SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE.

I. INTRODUCTION

Plaintiff U.S. Specialty Insurance Company (“USSIC”) brought this declaratory judgment action against Defendant Harleysville Worcester Insurance Company (“Harleysville”). (ECF No. 1). USSIC seeks, inter alia, a declaration that Harleysville has a duty to defend and indemnify in connection with a state-court personal injury action. (Id. ¶¶ 32-41). USSIC has moved for partial summary judgment with respect to its duty-to-defend claim. (ECF No. 32 (the “Motion”)). For the reasons set forth below USSIC's Motion is GRANTED.

II. BACKGROUND

A. Factual Background

The following facts are summarized from USSIC's Rule 56.1 Statement of Undisputed Material Facts (ECF No. 35), Harleysville's Opposition to USSIC's Rule 56.1 Statement of Undisputed Facts (ECF No. 38-1), and their accompanying exhibits. (ECF Nos. 33; 34; 38-2). The facts are undisputed unless otherwise noted.

1. The Contract

Non-parties 370 Seventh Avenue Associates, LLC (the “Owner”)^[1] and Aggressive Heating, Inc. (“Aggressive”) entered into a contract pursuant to which Aggressive was to perform an oil-to-gas boiler conversion project (the “Project”) for the Owner (the “Contract”). (ECF No. 33-3; 35 ¶ 13). The Contract, which defines Aggressive as the “Contractor, ” provided that:

§ 3.3.1 The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention. The Contractor shall be solely responsible for, and have control over, construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work under the Contract, unless the Contract Documents give other specific instructions concerning these matters. If the Contract Documents give specific instructions concerning construction means, methods, techniques, sequences or procedures, the Contractor shall evaluate the jobsite safety thereof and, except as stated below, shall be fully and solely responsible for the jobsite safety of such means, methods, techniques, sequences or procedures. If the Contractor determines that such means, methods, techniques, sequences or procedures may not be safe, the Contractor shall give timely written notice to the Owner and [the] Architect and shall not proceed with that portion of the Work without further written instructions from the Architect. If the Contractor is then instructed to proceed with the required means, methods, techniques, sequences or procedures without acceptance of changes proposed by the Contractor, the Owner shall be solely responsible for any loss or damage arising solely from those Owner-required means, methods, techniques, sequences or procedures.

§ 3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, the Contractor or any of its Subcontractors.

§ 3.3.3 The Contractor shall be responsible for inspection of portions of Work already performed to determine that such portions are in proper condition to receive subsequent Work.

(ECF No. 33-3 at 23). The Contract required Aggressive to purchase insurance that named the Owner as an “additional insured[] for claims caused in whole or in part by the Contractor's negligent acts or omissions during the Contractor's operations. . .” (Id. at 40).

Aggressive entered into a subcontract with E.M. & E.M. Chimney and Masonry Repair, Inc. (“E.M.”), pursuant to which E.M. was to perform the work on the Project that Aggressive had agreed in the Contract to perform for the Owner (the “Subcontract”). (ECF Nos. 33-4; 35 ¶ 16).

2. The Insurance Policies

a. The Harleysville Policy

As required by the Contract, Aggressive obtained a commercial general liability (“CGL”) insurance policy from Harleysville for the period July 1, 2013 to July 1, 2014 (the “Harleysville Policy”). (ECF Nos. 33-5 at 4; 35 ¶ 17). The Harleysville Policy sets limits of $1 million per occurrence and $2 million in the aggregate. (ECF Nos. 33-5 at 12; 35 ¶ 18). The Harleysville Policy contains an endorsement entitled “Additional Insured - Owners, Lessees or Contractor - Automatic Status When Required in Construction Agreement With You” (the “Additional Insured Endorsement”). (ECF Nos. 33-5 at 34; 35 ¶ 19). The Endorsement provides:

A. Section II - Who Is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured 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.

(ECF Nos. 33-5 at 34; 35 ¶ 19).

The Harleysville Policy's “Other Insurance” provision (the “Other Insurance Provision”) states:

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in Paragraph c. below.

b. Excess Insurance

(1) This insurance is excess over:

(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:

(i) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for “your work”; ...

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

(2) When this insurance is excess, we will have no duty under Coverages A or B to defend the insured against any “suit” if any other insurer has a duty to defend the insured against that “suit”. If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.

(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:

(a) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and

(b) The total of all deductible and self-insured amounts under all that other insurance.

(4) We will share the remaining loss, if any, with any other insurance that is not described in this Excess Insurance provision and was not bought specifically to apply in excess of the Limits of Insurance shown in the Declarations of this Coverage Part.

c. Method Of Sharing

If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.

If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

(ECF Nos. 33-5 at 25-26 ¶ 4; 35 ¶ 20).

The Harleysville Policy also has an endorsement entitled “Other Insurance Amendment” (the “Amendment”), which states:

Any coverage provided by . . . CG 20 33 Additional Insured - Owners, Lessees or Contractors - Automatic Status When Required in Construction Agreement with You . . . to an additional insured shall be excess over any other valid and collectible insurance available to the additional insured whether primary, excess, contingent, or on any other basis unless a written contract specifically requires that this insurance be primary and that the additional insured's primary coverage be noncontributory.

Even if the requirements of the above paragraph are met, this coverage shall share with other insurance available to the additional insured which is conferred onto said person or organization by a separate additional insured endorsement. This cost sharing shall be pursuant to Section IV, paragraph 4.c., Method of Sharing . . .

(ECF Nos. 33-5 at 35; 35 ¶ 21).

b. The USSIC Policy

The Owner is the named insured under a CGL insurance policy that USSIC issued for the period June 17, 2013 to June 17, 2014 (the “USSIC Policy”). (ECF Nos. 34-1 at 5; 35 ¶ 22).^[2] The USSIC Policy sets limits of $1 million per occurrence and $2 million in the aggregate, and applies in excess of a self-insured retention of $100, 000 each occurrence (the “SIR”). (ECF Nos. 34-1 at 20; 35 ¶ 23). The USSIC Policy defines the SIR as “the amount of dollars including ‘loss adjustment expense' for which the Named Insured is responsible for each ‘occurrence' or offense. This amount is charged to the ‘stop loss aggregate'.” (ECF No. 34-1 at 38 ¶ 7).^[3]

The USSIC's “Self-Insured Retention Endorsement Loss Adjustment Expense Included in Retention, ” (the “SIR Endorsement”), which sets the SIR at $100, 000 per occurrence, provides:

The Insurance provided by this...