U.S. Specialty Ins. Co. v. Wesco Ins. Co.

529 F.Supp.3d 251

U.S. SPECIALTY INSURANCE COMPANY, Plaintiff,

v.WESCO INSURANCE COMPANY, Defendant.

Wesco Insurance Company, Third-Party Plaintiff,

v.Colony Insurance Company, Third-Party Defendant.

Wesco Insurance Company, Plaintiff,

v.Colony Insurance Company, Defendant.

1:19-cv-4260-MKV, 1:19-cv-3295-MKV

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

Signed March 29, 2021

Maria Jorgelina Foglietta, Daniel Wagner London, London Fischer LLP, New York, NY, for Plaintiff.

Jonathan Robert Harwood, Traub Lieberman Straus & Shrewsbury LLP, Hawthorne, NY, for Third-Party Defendant.

Jacob Jonathan Palefski, Kennedys CMK LLP, Max W. Gershweir, Law Office of Max W. Gershweir, New York, NY, for Defendant/Third-Party Plaintiff.

OPINION & ORDER

MARY KAY VYSKOCIL, United States District Judge:

These consolidated actions involve a coverage dispute among insurers in connection with an underlying lawsuit for injuries that a worker allegedly sustained during a construction project. U.S. Specialty Insurance Company ("USSIC") seeks summary judgment declaring that Wesco Insurance Company ("Wesco") is obligated to defend and indemnify three USSIC insureds, SGN 443 Greenwich Street Owner LLC ("SGN"), 443 Developer LLC ("443 Developer"), and Collaborative Construction Management LLC ("CCM"), that were involved in the project and have been name as defendants in the underlying lawsuit [19-cv-4260 ECF #45]. Wesco opposes USSIC's motion only in part, only on the ground that Colony Insurance Company ("Colony") has a duty to defend 443 Developer on a primary basis. Wesco seeks summary judgment declaring that 443 Developer and Rockaway Contracting Corp. ("Rockaway"), another company involved in the project and named in the underlying lawsuit, are additional insureds under the relevant Colony policy and that Colony has a duty to defend them [19-cv-4260 ECF #44]. Colony opposes Wesco's motion. For the reasons set forth below, the motions of both USSIC and Wesco are GRANTED.

I. BACKGROUND ¹

A. Facts, Contracts, and Policies

SGN 443 Greenwich Street Owner LLC ("SGN") owned a warehouse at 443 Greenwich Street in New York City. See USSIC 56.1 ¶ 2; Wesco Counter to USSIC 56.1 ¶ 2; Colony 56.1 ¶¶ 3, 5. SGN hired 443 Developer LLC ("443 Developer") as the general contractor for a construction project to convert the warehouse into an apartment building. See USSIC 56.1 ¶ 2; Wesco Counter to USSIC 56.1 ¶ 2; Colony 56.1 ¶ 3. Collaborative Construction Management LLC ("CCM") was the construction manager for the project. See USSIC 56.1 ¶ 3; Wesco Counter to USSIC 56.1 ¶ 3. As discussed below, U.S. Specialty Insurance Company ("USSIC") issued a policy that provides insurance coverage to SNG, 443 Developer, and CCM for the construction project [ECF #46-3 ("USSIC Policy")]. See USSIC 56.1 ¶¶ 13–15; Wesco Counter to USSIC 56.1 ¶¶ 13–15.

443 Developer hired Rockaway Contracting Corp. ("Rockaway"), as a subcontractor, to perform drywall and carpentry work [ECF #46-7 ("443 Developer-Rockaway Subcontract")]. See USSIC 56.1 ¶ 1; Wesco Counter to USSIC 56.1 ¶ 1; Colony 56.1 ¶ 3. Rockaway hired JPB Fabrications Inc. ("JPB") to perform certain work Rockaway had agreed to perform [ECF #44-2 at 55–61 ("Rockaway-JPB Subcontract"), 62–65 ("Rockaway-JPB Subcontract Rider")]. See USSIC 56.1 ¶ 7; Wesco Counter to USSIC 56.1 ¶ 7; Colony 56.1 ¶ 4. JPB, in turn, hired PTC Construction Corp. ("PTC") to perform work that it had agreed to perform. See USSIC 56.1 ¶ 8; Wesco Counter to USSIC 56.1 ¶ 8; Colony 56.1 ¶ 6.

PTC employed Carlos Alberto Gomez-Gomez ("Gomez-Gomez"). See USSIC 56.1 ¶ 11; Wesco Counter to USSIC 56.1 ¶ 11; Colony 56.1 ¶ 7. He alleges that he was injured while working on the construction project. See USSIC 56.1 ¶ 10; Wesco Counter to USSIC 56.1 ¶ 10; Colony 56.1 ¶ 7. Gomez-Gomez brought an action against SNG, 443 Developer, CCM, Rockaway, and JPB, among others, in New York State Supreme Court, Queens County, Index No. 713583/2016 ("Gomez-Gomez Action"). See USSIC 56.1 ¶ 9; Wesco Counter to USSIC 56.1 ¶ 9; Colony 56.1 ¶ 7.

The 443 Developer-Rockaway Subcontract required Rockaway, and subcontractors "of every tier," to obtain insurance naming SNG, 443 Developer, and CCM as additional insureds. See 443 Developer-Rockaway Subcontract, Art. 8 & Exh. D; USSIC 56.1 ¶¶ 4–6; Wesco Counter to USSIC 56.1 ¶¶ 4–6. The subcontract contains an indemnification provision in which Rockaway agreed to defend, indemnify, and hold harmless SNG, 443 Developer, and CCM from claims relating to Rockaway's subcontractors of any level. USSIC 56.1 ¶ 6; Wesco Counter to USSIC 56.1 ¶ 6. It specifies that Rockaway's insurance would be "primary insurance to the additional insured parties." USSIC 56.1 ¶ 5; Wesco Counter to USSIC 56.1 ¶ 5. The USSIC Policy that provides coverage to SNG, 443 Developer, and CCM also specifies that it is excess to other insurance. USSIC 56.1 ¶ 16; Wesco Counter to USSIC 56.1 ¶ 16.

Wesco Insurance Company ("Wesco") issued a policy to Rockaway [ECF #46-6 ("Wesco Policy")]. See USSIC 56.1 ¶ 17; Wesco Counter to USSIC 56.1 ¶ 17. The policy contains several endorsements that provide additional insured coverage to SNG, 443 Developer, and CCM as required by the 443 Developer-Rockaway Subcontract. See USSIC 56.1 ¶¶ 17–22; Wesco Counter to USSIC ¶¶ 17–22. The Wesco Policy specifies that the additional insured coverage "applies on a primary basis" if the underlying contract so requires. See USSIC 56.1 ¶ 20; Wesco Counter to USSIC ¶ 20. It also specifies that if other primary insurance is available to Rockaway, the Wesco Policy is excess. See Wesco 56.1 ¶ 17; Colony Counter to Wesco 56.1 ¶ 17. The Wesco Policy further specifies that, with respect to the additional insureds, where other primary insurance is available, Wesco will contribute on an equal-shares basis. See Wesco 56.1 ¶ 17; Colony Counter to Wesco 56.1 ¶ 17.

Colony Insurance Company ("Colony") issued a policy to JPB [ECF #44-8, 44-9, 44-10 ("Colony Policy")]. See Colony 56.1 ¶ 1; Wesco 56.1 ¶ 19. Although Colony disputes this, as the Court explains below, the Rockaway-JPB subcontract requires JPB to include Rockaway and 443 Developer as additional insureds. See Colony 56.1 ¶ 5; Wesco 56.1 ¶ 9; Rockaway-JPB Subcontract Rider ¶ 1(c); Rockaway-JPB Subcontract at 1; Rockaway-JPB Subcontract Rider at 1. The Colony Policy specifies that the insurance for additional insureds "required by written contract" is "primary." Wesco 56.1 ¶ 22; Colony Counter to Wesco 56.1 ¶ 22.

The Colony Policy contains an endorsement entitled "No Coverage Applies If Contractor Conditions Not Met" [ECF #44-10 at 2–3 ("Contractor Conditions Endorsement")]. The endorsement states that, "[a]s a condition precedent to any rights the insured may have under this Policy, the insured must comply with all of the conditions enumerated" in the endorsement. Contractor Conditions Endorsement at 1. It explains that, "[i]f the insured fails to comply," Colony "will have no obligation to either defend or indemnify the insured for any claims or legal actions brought against any insured." Id. The endorsement then specifies that "[t]he insured hereby warrants and agrees that any ‘contractor’ " has "maintained ‘adequate insurance.’ " Id. It defines contractor as a contractor, subcontractor, "or any other person or entity hired to perform work for the insured or on the insured's behalf." Id. at 2.

B. Procedural History

Wesco initiated an action against Colony in New York State Supreme Court, and Colony removed the case to this Court [19-cv-3295 ECF #2; accord 19-cv-4260 ECF #44-15]. In that case, Wesco asserted a claim for a declaratory judgment that Colony must defend and indemnify Rockaway, on a primary and non-contributory basis, and reimburse Wesco for defense costs in the Gomez-Gomez action. USSIC later initiated, in this Court, an action against Wesco, seeking a declaratory judgment that Wesco must defend and indemnify SGN, 443 Developer, and CCM on a primary and non-contributory basis [19-cv-4260 ECF #1]. Wesco then filed a third-party complaint against Colony, seeking a judgment declaring that, to the extent that Wesco must defend and indemnify 443 Developer, and is therefore liable to USSIC for defense costs, Colony is likewise required to provide coverage and pay costs [ECF #17]. The Court consolidated these actions for pretrial purposes [ECF #24].

USSIC moves for summary judgment against Wesco [ECF #45, 46, 47 ("USSIC 56.1"), 48 ("USSIC Mem."), 68, 69, 70]. Wesco opposes USSIC's motion in part [ECF #52 ("Wesco Partial Opp."), 53 ("Wesco Counter to USSIC 56.1")]. Wesco moves for summary judgment against Colony [ECF #44, 44-4 ("Wesco Mem."), 60 ("Wesco 56.1"), 67, 67-3]. Colony opposes Wesco's motion [ECF #54, 55, 56 ("Colony Opp."), 57 ("Colony 56.1"), 65, 66 ("Colony Counter to Wesco 56.1")].

II. LEGAL STANDARDS

Summary judgment is appropriate where the moving party demonstrates that there are no genuine issues as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56 ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment." Anderson , 477 U.S. at 247–48, 106 S.Ct. 2505. In a diversity case, a federal court applies state substantive law, and the parties agree that New York law applies here. See Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp. , 302 F.3d 83, 91 (2d Cir. 2002).

III. DISCUSSION

A. Wesco Must Defend and Indemnify SGN, 443 Developer, and CCM.

USSIC argues that (1) SGN, 443 Developer, and CCM are additional insureds under the Wesco Policy, (2) Wesco has a duty defend and indemnify them in the Gomez-Gomez action, and (3) Wesco's duty is primary to and non-contributory with USSIC's duty. Wesco does not disagree. See Wesco Partial Opp. at 1–2,12. Wesco opposes in part USSIC's motion for summary judgment only on the...