W. Waterproofing Co. v. Zurich Am. Ins. Co., 20-cv-3199 (AJN)

Western Waterproofing Company, Inc., Plaintiff, v. Zurich American Insurance Company, et al., Defendants.

No. 20-cv-3199 (AJN)

United States District Court, S.D. New York

February 3, 2022

OPINION & ORDER

ALISON J. NATHAN UNITED STATES DISTRICT JUDGE

Plaintiff Western Waterproofing Company, Inc. (“Western”) filed this action against Defendants Zurich American Insurance Company (“Zurich”), Allied World Specialty Insurance Company (“Allied Specialty”) Allied World Assurance Company (U.S.) Inc (“AWAC”), BDG Gotham Residential, LLC (“Gotham”), and ZDG, LLC (“ZDG”). Western seeks among other relief, declaratory judgments that Zurich and AWAC are obligated to defend and indemnify Western in a related case before this Court, BDG Gotham Residential, LLC et al v. Western Waterproofing Company, Inc et al., No. 19-cv-06386. In that related case, Gotham and ZDG seek damages against Western for injuries that Western allegedly caused in a construction project (“the Underlying Lawsuit”). Since this action's initiation, the Court has granted the intervention of five additional insurance companies, Starr Indemnity & Liability Company (“Starr”) Navigators Insurance Company (“Navigators”), Philadelphia Indemnity Insurance Company (“PIIC”), Markel American Insurance Company (“Markel”), and Berkley Insurance Company (“Berkley”) (collectively, “the Excess Insurers”).

Currently pending before the Court are cross-motions for summary judgment on Zurich's and AWAC's duties to defend Western in the Underlying Lawsuit and a motion filed by Gotham and ZDG to consolidate this action with the Underlying Lawsuit.^[1] The Excess Insurers, who could face financial liability if Zurich is found to have a duty to defend or indemnify Western, also oppose Western's motion for summary judgment and support Zurich's motion for summary judgment. For the reasons that follow, the Court DENIES Western's motion as to Zurich, GRANTS Zurich's motion as to Western, GRANTS Starr and Navigators' motion as to Western, DENIES Western's motion as to AWAC, and GRANTS AWAC's motion as to Western. Further, the Court DENIES ZDG and Gotham's motion to consolidate.

I. Background

A. Factual Background

The following facts are drawn from the parties' statements and counter-statements made pursuant to Local Civil Rule 56.1.

1. The Gotham Plaza Project and the Underlying Lawsuit

Gotham, the owner of the land at 158 East 126th Street, New York, New York, in September 2016 contracted with construction manager ZDG for construction of an eleven-story mixed-use building known as the Gotham Plaza Project (“the Project”). Western-Zurich Joint Statement of Facts (“Zurich JSOF”) ¶¶ 1-2, Dkt. No. 84; Western-AWAC Joint Statement of Facts (“AWAC JSOF”) ¶¶ 1-2, Dkt. No. 83. In April 2017, ZDG entered into a subcontract with Western for the installation of a curtainwall facade at the Project. Zurich JSOF ¶ 3. The subcontract required, among other provisions, that Western “furnish all of the labor, materials, equipment, and services, including, but not limited to, competent supervision, shop drawings, samples, tools and scaffolding as are necessary for the proper performance of the Work, ” and that it “use its best care, skill and diligence in supervising, directing and performing the Work.” AWAC Counter 56.1 Statement ¶¶ 1-2, Dkt. No. 104. It further required that Western “comply with all applicable city, state and federal laws, rules, regulations and codes of any governmental authority having jurisdiction over the Project.” Id. ¶ 3; see also id. ¶ 4 (providing that Western is “solely and fully responsible for the safe condition, protection and security of the site, its Work and its own personnel, materials, supplies, tools, vehicles and equipment, whether on or off the Project Site”).

On June 25, 2018, performing under the subcontract, Western used a Jekko MPK20 Minipicker (“the Jekko”) to lift facade panels into place. Zurich JSOF ¶ 4. While lifting a panel into place, the Jekko tipped over, allegedly damaging certain property and injuring two ironworkers under Western's employ, Christopher Jackson and Jorge Delgado. Id. ¶¶ 4-5. Delgado and Jackson filed personal injury suits against Gotham and ZDG and worker compensation claims against Western that are currently pending in New York state court. Id. ¶ 5.

In a letter dated July 13, 2018, ZDG declared Western to be in default under the subcontract “for, among other things and without limitation, its failure to proceed with its work in a timely manner and failure to obey all applicable laws, rules, codes, etc.” Western Counter to Zurich 56.1 Statement ¶ 9, Dkt. No. 110 (quoting AWAC JSOF, Ex. 2). ZDG provided Western 48 hours to cure its default. Id. ¶ 10. On August 9, 2018, ZDG sent Western a second letter, this one providing notice of termination for cause under the subcontract. Id. ¶ 11 (citing AWAC JSOF, Ex. 3). That letter stated in part:

As a result of the Incident, Western was issued violations by the New York City Department of Buildings (“DOB”) for: operating a crane (a) without a permit, (b) without tie-backs and (c) without engineered drawings. Moreover, Western was also cited for not having 16/32 hour rigging certifications for its personnel from an approved provider working with its rigging equipment; its crane operator's failure to provide a certificate license/qualification for the hoisting equipment; and for operating a crane without an Alt 2 permit showing the capacity of the crane, means and methods of rigging and radius parameters. These failures also resulted in similar violations being issued to ZDG.

Id. ¶ 12 (quoting AWAC JSOF, Ex. 3).

The letter further listed violations of 13 provisions of the subcontract. Id. ¶ 13. Last, it stated, “ZDG will hold Western responsible for and will seek to recover from Western and its surety, all of the costs, damages, expenses and liabilities ZDG has and will incur as a result of Western's defaults and breaches of the Subcontract.” Id. ¶ 14 (quoting AWAC JSOF, Ex. 3).

On June 4, 2019, Gotham and ZDG filed a suit against Western and Western Surety Company (“Surety”), which has no relation to Western, in New York state court. Id. ¶ 6. That action was removed to the Southern District of New York and assigned case number 19-cv-06386. Id. Gotham and ZDG's amended complaint raises three causes of action against Western for breach of contract, negligence, and gross negligence, and seeks damages in excess of $37, 147, 39. AWAC JSOF, Ex. 4 (“the Underlying Complaint”). The Underlying Complaint alleges that Western's acts and omissions “set into motion a chain of events” that resulted in the June 25 accident, “serious physical injury to Christopher Jackson and Jorge Delgado, physical damage to the Premises and the Project (including loss of use), and extensive cost overruns and delays.” Id. ¶ 41. Further, it states that ZDG had to “replace Western with another subcontractor” to complete the project and that, “[i]n addition to the foregoing, certain portions of the work performed by Western under the Subcontract prior to the termination thereof were defective and required remedial work and/or replacement.” Id. ¶¶ 42-43. Gotham and ZDG also alleged a breach of contract claim against Surety for its failure to perform under the performance bond following Western's default under the subcontract. Id. ¶¶ 69-72. The Underlying Lawsuit has proceeded and is presently in discovery. See No. 19-CV-06386, Dkt. No. 81 (S.D.N.Y. Nov. 17, 2021).

2. Zurich's coverage

At the center of the present cross-motions are two insurance policies. The first of these policies was issued by Zurich. ZDG maintained a Contractor Controlled Insurance Plan (“CCIP”), which provided certain insurance coverage to contractors that provided direct labor to the Project and were enrolled in the CCIP. Zurich JSOF ¶ 7. The CCIP included a Commercial Insurance policy issued by Zurich, effective from November 16, 2015, to November 16, 2019, which contained a Commercial General Liability Coverage Form (the “Zurich CGL Policy”). Id. ¶ 8 (citing Zurich JSOF, Ex. 4). Also included in the CCIP was a Workers Compensation and Employers Liability Policy issued by another Zurich Company, American Zurich Insurance Company (the “Zurich WC/EL Policy”). Zurich Counter 56.1 Statement ¶¶ 5-6, Dkt. No. 98. Western qualifies as a named insured under both the Zurich CGL Policy and the Zurich WC/EL Policy. Id. ¶¶ 3-4, 6-9.

The Zurich CGL Policy provides that Zurich “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury" or ‘property damage' to which this insurance applies. [Zurich] will have the right and duty to defend the insured against any ‘suit' seeking those damages. However, [Zurich] will have no duty to defend the insured against any ‘suit' seeking damages for ‘bodily injury' or ‘property damage' to which this insurance does not apply.” Id. ¶ 24. To be covered, “[t]he ‘bodily injury' or ‘property damage' [must be] caused by an ‘occurrence.'” Id. An occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. ¶ 25.

Bodily injury is defined as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” Id. ¶ 26. Property damage includes both “[p]hysical injury to tangible property, including all resulting loss of use of that property” and “[l]oss of use of tangible property that is not physically injured.” Id. ¶ 27. This coverage is subject to a series of exclusions that preclude coverage by Zurich. Id. ¶ 28. The Zurich CGL Policy has a limit of $2 million for each occurrence, subject to deductibles. Western Counter to Excess Insurers 56.1 Statement ¶ 7, Dkt....