162 A.D.3d 7, 2018-03242, Nadkos, Inc. v. Preferred Contractors Insurance Company Risk Retention Group LLC

Docket Nº:2018-03242, 6329, Index 651556/16
Citation:162 A.D.3d 7, 76 N.Y.S.3d 528
Opinion Judge:SINGH, J.
Party Name:NADKOS, INC., Plaintiff-Appellant, v. PREFERRED CONTRACTORS INSURANCE COMPANY RISK RETENTION GROUP LLC, Defendant-Respondent, Chesakl Enterprises, Inc., Defendant.
Attorney:Melito & Adolfsen P.C., New York (S. Dwight Stephens and Ignatius John Melito of counsel), for appellant. Diane Bucci, New York, for respondent.
Judge Panel:Acosta, P.J., Manzanet-Daniels, Tom, Oing, Singh, JJ. Singh, J.
Case Date:May 03, 2018
 
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162 A.D.3d 7

76 N.Y.S.3d 528

NADKOS, INC., Plaintiff-Appellant,

v.

PREFERRED CONTRACTORS INSURANCE COMPANY RISK RETENTION GROUP LLC, Defendant-Respondent, Chesakl Enterprises, Inc., Defendant.

No. 2018-03242

6329, Index 651556/16

Supreme Court of New York, First Department

May 3, 2018

[76 N.Y.S.3d 529] Plaintiff appeals from an order of the Supreme Court, New York County (Melissa A. Crane, J.), entered November 6, 2017, which granted defendant Preferred Contractors Insurance Company Risk Retention Group LLC ‘s (PCIC) motion for summary judgment, denied plaintiff’s cross motion for summary judgment, and declared that PCIC does not have a duty to defend or indemnify plaintiff in the underlying personal injury action.

Melito & Adolfsen P.C., New York (S. Dwight Stephens and Ignatius John Melito of counsel), for appellant.

Diane Bucci, New York, for respondent.

Acosta, P.J., Manzanet-Daniels, Tom, Oing, Singh, JJ.

OPINION

SINGH, J.

[76 N.Y.S.3d 530] The

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issue on this appeal, and one of first impression for this Court, is whether a risk retention group’s (RRG)1 failure to

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comply with the provision of Insurance Law § 3420(d)(2), requiring a timely notice of disclaimer, constitutes an unfair claim settlement procedure, prohibition of which is permitted under the federal Liability Risk Retention Act of 1986 (LRRA) (15 U.S.C. § 3901, et seq. ). We agree with Supreme Court that a foreign RRG, such as defendant Preferred Contractors Insurance Company Risk Retention Group LLC (PCIC), does not need to comply with Insurance Law § 3420(d)(2) because it is preempted by the LRRA.

This insurance coverage declaratory judgment action arises out of an accident that occurred on May 27, 2015 during a construction project in Brooklyn owned by 596 E19 Partners, LLC, which hired plaintiff Nadkos, Inc. as general contractor. Nadkos entered into a subcontract with defendant Chesakl Enterprises, Inc. to perform the structural steel work. Chesakl hired Mirkamel Vafaev as a subcontractor; he allegedly fell and was injured while performing work under his subcontract.

Pursuant to its subcontract with Nadkos, Chesakl obtained general liability insurance from PCIC, a RRG, naming 596 and Nadkos as additional insureds.

In July 2015, Vafaev commenced the underlying personal injury action in Kings County, against 596, Nadkos, Chesakl, and Oleksandr Nad, allegedly a principal of Nadkos, alleging negligence and violations of Labor Law § § 200 and 241(6).

On August 25, 2015, Colony Insurance Company, the commercial general liability insurer of Nadkos, tendered the underlying lawsuit to Chesakl and PCIC for defense and indemnification. On September 1, 2015, PCIC denied coverage to Chesakl on the basis of several policy exclusions. On November 16, 2017, PCIC disclaimed coverage to Nadkos based on the same exclusions.

On November 17, 2015, Colony advised PCIC that it had not timely disclaimed as required by Insurance Law § 3420, and therefore PCIC had waived any coverage defenses as to Nadkos under its policy. Later that day, PCIC responded that it is a RRG organized under the laws of Montana, with a Montana choice of law provision in the policy that renders New York Insurance Law § 3420 inapplicable. PCIC...

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