Admiral Indem. Co. v. Travelers Cas. & Sur. Co. of Am.
| Decision Date | 08 August 2012 |
| Docket Number | No. 11 Civ. 1158(JGK).,11 Civ. 1158(JGK). |
| Citation | 881 F.Supp.2d 570 |
| Parties | ADMIRAL INDEMNITY COMPANY, Plaintiff, v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Defendant. |
| Court | U.S. District Court — Southern District of New York |
OPINION TEXT STARTS HERE
Arnold Stream, Law Office of Arnold Stream, New York, NY, for Plaintiff.
Arthur N. Lambert, M. Diane Duszak, Frenkel Lambert Weiss Weisman & Gordon, LLP, New York, NY, for Defendant.
The plaintiff, Admiral Indemnity Company (“Admiral”), brings this action against Travelers Casualty and Surety Company of America (“Travelers”), for declaratory judgment that Travelers is obligated to pay all or part of the costs Admiral incurred in defending 315 East 69th Street Owners Corporation (“Owners Corp.”) in a state court action. Owners Corp. was insured by both Admiral and Travelers. Admiral and Travelers have each moved for summary judgment.
Because Admiral was the primary insurer for the defense costs of the state court action, and Travelers only provided excess coverage, Travelers is entitled to summary judgment dismissing the claim that it participate in the defense costs of that action.
The following facts are undisputed unless otherwise noted.
In 2005, Owners Corp., a condominium association, purchased insurance from both Admiral and Travelers. (Pl.'s R. 56.1 Stmt. at ¶¶ 1, 12; Def.'s R. 56.1 Stmt. at ¶¶ 1, 12.) Admiral issued Owners Corp. a commercial general liability insurance policy (“Admiral Policy”). (Pl.'s R. 56.1 Stmt. at ¶¶ 12–15; Def.'s R. 56.1 Stmt. at ¶¶ 12–15.) The Admiral Policy covered “bodily injury,” “property damage,” and “personal and advertising injury” among other things. (Pl.'s R. 56.1 Stmt. at ¶¶ 14–16; Def.'s R. 56.1 Stmt. at ¶¶ 14–16.) The Admiral Policy was an occurrence policy that applied to any occurrence “during the policy period.” (Admiral Policy, Affidavit of Jessica M. Mendelsohn, sworn to Oct. 12, 2011 (“Mendelsohn Aff.”), Ex. 5, at 5.) “Occurrence” is defined by the policy as “an accident, including continuous or repeated exposures to substantially the same general harmful conditions.” (Admiral Policy, Mendelsohn Aff. Ex. 5, at 18.)
Travelers issued Owners Corp. Non–Profit Management and Organization Liability Insurance (“Travelers Policy”). (Pl.'s R. 56.1 Stmt. at ¶ 1; Def.'s R. 56.1 Stmt. at ¶ 1.) The Travelers Policy provided Owners Corp. with directors and officers liability coverage. (Compl. ¶ 9.) The Travelers Policy provided coverage on a “claims made” basis, for claims first made against the insured and reported to Travelers during the policy period or during a further three-year discovery period. (Pl.'s R. 56.1 Stmt. at ¶¶ 3; Def.'s R. 56.1 Stmt. at ¶ 4.)
The policy periods for both the Admiral Policy and the Travelers Policy initially ran from February 1, 2005, until February 1, 2006. (Pl.'s R. 56.1 Stmt. at ¶¶ 1, 12; Def.'s R. 56.1 Stmt. at ¶¶ 1, 12.) Both Travelers and Admiral issued identical successor policies for the period from February 1, 2006 until February 1, 2007. (Pl.'s R. 56.1 Stmt. at ¶¶ 10–11, 18–19; Def.'s R. 56.1 Stmt. at ¶¶ 10–11, 18–19.)
Both the Admiral Policy and the Travelers Policy contain “Other Insurance” clauses. The Admiral Policy Other Insurance clause provides:
This insurance is primary except when [a number of conditions which are not relevant in this case occur.] If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary.
(Pl.'s R. 56.1 Stmt. at ¶ 20; Def.'s R. 56.1 Stmt. at ¶ 20.) In contrast, the Travelers Policy Other Insurance clause states:
If any Loss otherwise covered under this Policy is Insured under any other valid and collectible Policy or policies, then this Policy shall apply only in excess of the amount of any deductibles, retentions and limits of liability under such other insurance, whether such other insurance is stated to be primary, contributory, excess, contingent, or otherwise unless such other insurance is written specifically excess of this Policy by reference in such other Policy to the Policy Number of this Policy.
(Pl.'s R. 56.1 Stmt. at ¶ 9; Def.'s R. 56.1 Stmt. at ¶ 9.) “Loss” under the Travelers Policy includes defense costs. (Pl.'s R. 56.1 Stmt. at ¶ 7; Def.'s R. 56.1 Stmt. at ¶ 7.)
The Other Insurance clauses of the Admiral and Travelers Policies remained unchanged when the policies were reissued from 2006 to 2007. (Pl.'s R. 56.1 Stmt. at ¶¶ 10–11, 18–19; Def.'s R. 56.1 Stmt. at ¶¶ 10–11, 18–19.) However, in 2007, Admiral issued a revised policy that succeeded the Admiral 2006–2007 Policy and ran from February 1, 2007, until March 1, 2008 (“Revised Admiral Policy”). In the Revised Admiral Policy, Admiral altered its Other Insurance clause. The Revised Admiral Policy Other Insurance clause provides:
If other valid and collectible insurance is available to the insured for a loss we cover ... [t]his insurance is in excess over ... [a]ny other valid and collectible insurance, including its defense cost provisions. This insurance shall be specifically excess of any other policy by which another insurer has a duty to defend a ‘suit’ for which this insurance may also apply. When this insurance in excess, we will have no duty ... 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.
(Affidavit of Robert Buchert, sworn to Nov. 2, 2011 (“Buchert Aff.”), at ¶ 8.)
The Travelers Policy also has a “Property Damage Exclusion.” (Pl.'s R. 56.1 Stmt. at ¶ 8; Def.'s R. 56.1 Stmt. at ¶ 8.) The Property Damage Exclusion excludes liability for any “[l]oss in connection with any [c]laim ... for or arising out of any damage, destruction, loss of use or deterioration of any tangible property....” (Pl.'s R. 56.1 Stmt. at ¶ 8; Def.'s R. 56.1 Stmt. at ¶ 8.)
Admiral seeks to hold Travelers liable for a share of the costs that Admiral has expended in the defense of a lawsuit that was brought in the New York State Supreme Court, New York County, entitled Stephen Gallup v. 315 East 69th Street Owners' Corp., et al. (the “Gallup Action”). The occurrence that formed the basis for the Gallup Action occurred in March 2005.1Stephen Gallup owned the penthouse apartment at 315 East 69th Street (“the Building”) including a greenhouse attached to the apartment. (Pl.'s R. 56.1 Stmt. at ¶¶ 33–35; Def.'s R. 56.1 Stmt. at ¶¶ 33–35.) Gallup had an agreement (the “Greenhouse Agreement”) with Owners Corp. that allegedly gave Gallup primary responsibility over the greenhouse, including maintenance and repair. (Pl.'s R. 56.1 Stmt. at ¶ 35.)
In or about March 2005, as the alleged result of ongoing repair work to the exterior of the Building undertaken by Owners Corp., Gallup's greenhouse was damaged. ( See Gallup Complaint at ¶ 22.) Gallup and Owners Corp. spent months negotiating to resolve the damages issues. ( See Gallup Complaint.) The negotiations included an alleged Alteration Agreement between the parties. ( See Gallup Complaint at ¶ 66.) However, as a result of an impasse in negotiations, Gallup brought suit in state court in April, 2006 against Owners Corp. and others. ( See Gallup Complaint at ¶¶ 1–9.)
Gallup's complaint asserted eleven causes of action seeking: (1) a permanent injunction barring Owners Corp. from attempting to repair or replace the greenhouse; (2) a declaration that the Alteration Agreement was enforceable; (3) a declaration that Gallup was in compliance with the Greenhouse Agreement; (4) a mandatory injunction requiring Owners Corp. to abide by the Greenhouse and Alteration Agreements; (5) recovery for damages to Gallup's real and personal property, due to faulty repairs; (6) constructive eviction from a part of Gallup's unit, due to faulty repairs; (7) breach of the warranty of habitability, due to faulty repairs; (8) a permanent injunction barring Owners Corp. from attempting to terminate Gallup's proprietary lease, based upon his refusal to pay costs and expenses that Owners Corp. incurred due to faulty repairs; (9) a claim against Steven Seplow, the building manager employed by Owners Corp., for damages from the faulty repairs; (10) a claim for defamation against Steven Seplow; and (11) attorneys' fees. (Pl.'s R. 56.1 Stmt. at ¶ 36; Def.'s R. 56.1 Stmt. at ¶ 36.)
In May 2006 Travelers disclaimed coverage for the Gallup Action, explaining in a letter dated May 11, 2006, that all claims in the action fell within the Property Damage Exclusion. (Pl.'s R. 56.1 Stmt. at ¶ 37 Def.'s R. 56.1 Stmt. at ¶ 37.) In a letter dated May 15, 2006, Admiral partially disclaimed coverage, citing exclusions in the Admiral Policy. (Buchert Aff. at ¶ 3; Buchert Letter, Buchert Aff. Ex. F.) Admiral disclaimed coverage as to all causes of action except the fifth (property damage), the ninth (faulty repairs by Steven Seplow), and the tenth (defamation against Steven Seplow). (Buchert Letter, Buchert Aff. Ex. F.) However, recognizing that “the duty to defend is broader than the duty to indemnify,” Admiral agreed to defend Owners Corp. under the Admiral Policy for all claims in the Gallup Action. (Buchert Aff. at ¶ 3; see also Buchert Letter, Buchert Aff. Ex. F.)
On February 18, 2011, Admiral filed the present action against Travelers. Jurisdiction is based on diversity of citizenship jurisdiction. 28 U.S.C. § 1332. Admiral alleges three causes of action: (1) declaratory judgment that Travelers was obligated to pay all or part of the defense costs Admiral incurred defending the Gallup Action; (2) declaratory judgment that Travelers owed indemnification to Admiral for all or part of the liabilities that arose with respect to the Gallup Action; and (3) recovery for breach of contract on the theory that Admiral was an “implied third party beneficiary” of the contract between OwnersGroup and Travelers. ( See Compl. ¶¶ 31–40.) 2
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