Bp A.C. Corp. v. One Beacon, 6188.

• Decision Date: 06 July 2006
• Docket Number: 6188.
• Citation: 2006 NY Slip Op 05297,821 N.Y.S.2d 1,33 A.D.3d 116
• Parties: BP AIR CONDITIONING CORP., Appellant-Respondent, v. ONE BEACON INSURANCE GROUP, Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

33 A.D.3d 116

821 N.Y.S.2d 1

2006 NY Slip Op 05297

BP AIR CONDITIONING CORP., Appellant-Respondent, v. ONE BEACON INSURANCE GROUP, Respondent-Appellant.

6188.

Appellate Division of the Supreme Court of the State of New York, First Department.

July 6, 2006.

Wechsler & Cohen, LLP, New York City (Mitchell S. Cohen and Anne T. Cirasuolo of counsel), for appellant-respondent.

DeCicco, Gibbons & McNamara, P.C., New York City (Ioana Gheorghiu and Daniel J. McNamara of counsel), for respondent-appellant.

OPINION OF THE COURT

FRIEDMAN, J.P.

The question presented is whether plaintiff, as an additional insured under a commercial general liability (CGL) policy, is entitled to a defense in an action in which it is uncertain whether any eventual judgment against plaintiff will be within the scope of the coverage. Our answer to this question is dictated by the controlling principle that, in the absence of unambiguous contractual language to the contrary, an additional insured "enjoy[s] the same protection as the named insured" (Pecker Iron Works of N.Y. v Traveler's Ins. Co., 99 NY2d 391, 393 [2003] [internal quotation marks and citations omitted]). Since nothing in the subcontract or CGL policy here at issue indicates that plaintiff, as an additional insured, is to be afforded less protection than the named insured, we conclude, as did the IAS court, that the insurer's duty to defend plaintiff in the underlying personal injury action has been triggered. Consistent with the further holding of Pecker, we modify the IAS court's declaration to make clear that plaintiff is afforded primary coverage in the underlying action by the additional insured endorsement, rather than by any policy covering plaintiff as a named insured.

The relevant facts may be briefly stated. In 2000, Henegan Construction Company, Inc. (Henegan), a general contractor, hired plaintiff BP Air Conditioning Corp. (BP) as HVAC subcontractor for a construction project at One World Trade Center (the Project). BP, in turn, subcontracted the HVAC-related steamfitting work for the Project to Alfa Piping Corp. (Alfa). The purchase order representing the agreement between BP and Alfa required Alfa to obtain "Comprehensive General Liability Insurance (including contractual liability) and automobile insurance in amounts of not less than $4,000,000 combined single limit, naming [BP] additional insured, all policies to provide for 30 day notice to [BP] prior to cancellation or material modification."

As required by Alfa's agreement with BP, Alfa's CGL policy for the relevant period included an additional insured endorsement providing in pertinent part as follows:

"Who is An Insured (Section II) is amended to include as an 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 arising out of your ongoing operations performed for that insured. A person's or organization's status as an insured under this endorsement ends when your operations for that insured are completed."

Defendant One Beacon Insurance Group (Beacon) is the successor in interest to the insurance company that issued Alfa's CGL policy.

On December 5, 2000, Joseph Cosentino, while working on the Project as an employee of Karo Sheet Metal, Inc. (Karo), another subcontractor of BP, allegedly was injured when he slipped and fell on a patch of oil at the work site. Cosentino commenced an action against Henegan, which action is now captioned Cosentino v Henegan Construction Company, Inc., et al. (New York County Clerk's Index No. 110853/01 [hereinafter, the Cosentino Action]). Henegan brought a third-party action against BP and Alfa; thereafter, Cosentino added BP and Alfa (among other parties) as direct defendants. After Beacon declined BP's tender of its defense in the Cosentino Action, BP commenced a fourth-party action against Beacon seeking a declaration as to BP's rights as an additional insured under Alfa's policy. BP's fourth-party claim against Beacon was subsequently severed from the Cosentino Action, giving rise to the instant independent declaratory judgment action, to which BP and Beacon are the sole parties.

It appears from the evidence gathered through discovery in the Cosentino Action (and placed in the record before us) that a question of fact exists as to which contractor was the source of the patch of oil on which Cosentino slipped. Specifically, the oil may have originated from any of the contractors who used oil to thread pipe at the work site. Such contractors included Alfa, Forest Electric Corporation (the electrical contractor), and a sprinkler contractor. Of these contractors, only Alfa was a subcontractor of BP.

The instant appeal arises from BP's motion for partial summary judgment in this declaratory judgment action. The motion sought a declaration requiring Beacon to undertake BP's defense in the Cosentino Action and to reimburse BP for its past defense costs therein. Beacon opposed the motion, arguing, inter alia, that BP's additional insured coverage under Alfa's policy would not be triggered until the cause of Cosentino's accident had been adjudicated. Beacon also argued, in the alternative, that, even if its duty to defend BP under Alfa's policy had been triggered, it could not be determined whether Beacon was required to bear 100% of BP's defense costs as the primary insurer. Beacon contended that coverage by other carriers, who were not parties to this action and whose policies were not before the court, might also have been triggered, requiring such carriers to share in the cost of defending BP. Beacon suggested that such coinsurers might include BP's own carrier and the carrier insuring Karo, the BP subcontractor that had employed Cosentino. In this regard, Beacon pointed out that Karo's contract with BP contained an insurance provision (identical to the one in the BP/Alfa contract) requiring Karo to have its CGL policy cover BP as an additional insured.

In the order appealed from, the motion court held that the allegations against Alfa in the Cosentino Action had triggered BP's additional insured coverage under Alfa's policy, thereby obligating Beacon to defend BP, and granted BP's motion to the extent of issuing a declaration to that effect. The court denied the motion, however, to the extent it sought a declaration that Beacon's coverage was primary, on the ground that no such determination could be made without an examination of the other potentially applicable policies, which were not before the court.¹ BP has appealed, and Beacon has cross-appealed.

We turn first to the question raised by Beacon's cross appeal, namely, whether the pleadings and evidence in the Cosentino Action obligate Beacon to defend BP as an additional insured under Alfa's policy. For the reasons set forth below, we answer this question in the affirmative, as did the motion court.

We begin by reviewing the principles governing a liability insurer's duty to defend its insured. Our Court of Appeals very recently has had occasion to reiterate these principles:

"It is well settled that an insurance company's duty to defend is broader than its duty to indemnify. Indeed, the duty to defend is `exceedingly broad' and an insurer will be called upon to provide a defense whenever the allegations of the complaint `suggest ... a reasonable possibility of coverage' (Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 648 [1993]). `If, liberally construed, the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, false or baseless the suit may be' (Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663, 670 [1981]).

"The duty remains `even though facts outside the four corners of [the] pleadings indicate that the claim may be meritless or not covered' (Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 63 [1991]). For this reason, when a policy represents that it will provide the insured with a defense, we have said that it actually constitutes `litigation insurance' in addition to liability coverage (see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310 [1984], quoting International Paper Co. v Continental Cas. Co., 35 NY2d 322, 326 [1974]). Thus, an insurer may be required to defend under the contract even though it may not be required to pay once the litigation has run its course." (Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 [2006] [emphasis added].)

Under the foregoing principles, there can be no doubt that Beacon is obligated to defend BP in the Cosentino Action. Cosentino's amended complaint alleges that his injuries were caused by the negligence of, among other defendants, Alfa, BP's subcontractor and the subject policy's named insured. Thus, there is a "reasonable possibility" (Continental Cas. Co., 80 NY2d at 648) that the Cosentino Action will result in a judgment against BP within the scope of its coverage under Alfa's policy with Beacon. That policy, to reiterate, covers BP as an additional insured "with respect to liability arising out of [Alfa's] ongoing operations performed for [BP]." Plainly, if BP is ultimately held liable to Cosentino, such liability would "aris[e] out of [Alfa's] ongoing operations performed for [BP]" to the extent the factfinder in the Cosentino Action determines that Alfa's negligence in the course of its work as a BP subcontractor was a contributing cause of Cosentino's injuries. It has no bearing on the existence of a duty to defend that it is also possible that Beacon "may not be required to pay once the litigation has run its course" (Automobile Ins. Co. of Hartford v Cook, 7 NY3d at 137, supra).

Beacon concedes that the Cosentino Action may result in a judgment against BP within the scope of BP's...