Burlington Ins. Co. v. NYC Transit Auth.
| Decision Date | 11 August 2015 |
| Docket Number | 102774/11. |
| Parties | The BURLINGTON INSURANCE COMPANY, Plaintiff–Respondent, v. NYC TRANSIT AUTHORITY, et al., Defendants–Appellants. |
| Court | New York Supreme Court — Appellate Division |
Shein & Associates, P.C., Syosset (Charles R. Strugatz of counsel), for appellants.
Ford Marrin Esposito Witmeyer & Gleser, L.L.P., New York (Joseph D'Ambrosio, Andrew I. Mandelbaum and John A. Mattoon, Jr. of counsel), for respondent.
DAVID FRIEDMAN, J.P., KARLA MOSKOWITZ, PAUL G. FEINMAN, JUDITH J. GISCHE, and BARBARA R. KAPNICK, JJ.
FRIEDMAN, J.P.
The outcome of this appeal turns on whether defendants New York City Transit Authority (NYCTA) and Metropolitan Transit Authority (MTA) are entitled to coverage from plaintiff The Burlington Insurance Company (Burlington) for the subject loss under policy endorsements making defendants additional insureds, in pertinent part, “only with respect to liability for ‘bodily injury,’ ... caused, in whole or in part, by [the named insured's] acts or omissions ... [i]n the performance of [the named insured's] ongoing operations[.]” The record establishes that the injury to the plaintiff in the underlying action (who was not an employee of the named insured) was caused by an “act” of the named insured in its ongoing operations on behalf of defendants, even though the record also establishes that the named insured was not at fault for causing the accident. This Court's most recent precedents have construed additional insured endorsements containing substantially the same “acts and omissions” language as do the endorsements at issue here as providing additional insured coverage where there is a causal link between the named insured's conduct and the injury, regardless of whether the named insured was negligent or otherwise at fault for causing the accident. Adhering to these precedents, we hold that defendants were entitled to coverage as additional insureds in the underlying action under the subject insurance policy. Given that the policy covers defendants for this loss, the anti-subrogation rule bars Burlington from recovering, as subrogee of the City of New York, contractual indemnification from defendant NYCTA, under the lease agreement between the City and NYCTA, for the amounts Burlington has paid to defend and settle the underlying action on behalf of the City.
The underlying personal injury action arose from a subway construction project in Brooklyn, for which defendants NYCTA and MTA engaged nonparty Breaking Solutions to supply concrete-breaking excavation machines and personnel to operate the machines under NYCTA's direction. Pursuant to the insurance requirements of its contract, Breaking Solutions obtained a commercial general liability policy from Burlington for the period from July 17, 2008, through July 17, 2009. The Burlington policy includes endorsements designating NYCTA, MTA and the City (the fee owner of subway properties, which are leased to NYCTA) as additional insureds, with such additional insured coverage restricted to, in pertinent part, liability for bodily injury “caused, in whole or in part,” by “acts or omissions” of Breaking Solutions.1
On February 14, 2009, an explosion occurred in the Brooklyn subway tunnel that was being excavated by a Breaking Solutions machine. The explosion occurred when the excavator came into contact with an energized electrical cable buried below the concrete. It is undisputed that it had been NYCTA's responsibility to identify and mark or protect hazards in advance, so as to enable the excavator operator to avoid them, and to shut off power to electrical cables in the work area. Thomas Kenny, an employee of NYCTA, was injured when he fell from an elevated work platform as a result of the explosion.
In April 2009, Kenny and his wife (suing derivatively) commenced a personal injury action against the City and Breaking Solutions in the United States District Court for the Eastern District of New York (the Kenny action). The City was sued as owner of the subway property for alleged violations of its nondelegable duties under Labor Law § 240(1) and § 241(6). NYCTA was not named in the Kenny action, presumably because Kenny, as a NYCTA employee, was barred from suing it under the Workers' Compensation Law.
The City, as a putative additional insured under Breaking Solutions' policy, tendered its defense in the Kenny action to Burlington. While Burlington accepted the tender, it initially did so subject to a reservation of the right to withdraw from the City's defense, and to deny it indemnification, in the event it emerged that the loss was not caused in whole or in part by Breaking Solution's acts or omissions. In December 2009, however, NYCTA sent Breaking Solutions a letter warning that outstanding and future payments under its contract would be withheld unless Burlington agreed to indemnify the City (to which, as previously noted, NYCTA had its own contractual indemnification obligation). Thereafter, Burlington stated that it would indemnify the City in the Kenny action, essentially withdrawing its previous reservation of rights. As a Burlington executive subsequently explained by affidavit in this action, Burlington withdrew its reservation of rights with respect to the City's coverage in the Kenny action “as an accommodation to its policyholder,” Breaking Solutions.
In or about March 2010, the City commenced a third-party action against NYCTA and MTA, asserting claims for contractual indemnification pursuant to the 1953 lease and for common-law contribution. Burlington accepted tender of the defense of NYCTA and MTA as putative additional insureds under the policy issued to Breaking Solutions. As it had initially done with respect to the City's defense, Burlington assumed the defense of NYCTA and MTA subject to a reservation of the right to withdraw in the event it emerged that the loss did not fall within the scope of the additional insured coverage. Burlington never withdrew its reservation of rights with respect to NYCTA's and MTA's coverage.
In the course of discovery in the Kenny action, it emerged that, while the Breaking Solutions excavator had caused the explosion by disturbing the buried cable, there had not been any negligence or other fault on the part of the Breaking Solutions employee who operated the excavator. Rather, because NYCTA had failed to identify and mark or protect the cable in preparation for the work, the Breaking Solutions operator had not known of the cable's presence, and NYCTA's failure to shut off power to the cable led to the explosion. NYCTA's internal documents essentially admitted that it was at fault for the incident. For example, in a February 17, 2009 memorandum, a NYCTA superintendent concluded that “the [excavation equipment] [o]perators were operating the equipment properly and had no way of knowing that the cable was submerged in the invert.” Another internal NYCTA memorandum, dated March 16, 2009, concluded that “this accident was primarily due to an inadequate/ineffective inspection process for identifying job-site hazards involving buried energized cables.”
The evidence that Breaking Solutions had not been at fault for the explosion prompted Burlington to disclaim coverage of NYCTA and MTA by letter dated December 10, 2010. Burlington took the position that, because there was no evidence that the explosion had resulted from negligence or other fault on the part of Breaking Solutions, Kenny's injury had not been “caused, in whole or in part,” by any “act or omission” of Breaking Solutions (the named insured), and that NYCTA and MTA therefore were not, for purposes of the Kenny action, additional insureds of Burlington under the relevant endorsements to Breaking Solutions' policy. Thereafter, in March 2011, Burlington commenced the present action in Supreme Court, New York County, asserting a single cause of action for a declaration that it does not owe NYCTA or MTA coverage with respect to the Kenny action under the Breaking Solutions policy.
In September 2011, the federal court granted a motion by the plaintiffs in the Kenny action to dismiss their own claims against Breaking Solutions with prejudice.2 In the same order, the court also dismissed from the Kenny action, without prejudice, the City's third-party claims against NYCTA and MTA, for the purpose of expediting the adjudication of the main action against the City. The City's and Breaking Solutions' cross claims against each other were dismissed pursuant to stipulation.
In June 2012, Burlington settled the Kenny action on behalf of the City, paying the plaintiffs $950,000. The following month, Burlington moved for leave to amend its complaint in this action to add a second cause of action, seeking to recover, as subrogee of the City's contractual indemnification rights under the 1953 lease, the amounts Burlington had expended on behalf of the City in the settlement and defense of the Kenny action. NYCTA and MTA opposed the motion to amend the complaint and cross-moved for summary judgment on the declaratory judgment claim pleaded in the original complaint. While that motion and cross motion were still pending, Burlington made a second motion for summary judgment declaring that it...
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