Crescent Beach Club LLC v. Indian Harbor Ins. Co.

• Decision Date: 22 June 2020
• Docket Number: 18-CV-5951(SJF)(AKT)
• Citation: 468 F.Supp.3d 515
• Parties: CRESCENT BEACH CLUB LLC, 333 Bayville Ave. Restaurant Corp., and James Scoroposki, Plaintiffs, v. INDIAN HARBOR INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of New York

468 F.Supp.3d 515

CRESCENT BEACH CLUB LLC, 333 Bayville Ave. Restaurant Corp., and James Scoroposki, Plaintiffs,

v.INDIAN HARBOR INSURANCE COMPANY, Defendant.

18-CV-5951(SJF)(AKT)

United States District Court, E.D. New York.

Signed June 22, 2020

Matthew S. Aboulafia, Aboulafia Law Firm LLC, New York, NY, Jack Glanzberg, New York, NY, for Plaintiffs.

Matthew John Shiroma, Day Pitney LLP, Hartford, CT, for Defendant.

ORDER

FEUERSTEIN, District Judge:

I. Introduction

On or about September 27, 2018, plaintiffs Crescent Beach Club LLC ("CBC"), 333 Bayville Ave. Restaurant Corp. ("333 Bayville") and James Scoroposki ("Scoroposki") (collectively, "plaintiffs") commenced this action in the Supreme Court of the State of New York, County of Nassau (the "state court"), against defendant Indian Harbor Insurance Company ("Indian Harbor" or "defendant") seeking, inter alia , judgment declaring that defendant is required to defend and indemnify them with respect to two (2) actions commenced by Robert Flores ("Flores") in the state court. On October 24, 2018, defendant filed: (A) a notice of removal pursuant to 28 U.S.C. §§ 1441 and 1446, removing the action to this Court based upon this Court's diversity of citizenship jurisdiction under 28 U.S.C. § 1332(a) ; and (B) an answer and counterclaims against plaintiffs and Ocean Restaurant (collectively, the "Crescent Beach parties"), seeking, inter alia , judgment declaring that defendant is not legally obligated to defend or indemnify the Crescent Beach parties in the underlying actions, and that CBC, 333 Bayville and Ocean Restaurant (collectively, "Crescent Beach") must reimburse defendant for past defense costs it incurred in one of the underlying actions. Pending before the Court are the parties’ respective cross motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons set forth below, the cross motions are granted in part and denied in part.

II. Background

A. Factual Allegations¹ .

Indian Harbor issued a commercial general liability insurance policy bearing Policy No. ESG300084401, effective June 17, 2016 through June 17, 2017 (the "Policy"), to 333 Bayville, providing limits of one million dollars ($1,000,000.00) per occurrence, subject to a ten thousand dollar ($10,000.00) per occurrence deductible. (56.1, ¶¶ 1, 3)² . Pursuant to Endorsement No. 1, the Policy lists CBC and "Ocean" as named insureds, (id. , ¶ 2), but the parties dispute whether Scoroposki is also an insured under the Policy. (See CBP 56.1, ¶ 2).

The Policy also contains an endorsement providing an exclusion of coverage for "Designated Ongoing Operations" (the "Construction Exclusion"), (56.1, ¶ 4), which states:

"This policy does not apply to any ‘bodily injury’, ‘property damage’, ‘personal and advertising injury’, or any other loss, cost, defense fee, expense, injury, damage, claim, dispute or ‘suit’ either arising out of, or related to, any construction, renovation, rehabilitation, demolition, erection, excavation or remedition [sic ] of any building and includes planning, site preparation, surveying or other other [sic ] construction or development of real property. This exclusion, however, shall not apply to routine maintenance activities."

(Id. , ¶ 5).

On or about February 2, 2017, Flores commenced an action in the state court against Crescent Beach (the "Crescent Action"), alleging, inter alia , that on or about January 24, 2017³ , he "was a worker lawfully at the premises located at 333 Bayville Avenue, Bayville, NY 11709" (the "Premises"). (56.1 ¶¶ 7-9). The complaint in the Crescent Action alleges, inter alia , that Crescent Beach: (i) owned the Premises; (ii) was "the general contractor at the premises regarding the work, labor and service performed thereat;" (iii) "entered into an agreement to have certain work, labor and services performed at the premises;" (iv) "obtained permit(s) to perform certain work at the premises;" (v) "directed ... controlled ... [and] managed the work performed at the premises and the work and/or the apparatus provided and utilized in connection with the work performed at the premises;" and (vi) violated Sections 200, 240(1) and 241(6) of the Labor Law of the State of New York.⁴ (56.1, ¶¶ 10-14, 19-21). In addition, the Crescent Action complaint alleges, inter alia , (i) that Flores "was lawfully at the premises as an employee of Phil-Mar, Inc. [‘Phil-Mar’], hired to perform work, labor and/or services at the premises;" (ii) that "on January 24, 2017 [sic ], while ... lawfully engaged in his employment in the work, demolition, construction, alteration and/or renovation of the aforesaid premises, [Flores] was caused to fall from a height off a wooden structure located on the premises, thereby sustaining severe and permanent personal injuries;" (iii) that "there existed at the aforementioned premises, a dangerous, hazardous, unguarded, unsupervised, unprotected and unsafe condition;" and (iv) that Flores's injuries were "caused by reason of the negligence, carelessness and recklessness of [Crescent Beach], their agents, servants and/or employees, in their ownership, operation, management, maintenance, control, supervision, inspection and repair of the premises." (Id. , ¶¶ 15-18).

On or about February 16, 2017, Indian Harbor received first notice of the Crescent Action. (56.1, ¶ 23; Counterclaims ["Countercl."], ¶ 29; CBP 56.1, ¶ 33). During his deposition on January 3, 2019, Richard Simanoff ("Simanoff") testified, in relevant part: (i) that he was the wholesale insurance broker who placed the Policy for plaintiffs; (ii) that in a February 21, 2017 e-mail to Michael Barnaba ("Barnaba"), defendant's claim handler, he wrote, "This claim has nothing to do with a construction project. It was with respect to routine maintenance work which should have been included as an exception in the form;" (iii) that in a February 23, 2017 e-mail sent by Matthew Silver ("Silver"), the manager of the Premises, to Barnaba, which was copied to Simanoff, Silver wrote, "This was a small maintenance job at the entrance pergola by Bayville Avenue;" and (iv) that in a March 3, 2017 e-mail, Simanoff wrote, "This situation is similar to hiring a landscaper at your house and then calling him back to fix or remove something." (56.1, ¶¶ 75-83).

During his deposition on February 11, 2019, Barnaba testified, in relevant part, (i) that he is the adjuster assigned to handle the claim giving rise to this action; and (ii) that "[t]he first report from the broker was that he [Flores] was pulling vines off of the pergola." (56.1, ¶¶ 84-86). A March 11, 2017 claims note by Barnaba indicates, inter alia ,

"I recall the broker told me on the phone upon receipt of my initial email that the plaintiff [Flores] was pulling vines down off the pergola when he fell, but in the email chain he indicates ‘The claimant was taking down the pergola and got hurt[.⁵ ]’ The insured has not been responsive to my emails seeking more specific project details. I note our construction exclusion is broad but not clearly defined. I don't know if ‘taking down’ the pergola would be construed to fall within the scope of ‘demolition’ (undefined) which is excluded. I also do not know what entails ‘routine maintenance activities’ (again undefined) as opposed to the various excluded construction activities. First and foremost we need a clear picture of the project which we presently lack. I am unable to determine coverage at this time. Therefore I think best course of action is to issue ROR, further investigate the scope of work (pull permits, depose plaintiff, plaintiff employer, insureds), and then review with Claims Legal if our Exclusion applies or not...."

(Aboulafia Decl., Ex. 13) (emphasis added).

Indian Harbor issued a reservation of rights letter dated March 13, 2017 (the "ROR"), (56.1, ¶ 24), pursuant to which it agreed to defend Crescent Beach in the Crescent Action under the Policy, subject to a reservation of rights, and quoted the Construction Exclusion, stating:

"We note Plaintiff [Flores] alleges he was injured while engaged in ‘demolition, construction, alteration and/or renovation of the aforesaid premises.’ Your policy specifically excludes any coverage for claims arising from Construction, Demolition, Renovation and Rehabilitation; however this Exclusion does not apply to routine maintenance activities.

At this time, we have insufficient information on the scope of work contracted and being performed by [Flores] to determine if the aforementioned Exclusion applies to bar coverage for this matter. Therefore, while we agree to undertake your defense at the outset of litigation, in accordance with any coverage which may be afforded by the policy, we must do so under a full reservation of rights. Once discovery has sufficiently progressed for us to make an informed decision on coverage, we will communicate with you further to advise you if we determine the Exclusion does apply and the policy affords no coverage for this claim. We expressly reserve the right to both deny coverage and withdraw your defense in this matter. We further reserve the right to file a declaratory judgment action and seek the court's determination on coverage should we find that to be necessary in this matter."

(Id. , ¶¶ 26-27). The ROR further provides, inter alia , that Indian Harbor retained Marc H. Pillinger, Esq., of Pillinger Miller Tarallo, LLP ("PMT"), to defend Crescent Beach in the Crescent Action. (Def. 56.1, Ex. C).

On July 27, 2017, Flores served a Verified Bill of Particulars in the Crescent Action, inter alia , (i) indicating that he sustained "permanent and personal injuries," including but not limited to "traumatic spinal cord injury," "paralysis/paraplegic from umbilicus downward," "loss of sensation bilateral lower extremities," "loss of motor control in the lower extremities," "inability to ambulate," and "inability to walk;" and (ii) claiming special damages, including medical damages, lost...