Gilbane Bldg. Co. v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 15 September 2016
• Parties: GILBANE BUILDING CO./TDX CONSTRUCTION CORP., et al., Plaintiffs–Respondents, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, et al., Defendants, Liberty Insurance Underwriters, Defendant–Appellant. Greenwich Insurance Company, Amicus Curiae.
• Court: New York Supreme Court — Appellate Division

143 A.D.3d 146

38 N.Y.S.3d 1

2016 N.Y. Slip Op. 06052

GILBANE BUILDING CO./TDX CONSTRUCTION CORP., et al., Plaintiffs–Respondents,

v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, et al., Defendants,Liberty Insurance Underwriters, Defendant–Appellant.Greenwich Insurance Company, Amicus Curiae.

Supreme Court, Appellate Division, First Department, New York.

Sept. 15, 2016.

Hardin, Kundla, McKeon & Poletto, P.A., New York (George R. Hardin of counsel), for appellant.

Saxe Doernberger & Vita, P.C., New York (Richard W. Brown of counsel), for respondents.

Kaufman Dolowich & Voluck, LLP, Woodbury (Michael L. Zigelman of counsel), for amicus curiae.

JOHN W. SWEENY, J.P., DIANNE T. RENWICK, DAVID B. SAXE, JUDITH J. GISCHE, MARCY L. KAHN, JJ.

RENWICK, J.

Plaintiffs Gilbane Building Co./TDX Construction Corp., a Joint Venture (the JV), and its individual members, Gilbane Building Company and TDX Construction Corporation, construction managers at a job site, seek a declaration that defendant Liberty Insurance Underwriters (Liberty) is obligated to defend and indemnify them, as an additional insured under a commercial general liability (CGL) policy issued by Liberty to a prime contractor. The principal issue in this appeal is the interpretation of the additional insurance endorsement in the policy which provides that an additional insured is “any person or organization with whom you [the insured] have agreed to add as an additional insured by written contract.” Trial courts have arrived at conflicting interpretations of a similarly worded additional insured clause as to whether coverage is extended not only to those “with whom” the insured agreed, but also to those “for whom” the insured agreed to provide coverage.¹ We hold that the subject additional insured clause covers only those that have a written contracts directly with the named insured.

Factual and Procedural Background

The underlying action giving rise to this insurance coverage dispute involves a construction project on property in Manhattan owned by the City of New York that is part of the Bellevue Hospital Campus. The project entailed the construction of a 15–story building with a double basement for use as a DNA lab for the Chief Medical Examiner of the City of New York. Pursuant to a contract with the City, the Dormitory Authority of the State of New York (DASNY) agreed to finance and manage the project.

The JV was retained by nonparty DASNY to provide construction management services in connection with the project. Under the construction management agreement, any prime contractor, whether retained by DASNY or otherwise, was required to name the construction manager as an additional insured under its liability policies.

Nonparty Samson Construction Company (Samson) entered into a separate contract with DASNY to perform services as the prime contractor for all foundation and excavation work on the project. In its prime contract, Samson agreed to procure commercial general liability insurance with an endorsement naming as additional insureds:

“Dormitory Authority of the State of New York, The State of New York, the Construction Manager (if applicable) and other entities specified on the sample Certificate of Insurance provided by the Owner.”

The sample Certificate of Insurance states:

“The following are Additional Insureds under General Liability as respects this project:

“City of New York

City of New York Health & Hospital Corporation

Forensic Biology Laboratory

Dormitory Authority–State of New York

Gilbane/TDX Construction Joint Venture.”

Samson, as required, obtained a policy from defendant Liberty for the relevant period, November 12, 2002 through November 12, 2003. The policy contained, as is relevant to this dispute, an “Additional Insured–By Written Contract” clause, stating:

“WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.

The policy also required that in the event of an “[o]ccurrence, [o]ffense, [c]laim or [s]uit” defendant be notified “as soon as practicable.” Endorsement No. 19 to the policy further provided:

“g. You must give us prompt notice if any of the following conditions arise of if any injury involves the following:

...

“(4) Any claim which may equal or exceed 50% of the insured's retention.

“(5) Any lawsuit or arbitration proceeding involving the policy brought against any insured.

“(6) Trial settings.

“(7) If defense counsel has been retained to defend a claim.”

“h. In the event that you do not give us notice within 30 days of the date you know or should have known of a claim or injury meeting one or more of the descriptions set forth in g. above, we shall have the option in our sole discretion to deny coverage under this policy if your failure to report any such loss has prejudiced our rights under this policy.”

During the project, Samson's excavation and foundation work allegedly caused adjacent buildings to sink, resulting in significant structural damage to those buildings. In or about October 2003, the JV issued a change order to Samson for extra work to stabilize the adjacent buildings.

In 2006, DASNY commenced the litigation against Samson and Perkins Eastman, Architects, P.C., the project architect, seeking damages for Samson's negligence in performing the work. In or about December 2010, Perkins Eastman commenced a third-party action against the JV and its members individually. Plaintiffs provided notice of the third-party action to defendant Liberty by letter dated April 25, 2011, seeking a defense and indemnification. Liberty denied coverage to plaintiffs by letter dated July 20, 2011, stating that plaintiffs had provided no documentation that Samson, the named insured, was supposed to defend and indemnify them, and that, in any event, plaintiffs' notice of the third-party action five months after it had been initiated was not timely under the policy.

Plaintiffs then commenced this action seeking a declaration that Liberty is obligated to provide them with coverage. Following discovery, Liberty moved for summary judgment declaring that it is not obligated to provide plaintiffs with coverage under the policy. It argued that plaintiffs did not qualify as additional insureds and that plaintiffs had failed to satisfy the notice of occurrence and notice of suit conditions in the policy.

Supreme Court denied Liberty's motion, holding that plaintiffs qualified as additional insureds under the policy. The court found that the policy “requires only a written contract to which Samson is a party” and that this requirement was met by Samson's written contract with DASNY, which obligated Samson to procure insurance naming as additional insured “the Construction Manager (if applicable)” and that the JV was undisputedly the construction manager.

On the issue of late notice, the court found that there was no express provision in the policy requiring an additional insured to give notice to the insurer of an occurrence or a lawsuit, only a provision requiring the named insured to give notice; that, accordingly, plaintiffs could rely on Samson's notice of occurrence, particularly since their interests were not adverse to Samson's; and that plaintiffs' reason for delaying five months in providing notice of the third-party action—that they needed to find the policy—was reasonable. Ultimately, the court declared that the JV is an additional insured under the Liberty policy.

Discussion

In this action for a judgment declaring the parties' rights under an insurance policy, this Court must be guided by the rules of contract interpretation because “[a]n insurance policy is a contract between the insurer and the insured” (Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 145, 855 N.Y.S.2d 459 [1st Dept.2008] ). As a result, the extent of coverage “is controlled by the relevant policy terms, not by the terms of the underlying trade contract that required the named insured to purchase coverage” (id. ; see also Travelers Indem. Co. v. American & Foreign Ins. Co., 286 A.D.2d 626, 626, 730 N.Y.S.2d 231 [1st Dept. 2001] ).

“Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies” (State of New York v. Home Indem. Co., 66 N.Y.2d 669, 671, 495 N.Y.S.2d 969, 486 N.E.2d 827 [1985] ). “[W]ell-established principles governing the interpretation of insurance contracts ... provide that the unambiguous provisions of an insurance policy, as with any written contract, must be afforded their plain and ordinary meaning, and that the interpretation of such provisions is a question of law for the court” (Broad St., LLC v. Gulf Ins. Co., 37 A.D.3d 126, 130–131, 832 N.Y.S.2d 1 [1st Dept.2006] ). “If, however, there is ambiguity in the terms of the policy, any doubt as to the existence of coverage must be resolved in favor of the insured and against the insurer, as drafter of the agreement” (id. at 131, 832 N.Y.S.2d 1 ). “A contract of insurance is ambiguous if the language therein is susceptible of two or more reasonable interpretations, whereas, in contrast, a contract is unambiguous if the language has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion” (id. [citations and internal quotations and marks omitted] ).

In this case, the “Additional Insured–By Written Contract” clause of the CGL policy provides additional insured coverage to “any person or organization with whom you [Samson] have agreed to add as an additional insured by written contract.” Contrary to Supreme Court's determination, and consistent with our prior decisions in AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc., 102 A.D.3d 425, 961...