Lend Lease (U.S.) Constr. LMB Inc. v. Zurich Am. Ins. Co.

• Decision Date: 22 December 2015
• Citation: 22 N.Y.S.3d 24,136 A.D.3d 52
• Parties: LEND LEASE (U.S.) CONSTRUCTION LMB INC., et al., Plaintiffs–Appellants–Respondents, v. ZURICH AMERICAN INSURANCE COMPANY, et al., Defendants–Respondents–Appellants.
• Court: New York Supreme Court — Appellate Division

136 A.D.3d 52

22 N.Y.S.3d 24

LEND LEASE (U.S.) CONSTRUCTION LMB INC., et al., Plaintiffs–Appellants–Respondents,

v.ZURICH AMERICAN INSURANCE COMPANY, et al., Defendants–Respondents–Appellants.

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

Dec. 22, 2015.

Greenberg, Trager & Herbst, LLP, New York (Richard J. Lambert of counsel), for Extell West 57th Street LLC, appellant-respondent.

Mound Cotton Wollan & Greengrass LLP, New York (Philip C. Silverberg, Mark S. Katz and Sanjit Shah of counsel) for respondents-appellants.

ANGELA M. MAZZARELLI, J.P., JOHN W. SWEENY, JR., RICHARD T. ANDRIAS, DAVID B. SAXE, ROSALYN H. RICHTER, JJ.

ANDRIAS, J.

Plaintiffs Extell West 57th Street LLC (Extell) and Lend Lease (U.S.) Construction LMB INC. (Lend Lease) are the owner and construction manager of a project to erect a 74–story mixed-use hotel and residential building in Manhattan. In this breach of contract and declaratory judgment action, plaintiffs seek coverage under a $700,000,000 builder's risk policy, consisting of five separate policies issued by defendants with identical terms, for damage caused by Superstorm Sandy's dislodgement and partial destruction of a tower crane that was affixed to the building for use in the performance of the construction work.

The insuring agreement provides that the "[p]olicy, subject to [its] terms, exclusions, limitations and conditions ... insures against all risks of direct physical loss of or damage to Covered Property while at the location of the INSURED PROJECT* and occurring during the Policy Term." Covered Property includes "Property Under Construction" and "Temporary Works."

The policy defines "Temporary Works," as

"[a]ll scaffolding (including scaffolding erection costs), formwork, falsework, shoring, fences and temporary buildings or structures, including office and job site trailers, all incidental to the project, the value of which has been included in the estimated TOTAL PROJECT VALUE* of the INSURED PROJECT* declared by the NAMED INSURED."

The policy excludes coverage for

"[c]ontractor's tools, machinery, plant and equipment including spare parts and accessories, whether owned, loaned, borrowed, hired or leased, and property of a similar nature not destined to become a permanent part of the INSURED PROJECT*, unless specifically endorsed to the Policy."

The tower crane was integral, not "incidental to the project," and therefore does not fall within the definition of Temporary Works. Even if the tower crane fell within the definition of Temporary Works, the contractor's tools, machinery, plant and equipment exclusion would be applicable and, contrary to the opinion of the dissent, enforceable. Accordingly, the order on appeal should be modified to grant defendants' motion for summary judgment and to declare that defendants have no obligation to provide coverage.

Lend Lease contracted with nonparty Pinnacle Industries II, LLC (Pinnacle) to furnish and install all superstructure concrete work for the project, which was included as a line item in Extell's budget with a value of $89,000,000. The contract provided, inter alia, that Pinnacle would supply "[d]iesel fuel tower cranes, all cherry pickers, any assist cranes, concrete pumps, and other heavy equipment required for the erection of the building." This included two cranes, whose "locations, lay outs and structural supports required [we]re to be designed by a licensed New York State professional engineer (N.Y.S PE) to meet all NYC, DOB, NYC DOT, OSHA and Construction Manager criteria." The contract further provided that Crane 2, the tower crane at issue in this appeal, "[wa]s to be supported by a reinforced slab on the 20th floor, included in this Contract, and associated supporting elements as required."

Pinnacle rented the tower crane from Pinnacle Industries III, LLC (Pinnacle Industries III), a related company, at a cost of $77,000 per month. Under its contract with Lend Lease, Pinnacle was obligated to "secure, pay for, and maintain Property Insurance necessary for protection against loss" of the crane. Pinnacle Industries III also subleased the tower crane to a steel contractor working at the project, Post Road Iron Works, Inc., for $77,000 per month. Pursuant to that sublease, Post Road was obligated to maintain liability and property damage insurance, including "coverage for the contractual liability created by this sublease agreement."

The 750–foot tall tower crane is a massive and sophisticated piece of equipment. Its components include (i) a turntable, which provided it with the ability to rotate as necessary; (ii) a working arm or boom, which was used to physically lift and move various items necessary to the construction of the building; (iii) various counterweights; (iv) a diesel-driven winch pack; and (v) a cab from where its necessary movements were controlled.

To support the tower crane and the loads it carried, Pinnacle built a base on the 20th floor of the building, which was bolted to a large pad of reinforced concrete that was strengthened and stabilized by beams encased into the floor slab. Plates were also cast into the shear walls connected by threaded rods. To provide increased stability, the mast of the tower crane, consisting of over 50 individual sections, was fastened or tied to the structural floor slabs at regular intervals, which required additional steel reinforcement of the slabs. Although the tower crane itself was to be completely removed from the project once its work was done, both the additional beams cast into the slab on the 20th floor, and the reinforcement of the floor slabs at the tie locations, were to permanently remain part of the building following the completion of construction.

On October 29, 2012, high winds from the Superstorm caused the tower crane to partially collapse. The boom flipped over and some parts of the crane broke away, falling to the street below. Extell submitted a claim in the amount of $6,494,723.01 for damage to the tower crane and building, which defendants disclaimed on the grounds that the tower crane did not constitute covered property and/or was excluded property under the policy. This litigation ensued.

An insured bears the burden of establishing the existence of coverage (see Platek v. Town of Hamburg, 24 N.Y.3d 688, 694, 3 N.Y.S.3d 312, 26 N.E.3d 1167 [2015] ). Unlike scaffolding, formwork, falsework, shoring and fences, the tower crane is not specifically identified in the definition of Temporary Works. Thus, to obtain coverage, plaintiffs must demonstrate, inter alia, that the tower crane is a "temporary structure" within the meaning of the clause.

In construing policy provisions defining the scope of coverage, courts "first look to the language of the policy" (Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208, 221, 746 N.Y.S.2d 622, 774 N.E.2d 687 [2002] ), which is "interpreted according to common speech and consistent with the reasonable expectation of the average insured" (Cragg v. Allstate Indem. Corp., 17 N.Y.3d 118, 122, 926 N.Y.S.2d 867, 950 N.E.2d 500 [2011] ). Thus, "[u]nless otherwise defined by the policy, words and phrases are to be understood in their plain, ordinary, and popularly understood sense, rather than in a forced or technical sense" (Hartford Ins. Co. of Midwest v. Halt, 223 A.D.2d 204, 212, 646 N.Y.S.2d 589 [4th Dept.1996], lv. denied 89 N.Y.2d 813, 658 N.Y.S.2d 243, 680 N.E.2d 617 [1997] ).

Although ambiguous provisions "must be construed in favor of the insured and against the insurer," unambiguous provisions "must be given their plain and ordinary meaning" (White v. Continental Cas. Co., 9 N.Y.3d 264, 267, 848 N.Y.S.2d 603, 878 N.E.2d 1019 [2007] ). Thus, courts will "not disregard clear provisions which the insurers inserted in the policies and the insured accepted, and equitable considerations will not allow an extension of coverage beyond its fair intent and meaning in order to obviate objections which might have been foreseen and guarded against" (Raymond Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 5 N.Y.3d 157, 162, 800 N.Y.S.2d 89, 833 N.E.2d 232 [2005] [internal quotation marks omitted] ).

The test for ambiguity is whether the language of the insurance contract is "susceptible of two reasonable interpretations" (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] ). "That one party to the agreement may attach a particular, subjective meaning to a term that differs from the term's plain meaning does not render the term ambiguous" (see Slattery Skanska Inc. v. American Home Assur. Co. 67 A.D.3d 1, 14, 885 N.Y.S.2d 264 [1st Dept.2009] ). Nor does the lack of a definition, in and of itself, render a word ambiguous (id. ).

The policy defines a temporary structure as something that is "incidental to the project." Although the term incidental is not defined, "it is common practice for the courts of this State to refer to the dictionary to determine the plain and ordinary meaning of words to a contract" (2619 Realty v. Fidelity & Guar. Ins. Co., 303 A.D.2d 299, 301, 756 N.Y.S.2d 564 [1st Dept.2003] [internal quotation marks omitted], lv. denied 100 N.Y.2d 508, 764 N.Y.S.2d 235, 795 N.E.2d 1244 [2003] ; see also R/S Assoc. v. New York Job Dev. Auth., 98 N.Y.2d 29, 33, 744 N.Y.S.2d 358, 771 N.E.2d 240 [2002] ; Chelsea Piers L.P. v. Hudson Riv. Park Trust, 106 A.D.3d 410, 411, 964 N.Y.S.2d 147 [1st Dept.2013] ).

Black's Law Dictionary defines the term "incidental" as "[s]ubordinate to something of greater importance; having a minor role" (10th ed. 2014). The American Heritage Dictionary, defines incidental as "[o]f a minor, casual, or subordinate nature" (5th ed. 2011). The Merriam–Webster Online Dictionary defines the term "incidental" as "being likely to ensue as a chance or minor consequence" (11th ed. 2003).

Applying these definitions, the 750–foot tower crane is not a structure that is "incidental" to the project. Indeed, rather than ensuing...