Preserver Ins. Co. v. Ryba

• Decision Date: 10 June 2008
• Docket Number: 97.
• Citation: 893 N.E.2d 97,10 N.Y.3d 635
• Parties: PRESERVER INSURANCE COMPANY, Appellant, v. Arthur RYBA et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

893 N.E.2d 97

10 N.Y.3d 635

PRESERVER INSURANCE COMPANY, Appellant, v. Arthur RYBA et al., Respondents.

97.

Court of Appeals of New York.

June 10, 2008.

Law Office of Max W. Gershweir, New York City (Max W. Gershweir of counsel), for appellant.

Goldberg Segalla LLP, Buffalo (Richard J. Cohen of counsel), for respondents.

OPINION OF THE COURT

KAYE, Chief Judge.

At the heart of this dispute between two insurers — in a case where a construction worker allegedly suffered a grave job site injury — is the question whether the employers' liability insurance coverage is limited to $100,000, as specified in the policy, or unlimited. In this case we conclude that it is limited.

Factual Background

On May 17, 2003 Arthur Ryba, a New Jersey construction worker employed by subcontractor East Coast Stucco & Construction, Inc., allegedly fell from scaffolding while performing work on premises in Orangeburg, New York, owned by general contractor Joaquim Almeida. At the time of the incident, East Coast Stucco, a New Jersey company, maintained a workers' compensation and employers' liability policy issued by Preserver Insurance Company, also of New Jersey. This policy was both underwritten and delivered in New Jersey. Despite East Coast's alleged agreement to have Almeida listed in its policy as an additional insured, it failed to do so.

Claiming that Almeida's negligence resulted in his paraplegia, Ryba asserted various causes of action against Almeida including common-law negligence and violations of Labor Law §§ 200, 240(1) and § 241(6). Because Ryba claimed a grave injury, Almeida commenced a third-party action against Ryba's employer, East Coast Stucco, asserting causes of action for common-law indemnification/contribution, contractual indemnification and breach of contract for failure to procure the promised liability insurance.

On April 23, 2004, Preserver commenced this declaratory judgment action and sought summary judgment on the complaint's three causes of action. First, Preserver sought a declaration that it has no duty to defend Almeida's cause of action for contractual indemnification or for breach of contract for failure to procure insurance for Almeida because its policy expressly excludes coverage for any liability assumed under a contract. Second, Preserver argued that it had no duty to defend or indemnify East Coast Stucco against Almeida's cause of action for common-law indemnification because Ryba's accident in Orangeburg, New York, was not necessary or incidental to East Coast Stucco's work in New Jersey. Third, Preserver argued that if it must provide employers' liability insurance, coverage is limited to $100,000 as provided by the policy.

In response, Northern Assurance Company of America (Almeida's homeowners' insurer, incorrectly sued as "One Beacon Insurance Company") cross-moved for summary judgment on all three causes of action, contending that Preserver was time-barred under Insurance Law § 3420(d) from disclaiming coverage, and that the Preserver policy is limitless as to the amount of coverage.

Supreme Court agreed with Northern, holding that Insurance Law § 3420(d) applied because Preserver's policy was "issued for delivery" in New York and that Preserver was therefore time-barred from disclaiming coverage. The court then concluded that the policy itself required Preserver to provide unlimited employers' liability coverage.¹ The Appellate Division affirmed on both grounds. We now reverse.

Analysis

The policy at issue is a standard form workers' compensation and employers' liability contract, mirroring the format and language of model policies that appear in both the New York and New Jersey Workers Compensation and Employers Liability Manuals (the Manuals).²

The Information Page. At the front of the policy is an "Information Page," which discloses the policy period ("ITEM 2"), coverage ("ITEM 3") and premium ("ITEM 4"). For ease of reference, a copy of the page is annexed to this writing.

Most notable is "ITEM 3. COVERAGE," which is divided into four subsections (A)-(D), the first three corresponding to various "Parts" — One through Three — found in the body of the policy. In turn, Part One within the policy refers to "Workers Compensation Insurance," Part Two to "Employers Liability Insurance" and Part Three to "Other States Insurance." While the issue here centers on the coverage afforded by Part Two, all three parts provide useful information.

Item 3.A. in the Information Page reads "Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: NEW JERSEY." Item 3.B. states "Employers Liability Insurance: Part Two of the Policy applies to work in each state listed in item 3.A. The limits of our Liability under Part Two are: Bodily Injury by Accident $100,000. each accident."³ Item 3.C. reads: "Other States Insurance: Part Three of the policy applies to the states, if any listed here: ALL STATES EXCEPT

ND, OH, WA, WV, WY AND STATES DESIGNATED IN ITEM 3.A OF THE INFORMATION PAGE."

Part One. Within the body of the policy, "Part One-Workers Compensation Insurance" provides both defense and payment for costs resulting from bodily injuries caused by conditions of the insured's employment. Notably Part One states: "Terms of this [workers compensation] insurance that conflict with the workers compensation law are changed by this statement to conform to that law."

Part Two. "Part Two-Employers Liability Insurance" contains no similar clause. Indeed, in a subsection titled "Exclusions" the policy makes clear that the employers' liability policy does not cover "any obligation imposed by a workers compensation, occupational disease, unemployment compensation or disability benefits law, or any similar law." Also of note in the "Exclusions" is that the employers' liability policy does not cover "liability assumed under a contract." In a subsection entitled "Limits of Liability," Part Two underscores that

"[o]ur liability to pay for damages is limited. Our limits of liability are shown in Item 3.B. of the Information Page. They apply as explained below.

"1. Bodily Injury by Accident. The limit shown for `bodily injury by accident-each accident' is the most we will pay for all damages covered by this insurance because of bodily injury to one or more employees in any one accident."

Part Three. Finally, "Part Three-Other States Insurance" states that

"[i]f you begin work in any one of those states [shown in Item 3.C. of the Information Page] after the effective date of this policy and are not insured or are not self-insured for such work, all provisions of the policy will apply as though that state were listed in Item 3.A. of the Information Page." Part Three also requires that East Coast "[t]ell us at once if you begin work in any state listed in Item 3.C. of the Information Page" (presumably allowing for increased premiums for increased risk). There is no evidence that East Coast Stucco informed Preserver that it commenced operations on Almeida's New York property.

The policy concludes with several New Jersey endorsements and schedules mirroring stock forms found in the New Jersey Workers Compensation and Employers Liability Insurance Manual. There are no endorsements for New York or any of the other states included in Item 3.C. of the Information Page. Finally, despite East Coast's alleged agreement to have Almeida listed in its policy as an additional insured, he is not. "Issued for Delivery": The Disclaimer Issue

New York Insurance Law § 3420(d) provides that when a liability policy is "delivered or issued for delivery in this state, [if] an insurer shall disclaim liability or deny coverage for death or bodily injury ... it shall give written notice as soon as is reasonably possible." It is undisputed that the policy was actually delivered in New Jersey by a New Jersey insurer to a New Jersey insured. Was the policy nonetheless "issued for delivery" in New York? We answer in the negative.

A policy is "issued for delivery" in New York if it covers both insureds and risks located in this state (see Columbia Cas. Co. v. National Emergency Servs., 282 A.D.2d 346, 347, 723 N.Y.S.2d 473 [1st Dept.2001]; see also American Ref-Fuel Co. of Hempstead v. Employers Ins. Co. of Wausau, 265 A.D.2d 49, 53, 705 N.Y.S.2d 67 [2d Dept.2000]). By including New York as an "Item 3.C." state, the policy covers risks located in New York. East Coast Stucco is, however, a New Jersey company, with its only offices located in that state, so it cannot be said that the insured is located in New York. Because the policy was neither actually "delivered" nor "issued for delivery" in New York, Preserver is not required by Insurance Law § 3420(d) to make timely disclaimer of coverage.

Further, since the policy explicitly excludes coverage for any liability assumed under a contract, Preserver must neither defend nor indemnify East Coast Stucco for the contractual indemnification or breach of contract causes of action. And even if the policy were "issued for delivery" in New York, Preserver still would not be barred from denying coverage for Almeida's breach of contract claim since Insurance Law § 3420(d) requires timely disclaimer only for denials of coverage "for death or bodily injury."

Limitation of Liability: The Contract Issue

By the terms of the policy, under the section entitled "Limits of Liability" in "Part Two-Employers Liability Insurance," Preserver states that its liability for damages is limited as shown in Item 3.B. of the Information Page and that this limit is the most it will pay for bodily injuries to an employee in...