Romco Structural Sys. Corp. v. Axis Ins. Co.
| Decision Date | 31 March 2022 |
| Docket Number | 1:20-cv-2772 (ST) |
| Citation | 596 F.Supp.3d 464 |
| Parties | ROMCO STRUCTURAL SYSTEMS CORP., Plaintiff, v. AXIS INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
George Maniatis, Mendes & Mount, LLP, New York, NY, Neil L. Sambursky, Pillinger Miller Tarallo LLP, Garden City, NY, for Plaintiff.
Robert M. Mangino, Jr., Clyde & Co. LLP, Morristown, NJ, for Defendant.
INTRODUCTION
This case involves an insurance dispute between an insured employer, Plaintiff, and its excess liability insurer, Defendant. Plaintiff's employee was injured at a construction site while working for Plaintiff and brought an action in state court, which Plaintiff was eventually brought into via a third-party complaint. Defendant disclaimed coverage for the injury, but Plaintiff argues that disclaimer was both improper under the New York Insurance Law and a breach of its insurance contract, and that it is entitled to coverage for the employee's injury. Both parties have moved for summary judgment. For the reasons detailed herein, Plaintiff's motion for summary judgment is DENIED, and Defendant's motion for summary judgment is GRANTED.
The following facts are agreed upon by both parties.
Marel Dejesus Vargas Rojas fell from an elevated height on June 26, 2018, while working on a construction project at 4890 Veterans Memorial Highway in Holbrook, New York. Pl. R. 56.1 Br., ¶ 1, ECF No. 30-1. In his complaint in an action in state court seeking damages for his injuries, Rojas alleges that at the time of his work accident, he was employed by Plaintiff. Rojas Compl., ¶ 46, ECF No. 1, Ex. 1. Rojas’ suit was initially brought against several defendants not named in this action, who allegedly owned or were responsible for the premises and/or construction site at which Rojas was performing the construction work. Id. at ¶¶ 10-45. Rojas alleged the defendants named in his action were negligent, and that negligence led to his injuries. Def. R. 56.1 Br., ¶¶ 2-6, ECF No. 33-2. ROMCO was never named as a defendant by Rojas. Id. at ¶ 7. On or around June 15, 2020, two of the defendants named in the Rojas action, Above All Equities, Inc. and LS Steel, Inc., filed a third-party complaint against the Plaintiff in this action, ROMCO, asserting claims for contribution, indemnity, and breach of contract. Pl. R. 56.1 Br., ¶ 51.
Plaintiff had three insurance policies at the time of Rojas’ accident, one of which is relevant to this action. The first was a commercial liability policy provided by Admiral Insurance Company in the amount of $1,000,000 per occurrence and $2,000,000 of general aggregate coverage, effective November 8, 2017, to November 8, 2018. Id. at ¶ 29. The second policy was a New York State Insurance fund policy effective at the time of Rojas’ accident. Def. R. 56.1 Br., ¶ 41. The third, at issue here, was a policy issued by the Defendant to the Plaintiff for excess liability coverage above and beyond the Admiral policy in the amount of $5,000,000. Pl. R. 56.1 Br., ¶ 8. Above All Equites, Inc. and L.S. Steel, Inc., two defendants in the Rojas action, were named as additionally insured on the policy, but only "with respect to liability for ‘bodily injury’ caused, in whole or in part, by: (1) [ROMCO's] acts or omissions; or (2) [t]he acts or omissions of those acting on [ROMCO's] behalf; in the performance of [ROMCO's] ongoing operations for the additional insured(s)." Pl. R. 56.1 Resp. Br., ¶ 10, ECF No. 34-1.
The AXIS policy, when issued, contained two provisions pertinent to this action. The first appears in the endorsements section and is listed as an exclusion endorsement for employee or worker bodily injury. It says, "It is agreed that ... this insurance does not apply to any liability or damages arising out of any actual alleged injury to an employee or temporary worker of any insured arising out of or in the course of employment by any insured ... This exclusion applies whether an insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of injury." Mangino Aff., Ex. Y, 122, ECF No. 33-3. The second pertinent provision appears separately as a New York-specific "limits of insurance endorsement" and reads, "Excess coverage for employers’ liability is not applicable in situations where an employee is subject to New York Workers Compensation Law, because employers’ liability coverage is unlimited in nature in New York State." Id. at 133.
There is extensive evidence in the record of why the policy contained these endorsements. RT Specialty acted to procure the AXIS insurance policy for ROMCO. Def. R. 56.1 Br., ¶¶ 11-12. On both October 26, 2017, and November 8, 2017, ROMCO indicated to AXIS that it had previously obtained workers’ compensation coverage for its employees. Id. at ¶¶ 10-11. On November 9, 2017, RT Specialty sent an email to AXIS, asking for a policy providing $5 million in coverage in excess to the already obtained Admiral policy and stating "[t]he excess doesn't require labor law coverage" and asking that the policy include "a labor law exclusion." Id. at ¶ 12. AXIS responded that such a policy would cost $125,000. Id. at ¶ 15. On November 14, at RT Specialty's request, AXIS sent a quote for the policy which included the requested exclusion. Id. at ¶¶ 17-18.
On November 20, 2017, RT Specialty emailed AXIS asking, "Can you tell me what your price would be with labor law coverage?" Id. at ¶ 19. AXIS responded, "I can tell you it would be considerably more and we would probably only support up to [$3 million] in limits." Id. at ¶ 20. RT Specialty asked AXIS to quote the policy with labor law coverage as well and, after some back and forth, AXIS quoted a $3 million excess policy with labor law coverage at a $280,000 premium. Id. at ¶¶ 21-26. On November 28, RT Specialty asked AXIS to move forward with the $3 million policy with labor law coverage, but then, on November 29, advised differently, writing, "The broker has confirmed that this insured would like to go with the $5M/$5M quote with the labor law exclusion ... Please bind coverage for the insured." Id. at ¶¶ 26-29. The binder sent to RT Specialty included the employee or worker bodily injury exclusion and the New York limit endorsement. Id. at ¶ 30. The policy was then issued, effective from November 29, 2017 to November 8, 2018. Id. at ¶ 31.
On March 20, 2018, RT Specialty emailed AXIS to ask, while acknowledging that the "insured took the quote without labor law coverage," whether ROMCO could buy back labor law coverage and increase the policy limit. Id. at 32. Internal emails show that Simone Butler, an AXIS representative, indicated to colleagues that she told the broker AXIS "could only entertain" a $1 million policy that included labor law coverage and that AXIS "would have to cancel the current policy" in order to award a policy with labor law coverage to ROMCO. Id. at ¶ 34. On April 4, 2018, a quote was emailed for a new policy to RT Specialty but ROMCO, in the end, chose not to purchase an excess insurance policy with labor law coverage, and the previous existing policy from AXIS was never canceled. Id. at ¶ 37.
After Mr. Rojas’ accident, he filed his complaint in state court on July 18, 2018. Id. at ¶ 1. On June 13, 2019, Mr. Rojas’ counsel sent AXIS a copy of the amended complaint which included the information that Mr. Rojas was acting as an employee of ROMCO at the time of the accident and copies of affidavits of service on defendants LS Steel Inc. and Above All Equities, Inc. Id. at ¶ 42. On June 18, 2019, Jonathan Slade of AXIS acknowledged receipt of that email. Id. at ¶ 43.
On December 10, 2019, Mr. Rojas’ counsel sent a letter to Admiral and AXIS in which he informed them, "the reasonable value of Mr. Rojas’ claim handily exceeds" the Admiral and AXIS policy limits." Pl. R. 56.1 Br., ¶ 31. The communication included medical and expert reports. Id. at ¶ 32. On February 13, 2020, Mr. Rojas’ counsel sent AXIS a copy of the state court's decision granting Mr. Rojas partial summary judgment as to the liability of Above All Equities, Inc. and LS Steel, Inc. Id. at ¶ 41.
On April 21, 2020, Thomas Maher, defense counsel representing LS Steel and Above All Equities in the Rojas action, emailed Peter Waldron from AXIS, to inform him that, "there is a possibility that your excess layer may be impacted in this case." Mangino Aff., Ex. KK, 277. On April 24, 2020, Peter Waldron, on behalf of AXIS, advised ROMCO that AXIS was disclaiming coverage for ROMCO in the Rojas action, writing, "To date, AXIS has not received a notice of claim or tender of defense or indemnity from Romco regarding the Lawsuit ... However, out of an abundance of caution, AXIS assumes for the purposes of this letter that Romco or another party will seek coverage ... AXIS disclaims coverage for the Lawsuit." Id. at ¶ 47; Mangino Aff., Ex. LL, 280. The bases for the disclaimer were the policy's New York limitation and the employee or worker bodily injury exclusion endorsement. Id. at ¶¶ 46-47.
On June 5, 2020, ROMCO's counsel wrote to AXIS, demanding that it rescind the disclaimer and provide the excess coverage ROMCO believed owed to it. Id. at ¶ 49. A third-party complaint was filed against ROMCO in the Rojas action by Above All Equities, Inc. and LS Steel, Inc. on June 15, 2020, seeking contribution and indemnity from ROMCO. Id. at ¶ 51; Mangino Aff., Ex. MM, 296.
ROMCO filed the complaint in the instant action on June 23, 2020. In the complaint, ROMCO alleges the AXIS disclaimer of coverage, which occurred over ten months after receiving written notice from Mr. Rojas’ counsel but before any claim was filed by ROMCO, was untimely and improper, as well as invalid under New York Insurance Law § 3420. Pl. Compl., ¶¶ 23-24, ECF No. 1. It also alleges breach of contract for AXIS’ disclaimer. Id. at ¶¶ 46-48. ROMCO seeks damages,...
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