Scottsdale Ins. Co. v. United Indus. & Constr. Corp.

• Decision Date: 29 September 2015
• Docket Number: No. 12–CV–5732 (RRM)(LB).,12–CV–5732 (RRM)(LB).
• Citation: 137 F.Supp.3d 167
• Court: U.S. District Court — Eastern District of New York
• Parties: SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. UNITED INDUSTRIES & CONSTRUCTION CORP., Defendant.

137 F.Supp.3d 167

SCOTTSDALE INSURANCE COMPANY, Plaintiff,

v.UNITED INDUSTRIES & CONSTRUCTION CORP., Defendant.

No. 12–CV–5732 (RRM)(LB).

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

Signed Sept. 29, 2015.

Ann Odelson, Eileen H. de Callies, Douglas J. Steinke, Carroll McNulty & Kull, LLC, New York, NY, for Plaintiff.

Jason L. Fixler, Fixler & Lagattuta, LLP, New York, NY, for Defendant.

MEMORANDUM AND ORDER

ROSLYNN R. MAUSKOPF, District Judge.

Plaintiff Scottsdale Insurance Company ("Scottsdale") initiated this action on November 20, 2012, seeking, among other things, a declaration from the Court that it is not required to defend United Industries & Construction Corp. ("United") against two underlying lawsuits. (Compl. (Doc. No. 1) at 14.) Scottsdale subsequently disclaimed its duty to defend United against an additional lawsuit, and on January 15, 2013 filed an Amended Complaint seeking the same relief with respect to all three underlying lawsuits (collectively, the "Underlying Actions"). (Am. Compl. (Doc. No. 4) at 16.)

On October 10, 2014, each party moved for summary judgment. For the reasons set forth below, each party's motion is granted in part and denied in part.

BACKGROUND¹

1. The Underlying Actions

United is a company based in New York City whose sole shareholder is Antonio Morales. (Def.'s Resp. to Pl.'s Rule 56.1 Statement (Doc. No. 29–23) at ¶ 2.) United was incorporated in 2007 and is currently in the business of excavation, foundation and demolition work. (See Morales Deposition (Doc. No. 30–15) at 8, 11.)

In each of the Underlying Actions, the plaintiffs therein have alleged that they suffered property damage caused by excavation, demolition, and construction work performed by United and others at 755 and 757 60th Street (the "60th Street Location") and 2576 National Drive (the "National Drive Location"), in Brooklyn, New York. (Ye Compl. (Doc. No. 29–8); Li Compl. (Doc. No. 29–9); Azadalli Compl. (Doc. No. 29–10); see generally Def.'s Resp. to Pl.'s Rule 56.1 Statement at ¶ 4 (not contesting incorporation of the complaints into 56.1 Statement).) The Underlying Actions are Ye v. Golden City 8 Realty LLC (Kings Cty. Sup.Ct. Index Nos. 11874/2010 and 75286/2011) (the "Ye Action"); Li v. Golden City 8 Realty LLC (Kings Cty. Sup.Ct. Index No. 015128/2012) (the "Li Action"); and Azadalli v. Sourkoff Corp. (Kings Cty. Sup.Ct. Index No. 7089/2010) (the "Azadalli Action"). (Def.'s Resp. to Pl.'s Rule 56.1 Statement at ¶ 4.)

The Ye Action was initiated on May 11, 2010 against United, Golden City 8 Realty, Inc. ("Golden City"), Schulman Homes, Inc. ("Schulman"), and Kam Cheung Construction, Inc. ("Kam Cheung"). (Ye Compl. at 2, 13 (ECF Pagination).) According to Morales' testimony, United had performed a hand-demolition job at the 60th Street Location in 2008. (See Morales Deposition at 37–38, 45.) The plaintiffs in the Ye Action allege that "[o]n or about, prior to and after June 29, 2009," United, Schulman, and Kam Cheung performed "excavation, demolition, and construction" work at the 60th Street Location that caused damage to their premises at 749 and 753 60th Street. (Ye Compl. at ¶¶ 8–9, 10–12, 20–21.)

The Li Action is similar to the Ye Action. It was initiated on July 21, 2012 against United, Golden City, Schulman, Kam Cheung, and LMW Engineering Group LLC ("LMW"). (Li Compl. at 2, 15 (ECF Pagination).) The plaintiffs therein allege that "[o]n or about, prior to and after June 29, 2009 and continuing thereafter," United, Schulman, Kam Cheung, and LMW performed excavation, demolition, and construction work at the 60th Street Location that caused damage to their premises located 752 and 754 60th Street. (Id. at ¶¶ 8–9, 10–12, 22–23.) More specifically, they allege that

[d]uring the course of excavation[,] demolition and construction, Defendants caused and continue to cause extensive damage to Plaintiff's [sic] property's foundation walls and structure including Plaintiff's [sic] property interior walls, and causing among other things: 1) cracks and disturbances in the foundation; 2) cracks and floor separation; 3) movement of Plaintiff's [sic] walls away from the building; 4) cracked exterior walls, 5) cracked interior walls; 6) doors and windows that no longer plumb and that are out of alignment; 7) cracked sidewalk; and 8) sagging floors.

(Id. at ¶ 28.)

The Azadalli Action was initiated on March 22, 2010, and on December 14, 2010 the plaintiffs therein filed an amended complaint against United and several other defendants. (Azadalli Compl. at 2, 4, 11 (ECF Pagination).) Morales testified that United had excavated several truckloads of dirt from the National Drive Location one day in the summer of 2008, for which it was paid approximately $2,500. The Azadalli plaintiffs allege that, on or about August 2009, as a result of the defendants' excavation and construction work at the National Drive Location, their adjacent property "suffered physical damage, including but not limited to the total destruction of the outdoor patio deck, collapse of the brick retaining wall, compromise to the structural integrity of the house and damage to the water and natural gas lines." (Azadalli Complaint at ¶¶ 38–39.) The Azadalli Action complaint further alleges, in relevant part, that

[t]he proximate cause of the damage to plaintiffs' property was the negligence, carelessness and recklessness of the defendants ... in failing to use due care in the construction, demolition, excavation, development work performed upon the premises located at [the National Drive Location]; in failing to use due care in the underpinning, shoring, sheeting, bracing, reinforcing, and/or lateral supporting or adjoining properties during said work; ... in failing to insure that the adjoining properties were safeguarded, underpinned and supported; ... in the excavation operations, underpinning, stability; in permitting and allowing dangerous and defective conditions to exist within the construction area; in creating excessive vibrations during said work; [and] in causing earth movement and rock sliding in the area under and around the adjoining properties....

(Id. at ¶ 41.) On July 23, 2014, the New York Supreme Court granted United's motion for summary judgment and dismissed the Azadalli Action against United. (Azadalli Decision (Doc. No. 30–12) at 1.)

2. The Insurance Policies

From August 1, 2007 through August 1, 2009, Scottsdale provided insurance to United under three successive policies: (1) General Liability Policy No. CLS1393437 for the period from August 1, 2007 to August 1, 2008 (the "2007 Policy"); (2) General Liability Policy No. CLS1512440 for the period from August 1, 2008 to August 1, 2009 (the "2008 Policy"); and (3) General Liability Policy No. CPS1065636 for the period from August 1, 2009 to August 1, 2010 (the "2009 Policy", and along with the 2007 Policy and the 2008 Policy, the "Scottsdale Policies"). (Def.'s Resp. to Pl.'s Rule 56.1 Statement at ¶ 25.) Each of the Scottsdale Policies states the following:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.... This insurance applies to "bodily injury" and "property damage" only if ... [t]he "bodily injury" or "property damage" occurs during the policy period....

(2007 Policy (Doc. No. 29–17) at ¶¶ 1(a), 1(b)(2); 2008 Policy (Doc. No. 29–18) at ¶¶ 1(a), 1(b)(2); 2009 Policy (Doc. No. 29–19) at ¶¶ 1(a), 1(b)(2); see generally Def.'s Resp. to Pl.'s Rule 56.1 Statement at ¶ 26 (not contesting incorporation of the Scottsdale Policies into 56.1 Statement).)

Each of the Scottsdale Policies carves out various exclusions from coverage, and each of Scottsdale's first five causes of action in the Amended Complaint cites a different exclusion as the basis for Scottsdale's requested declaration that it is not required to defend United against the Underlying Actions. The first cause of action cites the following "Earth and Land Movement Exclusion," which appears in the 2007 Policy and 2008 Policy:

This policy does not apply to ... "property damage" ... or damages ... caused directly or indirectly or in whole or in part, by the movement, in any direction, of earth or land, regardless of:

1. The cause or source of such earth or land movement;

2. Whether such earth or land movement arises from natural or manmade forces or causes; or

3. Whether such earth or land movement occurs: a. Independently of;

a. As a result of;

b. In concurrence or connection; or

c. In any sequence associated

with any other natural or man-made forces, causes, events or operations.

Earth or land movement includes, but is not limited to, subsidence, settling, sinking, rising, slipping, falling away, caving in, shifting, expanding, contracting, dissolving, eroding, mudflow, sliding, tilting of land or earth, earthquakes, volcanic eruption and weather.

(2007 Policy at 47 (ECF Pagination); 2008 Policy at 48 (ECF Pagination).)

The second cause of action cites the following "Continuous or Ongoing Damages Exclusion," which appears in each of the Scottsdale Policies:

This insurance does not apply to "property damage" when any of the following apply:

...

1. The "property damage" first occurred, began to occur or is alleged to have occurred or been in the process of occurring, to any degree, in whole or in part, prior to the inception date of this policy.

2. The "property damage" is indiscernible from other damage that is incremental, continuous or progressive damage arising from an "occurrence" which first occurred, began to occur or is alleged to have occurred, to any degree, in whole or in part, prior to the inception date of this policy.

(2007 Policy at 36; 2008 Policy at 36; 2009 Policy...