Stoncor Grp., Inc. v. Peerless Ins. Co., 16 Civ. 4574 (LAK) (GWG)

• Decision Date: 15 August 2018
• Docket Number: 16 Civ. 4574 (LAK) (GWG)
• Citation: 322 F.Supp.3d 505
• Parties: STONCOR GROUP, INC., Plaintiff, v. PEERLESS INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

322 F.Supp.3d 505

STONCOR GROUP, INC., Plaintiff,

v.PEERLESS INSURANCE COMPANY, Defendant.

16 Civ. 4574 (LAK) (GWG)

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

Signed August 15, 2018

Jessica Leigh Gross, Lewis Brisbois Bisgaard & Smith, LLP, Michael Brian Sena, Herzfeld & Rubin, P.C., New York, NY, for Plaintiff.

Marshall Todd Potashner, David Ross Shyer, Jaffe & Asher LLP, New York, NY, for Defendant.

OPINION AND ORDER

GABRIEL W. GORENSTEIN, United States Magistrate Judge

Stoncor Group, Inc. and its insurer, First Continental Insurance Company (collectively "Stoncor") bring this action against Peerless Insurance Company ("Peerless") seeking a judgment declaring that Peerless must defend, indemnify, and hold harmless Stoncor in a related state court proceeding, and seeking to recover costs, fees, and expenses associated with that action. Peerless now brings this motion to stay the instant action pending resolution of the state court proceeding.¹

For the reasons set forth below, Peerless's motion is granted.

I. BACKGROUND

In 2008, Cesar Arias filed a lawsuit in state court ("the Arias Action") alleging that on September 19, 2006, while employed as a kitchen worker, he slipped "on the slippery surface of the floor" at the Grand Hyatt Hotel located on 42nd Street in New York, New York, and fell, causing him "serious, severe and permanent injuries and disabilities." Shyer Decl. ¶¶ 2, 5; Amended Summons and Amended Complaint of Cesar Arias, dated June 10, 2009 (annexed as Ex. 2 to Shyer Decl.) ("Arias Compl."), ¶¶ 4, 9, 14. This floor was allegedly manufactured by Stonhard, which is a division of Stoncor,² and installed by a company called Surfacesys Inc. ("Surfacesys"). See Shyer Decl. ¶¶ 4-6 & n.1; Am. Compl. ¶ 9. Arias's suit names

Stonhard and Surfacesys as defendants, alleging that both "did work on" the floor on which he slipped, were "negligent in the installation of the floor," and that the "floor was defective, dangerous, hazardous, unsafe and deficient in design." Shyer Decl. ¶ 2; Arias Compl. ¶¶ 5-8, 10-11.

Peerless had issued a Commercial General Liability coverage policy to Surfacesys effective as of September 16, 2006, and expiring on September 16, 2007. See Peerless Insurance Commercial General Liability Policy (annexed as Ex. 3 to Shyer Decl.) ("Policy"), at *24.³ Although Surfacesys was the named insured under this Policy, the Policy also contained certain coverage for additional insureds. See id. at *34-35. The Policy provided that "additional insureds" could be covered by "contract, agreement or permit," as long as several conditions were met. Id. First, any contract, agreement, or permit extending coverage to an "additional insured" must have "been executed ... prior to the ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury.’ " Id. at *35. Second, the injury for which coverage is sought must be a liability "arising out of: (a) [Surfacesys's] ongoing operations performed for" the additional insured, or on "[p]remises or facilities owned or used by" Surfacesys. Id. at *34. Finally, with respect to injuries arising out of Surfacesys's ongoing operations, an additional insured would be entitled to coverage under the Policy only if the injury did not occur after:

(1) All work, including materials, parts or equipment furnished in connection with such work, in the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the site of the covered operations has been completed; or

(2) That portion of "[Surfacesys's] work" out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

Id. at *35.

Stoncor asserts that pursuant to a "Master Installation Agreement," Surfacesys was required to, and did in fact, name Stoncor as an additional insured under the Policy before Arias suffered his injury. See Am. Compl. ¶¶ 11-12.

The "Master Installation Agreement" also provided that Stoncor "shall not be liable for any loss or casualty incurred or caused by" Surfacesys, and that Surfacesys would hold Stoncor "harmless from any and all liability, costs, damages, attorney's fees and expenses from any claims or causes of action of whatsoever nature arising while on or near the Project, or while performing Contract related work." Master Installation Agreement, dated Sept. 16, 2004 (annexed as Ex. 2 to the Declaration of Paul Franz in Support of Motion for Summary Judgment, filed May 15, 2017 (Docket # 39) ) ("Master Installation Agreement"), at 1. Pursuant to these provisions of the Master Installation Agreement, Stoncor brought a cross-claim against Surfacesys in the Arias Action on the ground that Surfacesys must indemnify Stoncor. See Shyer Decl. ¶ 16; Surfacesys's Notice of Motion and Affirmation, dated Dec. 1, 2017 (annexed as Ex. 5 to Shyer Decl.) ("Surfacesys's State Court Motion"), at Affirmation ¶¶ 54-56.

Stoncor brought the instant declaratory judgment action against Peerless in 2016, claiming that by virtue of the Master Installation Agreement, Stoncor was an additional insured under the Policy that Peerless was obligated to defend, indemnify, and hold harmless in the Arias Action. See Complaint, filed June 16, 2016 (Docket # 1), ¶¶ 10-12, 14; Am. Compl. ¶¶ 3, 11, 13, 15. On May 15, 2017, Stoncor moved for partial summary judgment on the issue of whether Peerless "has a duty to defend plaintiffs in" the Arias Action. Notice of Motion, filed May 15, 2017 (Docket # 37). Peerless cross-moved for summary judgment, seeking to have plaintiffs' amended complaint dismissed, and seeking a declaration that "Peerless does not have a duty to defend or indemnify" Stoncor in the Arias Action. See Notice of Motion for Summary Judgment, filed May 15, 2017 (Docket # 38). One ground that Peerless raised in its motion is that Surfacesys did not execute the "Master Installation Agreement" prior to Arias's injury, and Stoncor thus was not an additional insured. See Peerless Insurance Company's Memorandum of Law in Support of Motion for Summary Judgment, filed May 15, 2017 (Docket # 40), at 3-11. Another issue raised was whether Stoncor's and Surfacesys's operations were complete at the time of the accident. Id. at 11-22. Judge Lewis A. Kaplan, the district judge in this case, denied these motions by Order dated, March 29, 2018, stating "[t]he record reflects triable issues of fact as to whether an executed agreement existed between Stoncor ... and Surfacesys, ... and as to whether Stoncor's and Surfacesys' operations were complete, in each case prior to the incident underlying" the Arias Action. See Order, filed Mar. 29, 2018 (Docket # 69).

Both Stoncor and Surfacesys have also moved for summary judgment in the Arias Action. Shyer Decl. ¶ 15; Surfacesys's State Court Motion. These motions were marked submitted on April 2, 2018, and are currently sub judice. See Shyer Decl. ¶ 15. Surfacesys's motion asserts several bases for summary judgment as to Arias's claims. See Surfacesys's State Court Motion at Affirmation ¶¶ 23-53. Of particular relevance to the instant motion, Surfacesys seeks summary judgment as to Stoncor's cross-claim on the ground that Arias's injury occurred both after Surfacesys had completed installation of the floor and before Surfacesys executed the Master Installation Agreement. See id. at Affirmation ¶¶ 54-58.

On May 22, 2018, Peerless filed the instant motion to stay. See Def. Not.

II. GOVERNING LAW AND APPLICATION

Peerless's motion is imprecise in identifying the legal doctrine it invokes. Its main brief purports to summarize "[g]eneral [s]tay [l]aw," and cites to a mixture of federal and state cases, including cases applying the federal abstention doctrine. See Def. Mem. at 5-9. In its reply brief, it asserts that Stoncor's declaratory judgment action is "unripe" as to the duty to indemnify, and insists that "the federal abstention doctrine is irrelevant to this issue." Def. Reply at 2. Given this lack of clarity, we will examine both the ripeness and federal abstention doctrines.

Stoncor seeks a declaration from this Court that Peerless has a duty to both defend Stoncor in the Arias Action, and to indemnify Stoncor for any liability incurred in that action. See Am. Compl. ¶ 20. The doctrines of ripeness and abstention apply differently depending on the duty at issue, and we thus next describe these two duties before addressing the merits of the stay motion.

A. Duties to Defend and Indemnify

Under New York law, an "insurer's duty to furnish a defense is broader than its obligation to indemnify." Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304, 310, 486 N.Y.S.2d 873, 476 N.E.2d 272 (1984).⁴ As the New York Court of Appeals has explained,

[t]he duty to defend arises whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer, regardless of how false or groundless those allegations might be. The duty is not contingent on the insurer's ultimate duty to indemnify should the insured be found liable, nor is it material that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions.

Id. at 310, 486 N.Y.S.2d 873, 476 N.E.2d 272 (citation omitted). By comparison, "the duty to indemnify turns not on the allegations of the complaint but on the actual liabilities as borne out by the facts." Travelers Prop. Cas. Corp. v. Winterthur Int'l, 2002 WL 1391920, at *6 (S.D.N.Y. June 25, 2002). In other words, the insurer's duty to furnish a defense "generally ‘is triggered by the filing of a lawsuit,’ whereas the duty to indemnify generally ‘is triggered by a determination of liability.’ " Lafarge Can. Inc. v. Am. Home Assurance Co., 2018 WL 1634135, at *4 (S.D.N.Y. Mar. 31, 2018) (quoting Atl. Cas. Ins. Co. v. Value Waterproofing, Inc., 918 F.Supp.2d...