The City of New York v. Harleysville Ins. Co.

• Docket Number: 22-CV-3306 (RA)
• Decision Date: 14 July 2023
• Parties: THE CITY OF NEW YORK, Plaintiff, v. HARLEYSVILLE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

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THE CITY OF NEW YORK, Plaintiff, v. HARLEYSVILLE INSURANCE COMPANY, Defendant.

No. 22-CV-3306 (RA)

United States District Court, S.D. New York

July 14, 2023

MEMORANDUM OPINION & ORDER

RONNIE ABRAMS, UNITED STATES DISTRICT JUDGE:

The City of New York (the “City”) brings this insurance action against Harleysville Insurance Company (“Harleysville”) with respect to Harleysville's alleged duty to defend the City in an underlying personal injury action. The parties now cross-move for summary judgement on the third and fourth causes of action in the Amended Complaint.^[1] For the reasons that follow Harleysville's motion for summary judgment is denied, and the City's motion for summary judgment is granted.

BACKGROUND

The following facts are undisputed unless otherwise noted. In 2018, Prestige Pavers of NYC Inc. (“Prestige”) entered into a contract with the City, acting through the New York City Department of Parks and Recreation (the “Parks Department”), to reconstruct the Second Avenue entrance path at Poor Richard's Playground located at East 109th Street between Second and Third Avenues in Manhattan. City 56.1 Statement ¶ 1. Prestige is a named insured under a commercial general liability policy issued by Harleysville (the “Policy”) covering the policy period from June 1, 2019 to June 1, 2020. Id. ¶¶ 2-3. The Policy provides for a duty to defend, stating, in relevant part:

1. Insuring Agreement

a. 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.... We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.

Whitman Decl., Ex. 5, at 33. The Policy also includes additional insured endorsements. One endorsement, labeled “Additional Insured - Designated Person or Organization” (the “Designated Person Endorsement”), identifies “The City of New York” as an additional insured and provides:

Section II - Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury,” “property damage,” or “personal and advertising injury” caused, in whole or in part, by your acts or omissions or the acts or omissions of those acting on your behalf:

A. In the performance of your ongoing operations; or

B. In connection with your premises owned by or rented to you.

Id. at 65. Another endorsement, labeled “Additional Insured - Owners, Lessees or Contractors -Completed Operations - Automatic Status When Required in Construction Agreement With You” (the “Completed Operations Endorsement”), similarly provides:

Section II - Who Is An Insured is amended to include as an insured any person or organization for whom you are performing operations only as specified under a written contract . . . that requires that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability caused, in whole or in part, by the acts or omissions of the “Named Insured,” or those acting on behalf of the “Named Insured,” in the performance of the “Named Insured's” work for the additional insured ....

Id. at 74.

On February 19, 2020, M.M., a minor child, by her mother and natural guardian Belisa Calderon, filed an action in New York State Supreme Court captioned M.M. ex rel. Calderon and Calderon v. City of New York, New York City Department of Education, and New York City Board of Education, No. 151852/2020 (the “Calderon Action”). Id. ¶ 9; see Ziolkowski Decl., Ex. 1 (the “Calderon Complaint”). Prestige is not named as a defendant in the Calderon Action. The Calderon Complaint alleges, in relevant part, that on October 18, 2019, M.M. was lawfully within the confines of Poor Richard's Playground “when a certain gate . . . was caused to fall upon her causing her serious and permanent personal injuries.” Ziolkowski Decl., Ex. 1, ¶ 36. It further alleges that “it was the duty of defendant, CITY OF NEW YORK, its agents[,] servants[,] and or employees to maintain POOR RICHARD'S COURT . . . in a reasonably safe and suitable condition and in good repair,” including the gate that allegedly injured M.M., Id. ¶ 19, and that “[t]he CITY . . . their agents, servants and/or employees were negligent in the ownership, operation, management, maintenance, design and/or control of supervision and control of aforementioned GATE and courtyard . . . in causing, permitting and allowing the gate to become loose from the adjoining bracket . . .,” Id. ¶ 39. The Calderon Action is still pending, and no determination of liability has yet been made. Harleysville 56.1 Statement ¶¶ 28-30.

On April 8, 2022, the New York City Law Department (“Law Department”), on behalf of the City, notified Harleysville of the Calderon Action and demanded a defense under the Policy. City 56.1 Statement ¶ 12. On April 12, 2022, a Harleysville claim specialist responded requesting the City's contract with Prestige, the notice of the claim, and the 50-h hearing transcript. Id. ¶ 14. The Law Department sent Harleysville the Prestige contract, the notice of the claim, an exhibit from the 50-h hearing showing the gate that allegedly fell and injured M.M., the verified bill of particulars, and documentation from the Parks Department (the “Park Documents”). Id. ¶ 15. The Park Documents include a “Substantial Completion Inspection Report” dated August 12, 2019, which is addressed to Prestige and states, with respect to the Playground: “A copy of the ‘Final Punch List' is attached to this report. You are directed to complete all of the items on the ‘Final Punch List' no later than October 11, 2019.” Whitman Decl., Ex. 8, at 20. The attached “Final Punch List” includes the following entries: “Construction fence will stay in place until further notice” and “Install gate stops for all steel hoop fence gates.” Id. at 21. The Park Documents also include a “Guarantee Punch List Inspection Report” dated October 28, 2020-over a year later- which is again addressed to Prestige and states, “Some of the work and material involved does not satisfy the guarantee requirements, and, therefore, the attached punch list was established. You are directed to complete the punch list by November 22, 2020.” Id. at 23.

On April 25, 2022, Harleysville wrote a letter to the Law Department refusing to assume the defense of the Calderon Action. City 56.1 Statement ¶ 18. Harleysville stated the following grounds for refusal:

The contract does not contain language that requires our insured to defend and indemnify the City for their sole independent negligence. In addition, this matter has not yet been adjudicated. Therefore, we are unable to accept the tender for defense or indemnification on a contractual basis at this time. In addition, plaintiff has not asserted any direct allegations against Prestige Pavers of NYC Inc. in this lawsuit. Therefore, a duty to defend has not been triggered in this case.

Whitman Decl., Ex. 11. On May 2, 2022, the Law Department responded as follows: “Our investigation indicates that the gate in question that fell on plaintiff has been installed by your insured, Prestige Pavers. In order for an insurer to be obligated to defend an insured, the underlying tort suit need only allege action that is potentially covered by the policy . . . That is the case here.” Whitman Decl., Ex. 12 (emphasis in original). Harleysville responded once more on May 11, 2022, stating:

The City would not qualify as an additional insured under Prestige Pavers of NYC's policy at this time. Additional insured status would apply only with respect to liability caused in whole or in part by our insured's acts or omissions. Based on our investigation to date, there is no evidence that our insured caused in whole or in part the incident for which coverage is being sought. In addition, plaintiff has not asserted any direct allegations against Prestige Pavers of NYC Inc. in this lawsuit. Therefore, a duty to defend has not been triggered in this case.

Whitman Decl., Ex. 13. The City filed this federal action seeking a declaration that Harleysville is obligated to defend the City in the Calderon Action, and both parties now move for summary judgment.

LEGAL STANDARD

Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” WWBITV, Inc. v. Vill. of Rouses Point, 589 F.3d 46, 49 (2d Cir. 2009) (internal quotation marks omitted). In determining whether there is a genuine issue of material fact, the Court must view all facts “in the light most favorable to the non-moving party.” Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir. 2008). On cross-motions for summary judgment, “each party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration.” Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001).

DISCUSSION

“In New York, an insurer's duty to defend is exceedingly broad and distinct from the duty to indemnify.” Euchner-USA, Inc. v. Hartford Cas. Ins. Co., 754 F.3d 136, 140 (2d Cir. 2014) (internal quotation marks omitted). “[A]n insurer will be called upon to provide a defense whenever the allegations of...