U.S. Underwriters Ins. Co. v. Image By J&K, LLC

• Decision Date: 14 August 2018
• Docket Number: 16-CV-6176 (MKB)
• Parties: UNITED STATES UNDERWRITERS INSURANCE COMPANY, Plaintiff, v. IMAGE BY J & K, LLC, Sphinx Cleaning Systems, Inc., and Margarita LeClerc, Defendants.
• Court: U.S. District Court — Eastern District of New York

335 F.Supp.3d 321

UNITED STATES UNDERWRITERS INSURANCE COMPANY, Plaintiff,

v.IMAGE BY J & K, LLC, Sphinx Cleaning Systems, Inc., and Margarita LeClerc, Defendants.

16-CV-6176 (MKB)

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

Signed August 14, 2018

Robert W. Muilenburg, Coughlin Duffy LLP, Morristown, NJ, for Plaintiff.

Michael E. Longo, Goldberg Segalla LLP, New York, NY, William J. Edwins, Goldberg Segalla LLP, Garden City, NY, for Defendants.

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge

Plaintiff United States Underwriters Insurance Company ("U.S. Underwriters") commenced the above-captioned action on November 7, 2016, against Defendants Image By J & K, LLC ("Image"), Sphinx Cleaning Systems, Inc. ("Sphinx"), and Margarita LeClerc, seeking a declaratory judgment that it has no duty to defend or indemnify Image in the state court action, Margarita LeClerc v. Image By J & K, LLC and Image Building Maintenance, Inc. , Index No. 703797/2014 (Sup. Ct.) (the "LeClerc Action " ), pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. (Compl., Docket Entry No. 1.) On September 22, 2017, U.S. Underwriters and Image cross-moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, each seeking a declaration as to their rights and duties under the insurance agreement at issue. Image also requests reimbursement for costs incurred in connection with this action. (Pl. Mot. for Summ. J. ("Pl. Mot."), Docket Entry No. 30; Pl. Mem. in Supp. of Pl. Mot. ("Pl. Mem."), Docket Entry No. 31; Image Mot. for Summ. J. ("Image Mot."), Docket Entry No. 25; Image Mem. in Supp. of Image Mot. ("Image Mem."), Docket Entry No. 26.) For the reasons discussed below, the Court grants Image's cross-motion and denies U.S. Underwriters' cross-motion for summary judgment.

I. Background

a. LeClerc Action

Plaintiff U.S. Underwriters is a North Dakota insurance company, with a principal place of business in Pennsylvania, conducting business in New York. (Compl. ¶ 7.)¹ Defendant Image is a limited liability corporation with its principal place of business in Virginia. (id. ; Image Answer ¶ 7, Docket Entry No. 8.)

On March 4, 2010, Image entered into a "Floor Cleaning/Janitorial Services Agreement" (the "Agreement") with Walgreens Eastern Co., Inc. ("Walgreens"). (Pl. Statement of Material Facts Pursuant to Local R. 56.1 ("Pl. 56.1") ¶ 2, Docket Entry No. 35.) On March 23, 2011, Image subcontracted the services in the Agreement to Sphinx, a corporation with its principal place of business in New York. (Compl. ¶ 9; Pl. 56.1 ¶ 3.) Under the subcontract, Sphinx, inter alia , cleaned and waxed the floors of the Walgreens Pharmacy in Corona, New York (the "Premises"), upon the issuance of work orders by Image. (Subcontract Agreement between Sphinx and Image ("Subcontract Agreement") 2, annexed to Robert W. Muilenburg Decl. in Supp. of Pl. Mot. ("Muilenburg Decl."), Docket Entry No. 30-2 as Ex. D, Docket Entry No. 30-6.) The work orders detailed the "[s]ervices to be performed, the time frame of the [s]ervices to be performed, and the price to be paid to [Sphinx] for [its] [s]ervices." (Id. ) As part of its subcontract, Sphinx was also required to obtain general liability insurance naming Image as an additional insured. (Pl. 56.1 ¶ 7.) Sphinx thus obtained commercial liability insurance policy number CP 3554491 from U.S. Underwriters (the "Policy"). (Id. ¶ 14.)

On June 2, 2011, LeClerc, a Walgreens employee, fell and sustained bodily injuries at the Premises. (LeClerc Compl. ¶ 24, annexed to Image Mot. as Ex. A, Docket Entry No. 25-2.) LeClerc testified that on the day of the accident, the Premises opened at 7:30 AM, about forty-five minutes later than usual, because the cleaning crew had left later than usual. (LeClerc Dep. 44:2–23, 47:20–48:6, annexed to Image Mot. as Ex. R, Docket Entry No. 25-19.) Consequently, the floors allegedly had yet to dry and remained wet. (Id. at 48:15–16.) After the Premises were opened to the public, a customer fell down in aisle five. (Id. at 65:20–66:8.) About twenty to twenty-five minutes later, sometime between 8:00 and 9:00 AM, LeClerc also fell down in aisle five, suffering the complained of injuries. (Id. at 14:2–5; 67:12–15.) LeClerc alleges that Image or its agents were responsible for ensuring that the Premises were safe and their failure to properly dry the floors violated their duties of reasonable care and diligence, causing her injuries. (LeClerc Compl. ¶ 22–26.)

b. The Policy

The parties dispute whether Image qualifies as an additional insured under the Policy. Section II (A) of the Policy (the "Additional Insured Provision") provides the following definition of an additional insured:

Who is An Insured is amended to include as an additional insured the person(s) or organizations(s) shown in the Schedule, but only with respect to liability for "bodily injury", "property damages" or "personal and advertising injury" caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf;

in the performance of your ongoing operations for the additional insure[s] at the location[s] designated above.

(Policy, annexed as Ex. K to Image Mot. Docket Entry No. 25-12.)

Section II (B) of the Policy (the "Exclusions Provision") also provides certain policy exclusions specific to additional insureds:

With respect to the insurance afforded to these additional insureds, the following additional exclusions apply:

This insurance does not apply to "bodily injury" or "property damage" occurring after:

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

2. That portion of "your 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. ) The parties agree the term "your" in these sections is a reference to Sphinx, the named insured of the Policy. (Pl. 56.1 ¶ 16.)

II. Discussion

a. Standards of review

i. Summary judgment

Summary judgment is proper only when, construing the evidence in the light most favorable to the non-movant, "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) ; Wandering Dago, Inc. v. Destito , 879 F.3d 20, 30 (2d Cir. 2018) ; see also Cortes v. MTA NYC Transit , 802 F.3d 226, 230 (2d Cir. 2015). The role of the court "is not to resolve disputed questions of fact but only to determine whether, as to any material issue, a genuine factual dispute exists." Rogoz v. City of Hartford , 796 F.3d 236, 245 (2d Cir. 2015) (first quoting Kaytor v. Elec. Boat Corp. , 609 F.3d 537, 545 (2d Cir. 2010) ; and then citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A genuine issue of fact exists when there is sufficient "evidence on which the jury could reasonably find for the plaintiff." Anderson , 477 U.S. at 252, 106 S.Ct. 2505. The "mere existence of a scintilla of evidence" is not sufficient to defeat summary judgment. Id. The court's function is to decide "whether, after resolving all ambiguities and drawing all inferences in favor of the nonmoving party, a rational juror could find in favor of that party." Pinto v. Allstate Ins. Co. , 221 F.3d 394, 398 (2d Cir. 2000).

ii. Declaratory judgment

The Declaratory Judgment Act provides, in pertinent part, that "[i]n a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). For the purposes of the Declaratory Judgment Act, "actual controversy" means "whether the facts alleged, under all the circumstances, show that there is a substantial controversy between parties having adverse legal interests, or sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Golden v. Zwickler , 394 U.S. 103, 108, 89 S.Ct. 956, 22 L.Ed.2d 113 (1969) (quoting Maryland Casualty Co. v. Pac. Coal & Oil Co. , 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ); see also Nike, Inc. v. Already, LLC , 663 F.3d 89, 95 (2d Cir. 2011). " ‘[A] mere demand for declaratory relief does not by itself establish a case or controversy necessary to confer subject matter jurisdiction....’ ‘[Rather,] [w]here the remedy sought is a mere declaration of law without implications for practical enforcement upon the parties, the case is properly dismissed.’ " Mitskovski v. Buffalo & Fort Erie Pub. Bridge Auth. , 415 F. App'x 264, 267 (2d Cir. 2011) (quoting S. Jackson & Son, Inc. v. Coffee, Sugar & Cocoa Exch. Inc. , 24 F.3d 427, 431 (2d Cir. 1994) ).

Federal courts have "unique and substantial discretion in deciding whether to declare the rights of litigants" under the Declaratory Judgment Act. Wilton v. Seven Falls Co. , 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) ; Mariah Re Ltd. v. Am. Family Mut. Ins. Co. , 52 F.Supp.3d 601, 623 (S.D.N.Y. 2014) ; see also Dow Jones & Co., Inc. v. Harrods Ltd. , 346 F.3d 357, 359 (2d Cir. 2003) ("Courts have consistently interpreted [the Declaratory Judgment Act's] permissive language as a broad grant of discretion to district courts to refuse to exercise jurisdiction over a declaratory action that they would otherwise be empowered to hear."). The Second Circuit instructs district courts to consider certain prudential factors in determining whether to exercise their discretion to consider a declaratory judgment action:

(1) whether the judgment will serve a useful purpose in clarifying or

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