v. Century Sur. Co.
| Decision Date | 28 October 2015 |
| Docket Number | 15 Civ. 2801 (ER) |
| Parties | M.S.S. CONSTRUCTION CORP., Plaintiff, v. CENTURY SURETY COMPANY, K.S. BILLING & ASSOCIATES, INC., and MORSTAN GENERAL AGENCY, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Ramos, D.J.:
This action arises from an insurance coverage dispute between Plaintiff M.S.S. Construction Corporation ("Plaintiff") and Defendants Century Surety Company ("Century"), K.S. Billing and Associates, Inc. ("K.S. Billing), and Morstan General Agency ("Morstan," and collectively "Defendants"). The case was originally filed in New York State Supreme Court and removed to this Court on the basis of diversity jurisdiction. Before the Court is Plaintiff's motion to remand the action back to state court based on the joinder of two non-diverse Defendants, K.S. Billing and Morstan. Century opposes this motion, contending that Plaintiff fraudulently joined the non-diverse Defendants for the sole purpose of destroying federal jurisdiction. For the reasons discussed below, Plaintiff's motion to remand is GRANTED.
Plaintiff is a residential and commercial construction company incorporated under the laws of New York State with its principal place of business in Bronx, New York. Am. Compl. ¶ 1.
Defendant Century is incorporated in Ohio with its principal place of business in Michigan. Answer ¶ 2. Century is licensed in New York State to provide insurance and suretyship for private and public construction projects. Am. Compl. ¶ 2. During the time relevant to this action, Century allegedly insured Plaintiff. Id. ¶ 14.
Defendant, K.S. Billing is incorporated under the laws of New York State with its principal place of business in Richmond Hill, New York. Id. ¶ 3. K.S. Billing allegedly acted as a producer in obtaining the insurance policy at issue. Id. ¶¶ 10, 13. The parties, however, dispute whether K.S. Billing acted as Plaintiff's insurance broker and/or agent. See Pl.'s R. Mem. at 10 (); Def.'s Opp'n Mem. at 16 ().2
Defendant, Morstan, a corporation or other business entity of New York State, is an insurance agent with its principal place of business in Manhassett, New York. Am. Compl. ¶ 4. Morstan, acting as Century's local insurance agent, issued the Century insurance policy at the center of this dispute. Id. ¶ 14.
In March 2012, Plaintiff asked K.S. Billing to procure an insurance policy for Plaintiff's construction business that would provide coverage in connection with its contract to lease and erect sidewalk sheds and other equipment to the New York City Housing Authority ("NYCHA") for a construction project located at 1471 Wilson Avenue, Bronx, New York (the "NYCHA Project"). Id. ¶¶ 6, 10. According to Plaintiff, K.S. Billing was aware that Plaintiff wanted to obtain coverage for the NYCHA Project and knew, or should have known, that NYCHA requires that its construction vendors, including Plaintiff, obtain general liability insurance coverage and name NYCHA as an additional insured party. Id. ¶¶ 7, 2 (count 2).3 Plaintiff engaged K.S. Billing allegedly in reliance on its expertise as an advisor and procurer of insurance policies, including commercial general liability policies. Id. ¶¶ 11, 12.
On March 5, 2012, Plaintiff and K.S. Billing submitted Plaintiff's "Accord Commercial Insurance Application" (the "Application") to Century through its agent, Morstan, for a commercial general liability insurance policy. Id. ¶¶ 10, 13; Donny Dement's Affidavit ("Dement Aff.") in Support of Defendant's Motion for Summary Judgment ¶ 5, Ex. B.4 Plaintiff alleges that it requested coverage for the classification codes "painting" and "carpentry-NOC."5 Am. Compl. ¶ 13; see also Korzun Aff. Ex. B. Plaintiff claims that it specifically requested coverage for "carpentry-NOC"—an insurance classification code for carpentry operations not specifically described by another classification—to ensure that the sidewalk sheds used in the NYCHA Project were covered by the applied-for policy. Am. Compl. ¶¶ 13, 15. Plaintiff also allegedly requested that the policy not include any exceptions for exterior work to further ensure the sidewalk sheds would not be excluded from coverage, which according to Plaintiff, is standard practice when insuring sidewalk sheds. Id. ¶ 13.
Relying on a different version of the Application, Century disputes that Plaintiff requested coverage for "carpentry-NOC" and instead claims that the commercial general liability section of the Application submitted to Century included only the classifications "painting" and"carpentry-interior." Def.'s Opp'n Br. at 3, 11; Dement Aff. Ex. B at 3.6 It should be noted, however, that even Century's version of the Application lists "carpentry-NOC" in the section entitled "Nature of Business/Description of Operations by Premise(s)." Dement Aff. Ex. B at 1. Accordingly, notwithstanding the differences in the two Applications, both Applications list "carpentry-NOC" as a classification code. See Korzun Aff. Ex. B. at 2; Dement Aff. Ex. B at 1.
Also on March 5, 2012, Morstan, on behalf of Century, provided Plaintiff with a general liability quote, listing the coverage classification as "carpentry-interior." Dement Aff. ¶ 6, Ex. A. Two days later, on March 7, 2012, Century contends that K.S. Billing requested Morstan bind the coverage stated in the March 5, 2012 quote. Dement Aff. ¶ 8. Also on March 7, 2012, Plaintiff and NYCHA formally entered a contract for Plaintiff to erect and lease sidewalk sheds to NYCHA for use in the NYCHA Project. Am. Compl. ¶ 6. On March 8, Plaintiff's coverage was bound. Dement Aff. ¶ 10.
On March 20, 2012, Century, through Morstan, issued policy number CCP757251 to Plaintiff for the period beginning March 7, 2012 through March 7, 2013. Am. Compl. ¶ 14. A copy of the policy, issued by Century and signed by Morstan, was sent to Plaintiff and K.S. Billing. Id. ¶ 17. The policy provided "General Liability-Contractors" coverage for, inter alia, bodily injury and property damage arising from carpentry work performed at the NYCHA Project. Id. ¶¶ 20, 21; Dement Aff. Ex. D; Korzun Aff. Ex. C. The policy contained various endorsements, including an endorsement that limited the commercial general liability coverage to specific classifications listed therein—"painting-interior-buildings or structures" and "carpentry-interior." Am. Compl. ¶ 16; Dement Aff. Ex. D at 62; Korzun Aff. Ex. C at 6. It is not disputed that the policy issued by Century did not include the classification "carpentry-NOC," which Plaintiff contends would have covered claims other than those arising out of interior painting and carpentry work. Id.
Plaintiff contends that K.S. Billing, as the insurance producer, and Morstan, as the local insurance agent, owed Plaintiff a duty to procure and issue the policy requested by Plaintiff but breached that duty by procuring and issuing a non-conforming policy. Am. Compl. ¶¶ 2 (count 2), 6 (count 2). Plaintiff also alleges that Century and Morstan were aware of the classification code change but did not alert Plaintiff to the change in coverage. Id. ¶¶ 17, 18. Moreover, Plaintiff asserts that K.S. Billing did not advise or recommend identifying NYCHA as an additional insured under the policy. Id. ¶ 13.
Plaintiff also alleges that the policy contains a duty to defend provision and a "Blanket Additional Insured" endorsement that extended coverage "to include any person or organization you [Plaintiff] are required to include as an additional insured on this policy by a written contract or written agreement in effect during this policy period and executed prior to the occurrence of any loss" and thus, NYCHA is an additional insured under the policy. Id. ¶¶ 20, 22. Century claims that the policy contains no "Blanket Additional Insured" endorsement, nor names NYCHA as an additional insured. Answer ¶ 20; Def.'s Opp'n Mem. at 12. This Court has identified no "Blanket Additional Insured" endorsement in the policy. See Korzun Ex. C; Dement Ex. D. While NYCHA is listed as the Certificate of Liability Insurance holder, the certificate explicitly states that it "confers no rights upon the certificate holder [and] does not amend, extend or alter the coverage afforded by the policies below." Korzun Aff. ¶ 6, Ex. D.
On March 29, 2012, non-party Majestic Services Company ("Majestic") inspected Plaintiff's business allegedly on Morstan's request. Dement Ex. C. As part of Majestic's investigation, Majestic interviewed Manjit Singh ("Singh"), Plaintiff's principal and identified inMajestic's report as "the owner for this risk." Id. Singh allegedly stated that approximately 50% of Plaintiff's work involves interior painting while the other 50% consists of carpentry work and that 100% of services provided by Plaintiff are interior. Id.
From March 2012 through March 2013, Plaintiff installed and leased sidewalk sheds to NYCHA. Am Compl. ¶ 23. On August 12, 2012, Plaintiff and NYCHA received notice of a personal injury suit filed in New York State Supreme Court, Bronx County by Rodney Ortiz, Jr. and his father, Rodney Ortiz, alleging that on July 9, 2012, Mr. Ortiz Jr. suffered injuries involving the sidewalk sheds leased by Plaintiff to NYCHA (the "Underlying Action"). Id. ¶ 24. NYCHA demanded that Plaintiff and Plaintiff's insurer defend and indemnify NYCHA for any liability resulting from the Underlying Action. Id. ¶¶ 25, 26, 29. On October 1, 2012, NYCHA and Plaintiff, through K.S. Billing, notified Century of the Underlying Action and requested the appointment of counsel pursuant to the duty to defend clause in the policy. Id. ¶ 26; Affidavit of Andrew Malone in Support of...
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