Yoda Llc v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Decision Date: 13 October 2011
• Citation: 2011 N.Y. Slip Op. 07174,931 N.Y.S.2d 18,88 A.D.3d 506
• Parties: YODA, LLC, et al., Plaintiffs–Respondents–Appellants,v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant–Appellant–Respondent,Han Soo Lee, et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

88 A.D.3d 506

931 N.Y.S.2d 18

2011 N.Y. Slip Op. 07174

YODA, LLC, et al., Plaintiffs–Respondents–Appellants,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant–Appellant–Respondent,Han Soo Lee, et al., Defendants–Respondents.

Supreme Court, Appellate Division, First Department, New York.

Oct. 13, 2011.

Sedgwick Detert Moran & Arnold LLP, New York (J. Gregory Lahr of counsel), for appellant-respondent.Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola (Michael A. Miranda of counsel), for respondents-appellants.Law Offices of Kenneth A. Wilhelm, New York (Barry Liebman of counsel), for respondents.SAXE, J.P., FRIEDMAN, ABDUS–SALAAM, ROMÁN, JJ.

Order, Supreme Court, New York County (Doris Ling–Cohan, J.), entered July 8, 2010, which, denied defendant National Union's motion for summary judgment and plaintiffs' cross motion for summary judgment, unanimously modified, on the law, to grant the cross motion to the extent of declaring, on the fourth cause of action, that National Union is equitably estopped from denying plaintiffs Yoda and Riverhead excess coverage in the underlying personal injury action, and otherwise affirmed, without costs. Appeal from order, same court and Justice, entered September 15, 2010, which, upon reargument, adhered to the original determination, unanimously dismissed, without costs, as academic.

Plaintiffs Yoda and Riverhead, the general contractor and owner of a construction site, seek coverage under an excess insurance policy issued by defendant National Union to their subcontractor, Queens Stainless, with respect to the underlying Labor Law action. Their insurer, plaintiff United National, seeks a declaration that its coverage follows that of National Union.

The National Union excess policy follows the form of a commercial general liability policy, issued by First Specialty to Queens Stainless, that provides coverage to its insured for damages arising from bodily injury, and excludes coverage for liability arising from a contractual “agreement,” except if the insured has assumed liability for such damages under an “insured contract,” such as the subcontract between Yoda and Queens Stainless. The First Specialty policy also provides that its employer's liability exclusion “does not apply to liability assumed by the insured under an ‘insured contract,’ ” and requires the insurer to defend an indemnitee of the insured in certain circumstances.

In 2003, Yoda tendered the defense and indemnity in the underlying action to Queens Stainless and its insurers, and First Specialty accepted the tender, although no action for indemnification had been commenced against Queens Stainless. National Union actively participated in and monitored the litigation for the next three years, without issuing any disclaimer. In 2006, it accepted First Specialty's tender of its policy in connection with a court-ordered mediation, and attended the mediation with authority to settle the underlying action. Only after partial summary judgment was awarded in favor of the plaintiffs in the underlying action, and the damages trial was scheduled to begin, did National Union disclaim coverage, asserting that it had just “discovered” that the certificate of insurance provided to it by Yoda, which names Yoda and Riverhead as additional insureds, was false.

National Union's failure to timely disclaim coverage after tender was made by a party claiming indemnification from its insured, as required by Insurance Law § 3420(d), precludes it from disclaiming based on the employer's liability exclusion. However, the failure to disclaim “does not create coverage which the policy was not written to provide” ( Zappone v. Home Ins. Co., 55 N.Y.2d 131, 134, 447 N.Y.S.2d 911, 432 N.E.2d 783 [1982]; National Abatement Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 33 A.D.3d 570, 571, 824 N.Y.S.2d 230 [2006] ). The First Specialty policy does not provide automatic additional insured coverage for parties indemnified under an “insured contract” ( compare Kassis v. Ohio Cas. Ins. Co., 12 N.Y.3d 595, 885 N.Y.S.2d 241, 913 N.E.2d 933 ...