Zurich Am. Ins. Co. v. XL Ins. Am., Inc.

• Decision Date: 07 July 2021
• Docket Number: 20-cv-4614 (LJL)
• Citation: 547 F.Supp.3d 381
• Parties: ZURICH AMERICAN INSURANCE COMPANY and American Guarantee & Liability Insurance Company, Plaintiffs, v. XL INSURANCE AMERICA, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

547 F.Supp.3d 381

ZURICH AMERICAN INSURANCE COMPANY and American Guarantee & Liability Insurance Company, Plaintiffs,

v.XL INSURANCE AMERICA, INC., Defendant.

20-cv-4614 (LJL)

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

Signed July 7, 2021

Gabriel Edward Darwick, Benjamin Phillip Mark, Coughlin Duffy LLP, New York, NY, for Plaintiffs.

Matthew John Shiroma, Day Pitney LLP, Hartford, CT, for Defendant.

OPINION & ORDER

LEWIS J. LIMAN, United States District Judge:

Plaintiffs Zurich American Insurance Company ("Zurich") and American Guarantee & Liability Insurance Company ("AGL," and together, "Plaintiffs") move, pursuant to Federal Rule of Civil Procedure 56, for summary judgment on its claims that Defendant XL Insurance America, Inc. ("XL" or "Defendant") has a duty to defend and indemnify one of Zurich's insured entities, the City of Port Jervis (the "City"); that XL is obligated to provide coverage on a primary, non-contributory basis to Zurich up to its combined policy limits; and that XL is obligated to reimburse Zurich for all past defense costs, plus interest.

Defendant XL moves for summary judgment on its claim that XL has no duty to defend or indemnify the City. If the Court determines that XL has a duty to defend or that there is an issue of fact, XL additionally seeks declarations that it shares any duty to defend 50/50 with Zurich; that XL's potential indemnity obligation is limited to vicarious liability; that XL's liability under its primary policy is capped at $1,000,000; and that XL's excess policy is not triggered until all other policies are exhausted.

For the following reasons, summary judgment is granted in part and denied in part to Plaintiffs and granted in part and denied in part to XL.

BACKGROUND

I. Underlying State Court Action

This case is about insurance coverage for state court litigation relating to a personal injury at a construction site. For purposes of summary judgment, the following facts are undisputed.

On or about August 3, 2019, David Geoff Stewart ("Stewart") was injured by a falling micropile while working on a construction project to replace a bridge in Port Jervis, New York. At the time, Stewart was employed by D.A. Collins Construction Co., Inc. ("D.A. Collins"), which was under contract with the City. Specifically, in 2018, D.A. Collins entered into a contract with the City for highway improvements, bridge replacements, and safe sidewalk projects. D.A. Collins, in turn, subcontracted with Hayward Baker, Inc. ("HBI") to design, furnish, and install several micropiles at the construction site.

On or about December 18, 2019, Stewart and his spouse filed a lawsuit against the City in New York State Supreme Court, Orange County (the "State Court Action"). HBI was not named as a defendant or otherwise referenced in the complaint in the State Court Action. The complaint in the State Court Action alleges the City's negligence and violations of labor law (the "State Court Complaint"). On September 4, 2020, the City impleaded HBI to assert against it causes of action for common law and contractual indemnification and contribution. In its third-party complaint, the City alleges that Stewart seeks to hold it liable "by reason of [HBI's] wrongful conduct in the operation and/or control of the premises and roadway located in the City of Port Jervis." Dkt No. 25-2 ¶ 8. The State Court Action is ongoing.

Plaintiff Zurich insures D.A. Collins under a commercial general liability policy, Dkt. No. 25-9, and a commercial umbrella liability policy, Dkt. No. 25-10. Zurich agreed to defend the City in the State Court Action as an additional insured under its primary policy and umbrella policy up to a total limit of liability of $6 million. Dkt. No. 28 ¶ 46; Dkt. No. 25-11.

Defendant XL insures HBI under a commercial general liability policy, Dkt. No. 21-3, and an excess liability policy, Dkt. No. 21-4, issued to Keller Foundations, LLC ("Keller"), the parent company of HBI. The City is an additional insured under both policies, subject to the occurrence of certain conditions.

II. The Insurance Contracts

A. The City – D.A. Collins Contract

On or about July 31, 2018, the City and D.A. Collins entered into a contract in which D.A. Collins agreed to perform construction work for the City with respect to the Port Jervis Highway. Dkt. Nos. 21-12, 21-16.

Zurich produced a version of the contract that appends the Standard Specifications Manual of the New York State Department of Transportation. See Dkt. No. 21-12. Those specifications require D.A. Collins to maintain certain insurance, including additional insured coverage for the City "with respect to any claim arising from [D.A. Collins’] Work under this Contract or as a result of [D.A. Collins’] activities." Id. at 150 § 107-06(A)(4). It also contains that same "arising from" language with respect to indemnification: "[D.A. Collins] shall indemnify and save harmless ... any municipality in which the work is being performed ... from suits, claims, actions, damages, and costs, of every name and description arising from the work under its contract during its prosecution and until the final acceptance thereof." Id. at 158 § 107-09(C).

However, in a response to a subpoena from XL, the City produced to XL a copy of the contract between the City and D.A. Collins that did not include the Standard Specifications Manual. See Dkt. No. 21-16. In December 2019, Zurich wrote back, disputing that the contract between the City and D.A. Collins incorporated the standard specifications. See Dkt. No. 21-7.

B. The D.A. Collins – HBI Subcontract

D.A. Collins and HBI entered into a subcontract agreement, dated September 17, 2018, that requires HBI to name D.A. Collins and the City as additional insureds under its commercial general liability and excess liability policies on a primary, non-contributory basis (the "HBI Subcontract"). Dkt. No. 21-2. Exhibit C of the HBI Subcontract lists the "Insurance Requirements," which require HBI to maintain certain insurance:

2. Commercial General Liability Insurance. [HBI] shall maintain an occurrence form commercial general liability policy or policies insuring against liability arising from premises (including loss of use thereof), personal injury or death, advertising injury, liability insured under an insured contract (including the tort liability of another assumed in a business contract) occurring on or in any way related to the premises or occasioned by reason of the operations of [HBI].

Dkt. No. 21-2 at 21 § B.2.

Under, "Conditions Applicable to Insurance," "[a]ll policies of insurance required by [the HBI Subcontract] must meet the following requirements":

4. Additional Insureds. All insurance policies required by these specifications ... shall be endorsed to provide coverage to D.A. Collins Construction Co., Inc. and all other entities listed in Addendum 4 with respect to any and all claims arising from [HBI]’s Work under this contract or as a result of [HBI]’s (or Second Tier Subcontractor's) activities. Additional Insured Endorsements to be Primary and Non-Contributory ISO forms CG 20 10 11 85 or CG 20 10 04 13 AND CG 20 37 04 13 or the Equivalent.¹

Id. at 20 § A.4.

Under "Insurance Requirements," the "types of insurance and ... policy limits shall be as follows unless Addendum 4 contains additional types of insurance and/or higher limits" and "[t]he more onerous requirements shall apply":

2. b. Additional Insureds. All insurance policies required by these specifications ... shall be endorsed to provide coverage to D. A. Collins Construction Co., Inc. and all other entities listed in Addendum 4 with respect to any and all claims arising from [HBI]’s Work under this contract or as a result of [HBI]’s (or second tier subcontractors) activities. Additional Insured Endorsements to be Primary and Non-Contributory using ISO forms CG 20 10 11 85, CG 20 10 04 13 AND CG 20 37 04 13 or the Equivalent.²

Id. at 22 § B.2.b.

Finally, the HBI Subcontract provides, under "Primary Coverage": "All insurance policies ... shall provide that the required coverage shall be primary as to any other insurance that may be available to [D.A. Collins] for any claim arising from [HBI]’s Work under this Agreement, or as a result of [HBI]’s activities." Id. at 20 § A.5.

C. The XL Policies

1. XL Primary Policy

XL issued a commercial general liability policy to HBI's parent Keller for the policy period from July 1, 2019 to June 1, 2020, with limits of $2,500,000 per occurrence and in the aggregate, subject to a $650,000 deductible (the "XL Primary Policy"). See Dkt. No. 21-3. HBI is a named insured on the XL Primary Policy. Id. The policy contains dozens of additional insured endorsement forms, all produced by the Insurance Services Office ("ISO"): three "CG 20 10 10 01" forms (the "10 01 Form"); twenty-nine "CG 20 10 04 13 / CG 20 37 04 13" (the "04 13 Forms"); and eleven "CG 20 10 07 04 / CG 20 37 07 04" forms. Three forms are relevant here.

The 10 01 Form for Keller addresses liability "arising out of" HBI's ongoing operations. It states in part:

This endorsement applies to any person or organization to whom or to which Keller Foundation or its subsidiaries is required to provide additional insured status specifically utilizing this endorsement by,

(a) written contract or agreement; or

(b) to meet the obligations of a contract or agreement.

....

A. Section II – Who Is An Insured is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.

B. With respect to the insurance afforded to these additional insureds, the following exclusion is added:

2. Exclusions. 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)

...