Opinion
601695/2009.
Decided April 5, 2011.
The following papers read on these motions:
The court is aware that certain other supplemental affirmations or supplemental memoranda, besides those listed, were filed electronically by several first and second Third-Party Defendants, on the subject of Archstone's supplemental affirmation regarding certificates of insurance. However, this court has not listed those documents, since it did not receive courtesy copies in accordance with the rules for electronic filing in New York.
Archstone Motion for Partial Summary Judgment (Seq. No. 20) with Archstone-Henderson Affirmation and Exhibits 1 Archstone Rule 19A Statement 2 Archstone Memorandum of Law 3 Archstone-Henderson Reply Affirmation and Exhibits 4 Archstone Reply Memorandum of Law 5 Archstone Responses to Cross-Movants' Rule 19A Statements 6 Archstone-Henderson Supplemental Affirmation Regarding Certificates of Insurance ("COI") and Exhibits 7 Travelers Motion for Partial Summary Judgment (Seq. No. 21) with Travelers-Shiroma Affirmation and Exhibits 8 Travelers Rule 19A Statement 9 Travelers Memorandum of Law 10 Travelers-Shiroma Reply Affirmation and Exhibits 11 Travelers Responses to Cross-Movants Rule 19A Statements 12 Federated Mutual's Cross-Motion (Seq. No. 23) with Rule 19A Statement, Federated-Desantis Affirmation, and Exhibits 13 Federated Memorandum of Law 14 Federated-DeSantis Reply Affirmation 15 Federated-DeSantis Letter of Jan. 3, 2011 and Exhibits 16 American States' Cross-Motion (Seq. No. 24) with American States-Fuerth Affirmation and Exhibits 17 American States' Rule 19A Statement for its Cross-Motion 18 American States' Responses to Archstone's Rule 19A Statement 19 American States' Responses to Travelers' Rule 19A Statement 20 American States' Memorandum of Law 21 American States-Fuerth Reply Affirmation 22 American States-Kaufman Supplemental Affirmation Regarding COI Hartford Fire Insurance Company's Cross-Motion (Seq. No. 25) with Hartford Fire-Posner Affirmation and Exhibits 23 Hartford Fire's Rule 19A Statement 24 Hartford Fire's Response to Traveler's Rule 19A Statement 25 Hartford Fire's Response to Archstone's Rule 19A Statement 26 Hartford Fire's Memorandum of Law 27 Hartford Fire's Reply Memorandum 28 Hartford Fire Response to Archstone's Application Regarding COI 29 Zurich Cross-Motion (Seq. No. 26) with Zurich-Kinney Affirmation and Exhibits 30 Zurich Responses to Travelers' and Archstone's Rule 19A Statements and Rule 19A Counterstatement 31 Zurich Memorandum of Law 32 Zurich Reply Memorandum 33 Erie Insurance Exchange Cross-Motion (Seq. No. 27) with Responses to Travelers' and Archstone's Rule 19A Statements and Rule 19A Counterstatement, Erie-Goode Affirmation, and Exhibits 34 Erie Amended Memorandum of Law 35 Erie Reply Memorandum 36 Erie-Goode letter of January 13, 2011 37 Delos Cross-Motion (Seq. No. 28) with Delos-Butler Affirmation and Exhibits 38 Delos Memorandum of Law 39 Delos-Butler Reply Affirmation 40 Delos-Butler letter of December 29, 2010 41 Delos-Butler letter of March 1, 2011 42 Merchants Mutual Cross-Motion (Seq. No. 29 ) with Merchants-Krawczyk Affirmation and Exhibits 43 Merchants-Donnelly Affirmation in Opposition to Archstone 44 Merchants-Donnelly Affirmation in Opposition to Travelers 45 Merchants Responses to Travelers' and Archstones' Rule 19A Statements and Its Rule 19A Counterstatement 46 Merchants Memorandum of Law 47 Merchants and American European Donnelly letter of Jan. 13, 2011 and Exhibits 48 Merchants and American European Donnelly Affirmation in Opposition to Travelers 49 Merchants Mutual-Donnelly Reply Affirmation in Opposition to Archstone 50 Merchants Mutual and American European Donnelly Supplemental Affirmation Regarding Certificates of Insurance 51 American European Cross-Motion (Seq. No. 30) with American European-Krawczyk Affirmation and Exhibits 52 American European-Donnelly Affirmation in Opposition to Travelers 53 American European-Donnelly Affirmation in Opposition to Archstone 54 American European Responses to Archstone's and Travelers' Rule 19A Statements and Its Rule 19A Counterstatement 55 American European-Donnelly Reply Affirmation in Opposition to Archstone 56 Everest Cross-Motion (Seq. No. 31) with Everest-Odelson Affirmation and Exhibits 57 Everest Memorandum of Law 58 Everest-Odelson Reply Affirmation 59 Everest-Odelson letter of January 13, 2011 60 Everest-Odelson Supplemental Affirmation Regarding COI 61 ACE American Cross-Motion (Seq. No. 32) with ACE American-Cummings Affirmation and Exhibits 62 ACE American Memorandum of Law 63 ACE American's Responses to Archstone's and Travelers' Rule 19A Statements and Its Rule 19A Counterstatement 64 ACE American Reply Memorandum of Law 65 Continental Casualty Cross-Motion (Seq. No. 33) with Continental Casualty-Vigliano Affirmation and Exhibits 66 Continental Casualty Memorandum of Law 67 Continental Casualty-Vigliano Reply Affirmation 68 Continental Casualty-Vigliano letter of January 13, 2011 69 Ohio Casualty Cross-Motion (Seq. No. 34) with Ohio Casualty-Spira Affirmation and Exhibits 70 Ohio Casualty's Responses to Travelers' Rule 19A Statement and Exhibits 71 Ohio Casualty's Responses to Archstone's Rule 19A Statement and Exhibits 72 Ohio Casualty's Rule 19A Statement in Support of Its Cross-Motion 73 Ohio Casualty Memorandum of Law 74 Ohio Casualty-Spira Reply Affirmation 75 Ohio Casualty-Spira letter of January 13, 2011 and Exhibits 76 Ohio Causalty-Spira Supplemental Affirmation Regarding COI 77 Farm Family Cross-Motion (Seq. No. 35) with Farm Family-Eldridge Affirmation and Exhibits 78 Farm Family-Kohane Affirmation and Exhibits 79 Farm Family Responses to Archstone's Rule 19A Statement 80 Farm Family Responses to Travelers' Rule 19A Statement 81 Farm Family Rule 19A Statement 82 Farm Family Memorandum of Law 83 Interstate-Breen Affirmation in Opposition and Exhibits 84 Interstate Responses to Archstone's Rule 19A Statement 85 Interstate Responses to Travelers' Rule 19A Statement 86 Interstate Memorandum of Law 87 Interstate-Breen Sur-reply Affirmation and Exhibits 88 Interstate-Breen Supplemental Affirmation Regarding COI 89 Liberty Mutual-Viola Affirmation in Opposition and Exhibits 90 Liberty Mutual Responses to Archstone Parties' Rule 19A Statement 91 Liberty Mutual Responses to Travelers' Rule 19A Statement 92 Liberty Mutual Memorandum of Law 93 Liberty Mutual-Coel Supplemental Affidavit Regarding COI 94 Navigators-Minetto Affirmation in Opposition 95 Navigators Responses to Archstone's Rule 19A Statement 96 Navigators Responses to Travelers' Rule 19A Statement 97 Navigators Corrected Memorandum of Law 98 Navigators-Minetto letter of January 13, 2011 99 Navigators-Minetto Supplemental Affirmation Regarding COI 100 Pennsylvania National-Walker Affirmation in Opposition 101 Pennsylvania National Responses to Archstone's Rule 19A Statement 102 Pennsylvania National Responses to Travelers' Rule 19A Statement 103 Pennsylvania National Memorandum of Law 104 QBE-Maeglin Affirmation in Opposition 105 QBE Responses to Archstone's Rule 19A Statement 106 QBE Responses to Travelers' Rule 19A Statement 107 QBE Memorandum of Law 108 QBE-Maeglin Sur-reply Affirmation 109 QBE-Maeglin letter of January 13, 2011 110 Scottsdale Responses to Archstone's Rule 19A Statement and Exhibits 111 Scottsdale Respones to Travelers' Rule 19A Statement and Exhibits 112 Scottsdale-Kaminska Affirmation in Opposition 113 Scottsdale-Kaminska Sur-reply Affirmation 114 Scottsdale-Kaminska letter dated January 13, 2011 115
TABLE OF CONTENTS
fn_ fn_ Archstone v. Tocci In re Archstone Hunter DiGiovanna Gedenken fn_ fn_ fn_ fn_
As used throughout this decision, an "*" identifies a Second Third-Party Defendant from whom Archstone seeks coverage, but Travelers does not. Any other First or Second Third Party Defendant not identified by an "*" are insurers from whom both Archstone and Travelers seek coverage.
PRELIMINARY STATEMENT
Third-Party Plaintiff, The Travelers Indemnity Company, and Second Third-Party Plaintiffs, Archstone (formerly known as Archstone-Smith Operating Trust), Archstone Westbury LP (formerly known as ASN Roosevelt Center LLC), Archstone Multifamily Series I Trust, Archstone Communities LLC, and Tishman Speyer Properties LP, all collectively referred in this decision as "Archstone," move this court for partial summary judgment. Archstone seeks partial summary judgment on its claim that the Second Third-Party Defendants breached their insurance contracts by failing to defend Archstone in the "Tenant Actions" (individual and class actions brought by tenants of Archstone against it). Travelers seeks partial summary judgment for a declaration that the Third-Party Defendants have a duty to defend Tocci Building Corporation of New Jersey ("Tocci") in the "Archstone Action" (Archstone's suit against Tocci and other entities, seeking among other claims, indemnity for any damages Archstone has paid in the Tenant Actions).
BACKGROUND
QBE Insurance Corporation is the insurer of Adjo Contracting Corporation, a trade contractor (or subcontractor) that worked on the project known as Archstone Westbury. The Archstone Westbury is a complex of multiple apartment buildings, garages, and clubhouse, all of which suffered from pervasive and catastrophic water-related damage and mold infestation. QBE began this action seeking a declaration that it has no duty to defend or indemnify Archstone or Tocci as additional insureds in QBE's Commercial General Liability ("CGL") policies. QBE's policies contained an endorsement amending the policies and providing coverage to any "additional insured" for whom Adjo had contracted to perform operations. QBE's complaint also names as defendants numerous other trade contractors that worked on the Archstone Westbury complex, and their insurers, which included similar additional insured endorsements in their policies.
The general contractor of the Archstone Westbury project was Tocci, insured by Travelers and Virginia Surety Company. Archstone, through one or more of its entities, was the owner of the construction project and also owns, manages, and is the landlord of the apartment complex. Tocci, all trade contractors, and Archstone, together entered into indemnification and hold-harmless agreements. Also, the general contractor Tocci and all trade contractors on the project agreed procure commercial liability insurance to cover liability from their operations on the project. Tocci agreed to name Archstone as additional insured on its policies, and all trade contractors agreed to name Tocci, general contractor, and Archstone, owner, as additional insureds on their policies. Archstone also agreed to procure insurance for its own liability from the project. Other litigation is pending in Colorado regarding Archstone's own insurance policies, while litigation in the United District Court of Massachusetts determined that Virginia Surety had a duty to defend Tocci. Travelers, which insured Tocci, elected to defend Tocci as well as Archstone-Smith Operating Trust, under a full reservation of rights. Thus far, all other insurers have refused to defend or indemnify Tocci and Archstone.
This insurance litigation arises from class actions against Archstone and Archstone's suit against general contractor Tocci and others. The "Tenant Actions" are the various individual and class actions filed by tenants of Archstone, alleging personal injury and property damage related to pervasive water leaks and exposure to mold and other bacteria present throughout the Archstone Westbury complex. The "Archstone Action" is Archstone's suit against Tocci and others, seeking, among other damages, indemnification for any monies it will pay or has paid to tenants, because of the ubiquitous water intrusion issues and pervasion of mold growth.
Travelers filed a Third-Party Complaint seeking contribution from all subcontractors' insurers (or "AI Carriers") for the defense and indemnification of Tocci in the "Archstone Action." Archstone also filed a Second Third-Party Complaint seeking defense and indemnification for itself in the "Tenant Actions." Both Third-Party complaints allege that Tocci and Archstone tendered their defense to the AI Carriers, as insureds under the additional insured endorsements in the AI Carriers' policies. All AI Carriers have disclaimed coverage for Tocci and Archstone. They have taken the position that the CGL policies issued to the various subcontractors do not provide coverage to Tocci or Archstone as additional insureds under their policies, because any liability alleged in the Tenant Actions or the Archstone Action, does not arise out of the operations of their respective named insureds.
After an application by Travelers and Archstone, this court permitted those parties to file motions for partial summary judgment to determine issues relating to the duty to defend.
PROCEDURAL POSTURE
Travelers seeks a declaration that the Third-Party Defendants have a duty to defend Tocci in the Archstone Action. Declaratory judgments are a means to establish the respective legal rights of the parties to a justiciable controversy. ( See CPLR § 3001; see generally 43 N.Y.Jur2d Declaratory Judgments §§ 4.22). "The general purpose of the declaratory judgment is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations". ( James v. Alderton Dock Yards, 256 N.Y.298 [1931]; see Siegel, NY Prac. § 436 at 738 [4th ed.]). While fact issues certainly may be addressed and resolved in the context of a declaratory judgment action ( see Siegel, New York Practice, citing Rockland Power Light Co. v. City of New York, 289 NY 45, 43 N.E.2d 803), the point and the purpose of the relief is to declare the respective legal rights of the parties based on a given set of facts, not to declare findings of fact.
Because most lawsuits against Archstone have now terminated, Archstone seeks relief in the nature of partial summary judgment on its claims of breach of contract against the AI Carriers, for their failure to defend Archstone. Summary judgment is appropriate on a cause of action when: any disputed issues involve only matters of law, such as contract interpretation ( see, e.g., Alvarez v. Prospect Hospital, 68 NY2d 320; when the record objectively establishes that a party cannot support its allegations or has completely established them ( see, e.g., Ferluckaj v. Goldman Sacks Co., 12 NY3d 316); or when any unresolved fact issue is immaterial or is manufactured from patently incredible evidence ( see, e.g., Bank of New York v. 125-127 Allen Street Assoc., 59 AD3d 220 [1st Dep't 2009]).
If a party has presented a prima facie case of entitlement to summary judgment, because no triable issues of material fact exist, the opposing party is obligated to come forward and bare his proof by affidavit of an individual with personal knowledge, or with an attorney's affirmation to which appended material in admissible form, and the failure to do so may lead the court to believe that there is no triable issue of fact. ( Zuckerman v. City of New York, 49 NY2d 557, 562).
DISCUSSION
The motions ask this court only to decide the first and second Third-Party Defendants' duty to defend upon summary judgment. Because, the duty to defend "is not contingent on the insurer's ultimate duty to indemnify," ( Seaboard Surety Co. v. Gillette Co., 64 NY2d 304), these motions may be resolved at this juncture before any indemnification claims are resolved.
I. PRINCIPLES FOR DETERMINING COVERAGE
INVOLVING AN INSURER'S DUTY TO DEFEND (A.) Conflict of Law Issues
Regarding: ACE American (Texas); Erie (Pennsylvania); Hartford Fire* (New Jersey); Liberty Mutual (New Jersey); Pennsylvania National (Pennsylvania); Zurich* (Texas)
Several AI Carriers contend that the law of their jurisdiction applies to the interpretation of their insurance contracts. However, a conflict of law analysis is only necessary when the law of this jurisdiction and any other jurisdiction that may apply, are in actual conflict as regards the facts of the case. ( See Matter of Allstate Ins. Co. [Stolarz-N.J. Mfrs. Ins. Co.], 81 NY2d 219). The other jurisdictions that the AI carriers propose should apply, Texas, Pennsylvania, and New Jersey, admittedly apply the same basic law as New York to determine whether a duty to defend arises from the terms of the insurance contract and the allegations against the insured. ( Compare BP Air Cond. Corp. v. One Beacon Ins. Group , 8 NY3d 708 , Utica Nat'l Ins. Co. of Tex. . v. Am. Indem. Co., 141 SW3d 198 [Tex. 2004], Mutual Ben. Ins. Co. v. Haver, 555 Pa. 534, Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165). In fact, there is no conflict of laws "with respect to the applicability of basic tenets of contract interpretation in determining whether plaintiffs are covered under the additional insured endorsement." ( National Abatement Corp. v. National Union fire Ins. Co. of Pittsburg, PA , 33 AD3d 570 [1st Dep't 2006], Unimax Corp. v. Lumbermens Mut. Cas. Co., 908 F.Supp. 148 [SDNY 1995]).
To the extent that Texas and Pennsylvania have cases following some salient line of reasoning in interpreting common policy provisions, those decisions are generally reconcilable with the law of New York. For example, some AI carriers cite several Pennsylvania cases for the proposition that "occurrence" means something different and more particular under the law of Pennsylvania. In fact, such cases only elaborate the analysis with language regarding the "gist of the action," when determining whether a complaint alleges only injury to the faulty work/product itself, rather than the property of another. ( See Kvaerner Metals v. Comm. Union Ins. Co., 908 A.2d 888 [Pa. 2006], Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., Inc., 941 A.2d 706 [Pa. Super. 2007] [damage by water intrusion to defectively constructed walls is damage to faulty work/product itself]). This interpretation of the "occurrence" requirement and work/product exclusion is not in conflict with New York cases, which hold that the standard language in these clauses bar coverage for damage to the faulty work or product itself. ( See, e.g., George A. Fuller Co. v. United States Fid. Guar. Co. ( 200 AD2d 255, 259 [1st Dep't 1994], Village of Newark v. Pepco Contractors, Inc., 99 AD2d 661 [4th Dept. 1984]).
Such particular lines of cases in Pennsylvania with regard to the work/product exclusion and occurrence requirement, and cases in Texas with regard to extrinsic evidence, are therefore addressed only in the corresponding sections of this decision. Such cases, of course, may be properly considered to the extent that they assist this court's interpretation of the insurance contracts at issue, and there is no counterpart in New York's case law. However, no conflict of laws analysis is necessary at a general level, since no conflict exists when the laws of two jurisdictions are reconcilable, and particular cases from the other jurisdiction can be applied without inconsistency or conflict with the court's jurisdiction.
Lastly, Liberty Mutual's and Hartford Fire's arguments regarding the law of New Jersey, as regards measurement of the duty to reimburse, are premature at this stage. The parties have not briefed any issue regarding the AI carriers' financial burden to reimburse defense costs when another insurer is conducting the defense. ( See 70A NY Jur2d Insurance § 2080, Serio v. Public Svc. Mut. Ins. Co., 304 AD2d 167 [2d Dept. 2003] [citing Owens-Ill. v. United Ins. Co., 138 NJ 437 (1994)]).
(B). General Method for Interpreting Policy Language
"Generally, it is the insured's burden to establish coverage and the insurer's burden to prove the applicability of an exclusion." ( Rhodes v Liberty Mut. Ins. Co. , 67 AD3d 881 , 882 [2d Dept. 2009]). "As with the construction of contracts generally, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court." ( Vigilant Ins. Co. v Bear Stearns Companies, Inc. , 10 NY3d 170 , 177). Moreover, the court's interpretation of policy language must "afford[] a fair meaning to all of the language employed by the parties in the contract and leave[] no provision without full force and effect." ( Consolidated Edison Co. of NY v Allstate Ins. Co., 98 NY2d 208, 221-222 and citations therein). However, where a provision is ambiguous in a particular case, the ambiguity is resolved against the insurer absent clear evidence of a contrary intent. ( Lachs v. Fidelity Cas. Co. of New York, 306 NY 357, Tishman Construction Corp. of New York v. CNA Ins. Co., 236 AD2d 211 [1st Dep't 1997]).
Finally,"[i]n determining the scope of contractual obligations, the reasonable expectation of the parties is a factor to be considered. Indeed, any interpretation of an insurance contract implicates as a standard the reasonable expectation and purpose of the ordinary businessman when making an ordinary business contract." ( Greater New York Mutual Ins. Co. v. Mutual Marine Office, Inc., 3 AD3d 44 [1st Dep't 2003] and citations therein).
(C.) The Four Corners Rule
The "standard for determining whether an additional named insured is entitled to a defense is the same standard that is used to determine if a named insured is entitled to a defense." ( BP Air Conditioning Corp. v. One Beacon , 8 NY3d 708 , 715). The general rule is that the duty to defend must be determined from the allegations against the insured and the terms of the policy. ( BP Air, 8 NY3d at 714). "So long as the claims" asserted against the insured "may rationally be said to fall within policy coverage, whatever may later prove to be the limits of the insurer's responsibility to pay, there is no doubt that it is obligated to defend" ( Schwamb v. Fireman's Ins. Co., 41 NY2d 947, 949, Rhodes v. Liberty Mut. Ins. Co. , 67 AD3d 881 , 882 [2d Dep't 2009]).
Where the duty to defend is at issue, the court will liberally construe the alleged facts in an action against the insured in order to determine if the "claims against the insured arguably arise from a covered event." ( Rhodes v. Liberty Mut. Ins. Co. , 67 AD3d 881 , 882 [2d Dep't 2009]; Automobile Ins. Co. of Hartford v. Cook , 7 NY3d 131 ). Claims that fall within coverage need not predominate over claims that are excluded or outside the scope of coverage, and potentially covered claims need not be set out fully in the Complaint. In fact, it is sufficient that some allegation within an unrelated cause of action, sets forth facts which fall within the scope of coverage. ( Ruder Finn v. Seaboard Sur., 52 NY2d 663, 672 [finding a duty to defend for a federal suit on the basis of the words "false disparagement" contained within a cause of action generally alleging restraint of trade]).
"A policy protects against poorly or incompletely pleaded causes as well as those artfully drafted." ( Ruder Finn 52 NY2d at 670). However, the court's analysis of ambiguous allegations must be grounded in reality, and the court should be hesitant to impose a duty to defend on only an implausible and tortured view of such allegations. ( See Northville Indus. Corp. v. Nat'l Union Fire Ins. Co. of Pitts., 89 NY2d 621). Therefore, "[i]t is not the form of the pleadings which determines coverage, however, it is the nature of the insured's conduct." ( Touchette Corp. v. Merchants Mut. Ins. Co., 76 AD2d 7, 10 [4th Dep't 1980]; see also Hotel Des Artistes, Inc. v. Gen. Acc. Ins. Co. of Am. , 9 AD3d 181 , 192 [1st Dep't 2004]).
(D.) Extrinsic Evidence
In interpreting the general nature of the claims for which an insured seeks a defense from its insurer, the court may look to some limited material outside the four corners of the complaints. ( See Fitzpatrick v. American Honda Motor Co., Inc., 78 NY2d 61; Penn. Millers Mut. Ins. Co. v. Rigo, 256 AD2d 769 [3d Dep't 1998]). Such materials include an insured's judicial admissions in pleadings and other submissions, judicial findings in another proceeding, and extrinsic evidence made known to the insurer and which indicates that the claims would be covered regardless of the form of the pleadings. ( See Technicon Elecs Corp. v. American home Ins. Co., 74 NY2d at 75; Town of Moreau v. Orkin Exterminating Co., Inc., 165 AD2d 415 [3d Dep't 1991]; Fitzpatrick, 78 NY2d at 66-67).
Other jurisdictions permit any extrinsic evidence that is reasonably discoverable or ascertainable. For example, Mortgage Exp., Inc. v. Tudor Ins. Co. ( 771 N.W.2d 137, 147 [Neb. 2009]) held: "In determining its duty to defend, an insurer must not only look to the petition or complaint filed against its insured, but must also investigate and ascertain the relevant facts from all available sources."
Resort to extrinsic materials is particularly appropriate where "wooden application of the four corners of the complaint' rule would render the duty to defend narrower than the duty to indemnify-clearly an unacceptable result." ( Fitzpatrick, 78 NY2d at 66). Courts in other jurisdictions which have analyzed the issue, have concluded that "facts known to the insurer and extrinsic to the [] complaint can generate a duty to defend, even though the face of the complaint does not reflect a potential for liability under the policy" because "current pleading rules liberally allow amendment," and a "[] plaintiff cannot be the arbiter of coverage." ( Montrose Chemical Corp. v. Superior Court, 6 Cal. 4th 287, 296, 861 P.2d 1153).
On the other hand, the law does not permit an insurer to rely on extrinsic evidence to deny coverage, even when such extrinsic facts, if proven, would establish that the circumstances underlying the claims are not covered. ( Burlington Insurance Company v. GUMA Constr. Corp. , 66 AD3d 622 [2d Dep't 2009], Petr-All Petroleum Corp. v. Fireman's Ins. Co. of Newark, NJ, 188 AD2d 139 [4th Dep't 1993]). This judicial policy protects an insured whenever claims are asserted against him within the coverage that was purchased, regardless of the merit of such claims. ( Int'l Paper Co. v. Cont. Cas. Co., 35 NY2d 322, 326, Fitzpatrick, 78 NY2d at 66). However, an insurer can rely on facts that are judicially determined or admitted-such as an insured's prior conviction of knowingly dumping hazardous waste ( Town of Moreau v. Orkin Exterminating Co., Inc., 165 AD2d 415 [3d Dep't 1991]), or an insured's admission in the underlying proceeding that a contractor could not have caused the accident ( Worth Constr. Co. Inc. v. Admiral Ins. Co., 2005 WL 5749129, No. 118180/03 [NY Cty. Sup. Ct. June 6, 2005, J. Freedman], aff'd 10 NY3d 411).
However, at least within the Third Department, Appellate Division, insurers might be relieved of a duty to defend if extrinsic evidence establishes to a certainty that the insurer faces no liability for indemnity coverage. ( Erderman v. Eagles Ins. Co., 239 AD2d 847 [3d Dept. 1997], Penn. Millers Mut. Ins. Co. v. Rigo, 256 AD2d 769 [3d Dept. 1998], Gibbs v. CNA Ins. Co., 263 AD2d 836 [3d Dept. 1999]). But in Village of Brewster v. Virginia Sur. Co., Inc. ( 70 AD3d 1239 [3d Dept. 2010]), the Third Department held that an insurer could not avoid its duty to defend an additional insured even where extrinsic evidence might contradict allegations in the complaint regarding the named insured's negligence for a break in a water main.
Use of extrinsic evidence can also be limited by the judicial policy favoring quick resolution of the duty to defend: "[t]he defense of the negligence actions cannot await their outcome; it must be undertaken now." ( Prashker v. U.S. Guarantee Co., 1 NY2d 584, 592; see also Burlington Ins. Co. v. Guma Const. Corp., 66 AD3d 622 [2d Dept. 2009] [denying insurers discovery for the duty to defend]). This may limit use of some extrinsic evidence, particularly of a circumstantial nature, even on factual questions that are conditions precedent to coverage.
In the particular context of an additional insured endorsement, facts outside the four corners of a complaint may be necessary to determine whether particular claims trigger additional insured coverage. For example, even though a complaint may not specify whether a driver in an accident was operating a leased vehicle as a temporary replacement of the owner's vehicle, such a fact would be needed to actually trigger additional insured coverage in some automobile policies. Evidence that made such a fact known to the insurance carrier would be admissible to establish additional insured coverage. ( See Pahl v. Grenier, 277 AD2d 681 [3d Dep't 2000]).
Several AI Carriers whose home jurisdiction is Texas, contend that a conflict of law arises between the New York and Texas with regard to extrinsic evidence . Such a conflict might arise, if at all, only to the extent that any extrinsic materials or evidence has actually been offered. However, Archstone and Tocci have not submitted any expert reports, evidence of repairs or replacement work, or anything of that nature. This opinion discusses the use of the Trade Contracts, as incorporated by reference in the blanket additional insured endorsements, in section III.D of this opinion. The law of Texas with regard to extrinsic materials is discussed in greater detail therein.
(E.) Policy Exclusions and Limitations
Even though the insured party faces the initial burden of establishing coverage, the burden shifts to the insurer to disprove coverage by exclusionary clauses. If there is some reasonable possibility of coverage, "it is immaterial that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions." ( BP Air Cond. 8 NY3d at 714 and citations therein). An insurer who seeks to avoid defending an insured because of an exclusion faces the "heavy burden" of demonstrating that the subject exclusion eliminates all possibility of coverage. ( See Frontier Insul. Contr. Inc. v. Merchants Mut. Ins. Co., 91 NY2d 169, 175; Westpoint Intern., Inc. v. American Intern. South Ins. Co., 71 AD3d 561 [1st Dep't 2010]). Further, "an exclusion from coverage must be specific and clear in order to be enforced' and an ambiguity in an exclusionary clause must be construed most strongly against the insurer." ( Guachichulca v Laszlo N. Tauber Associates, LLC , 37 AD3d 760 , 761 [2d Dept. 2007] and citations therein).
II. GENERAL ANTECEDENTS TO COVERAGE (A.) Provisions Requiring That Notice of Occurrence Be Provided As Soon As Practicable
Regarding: American European; American States; Continental; Delos; Farm Family; Merchants Mutual; Ohio Casualty; Pennsylvania National; Scottsdale; Federated Mutual* 1. General Discussion
Most insurers include language that requires an insured to provide notice of any covered event "as soon as practicable." The insurer must in turn provide timely notice of disclaimer: "An insurer must give written notice of disclaimer on the ground of late notice as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability,' and failure to do so precludes effective disclaimer.'" ( Matter of Firemen's Fund Ins. Co. v. Hopkins, 88 NY2d 836, 837; see also General Acc. Ins. Gr. v. Cirucci, 46 NY2d 862).
"The obligation to give notice as soon as practicable' of an occurrence that may result in a claim is measured by the yardstick of reasonableness." ( Brooks v. Zurich-American Ins. Group, 300 AD2d 176, 178 [1st Dept. 2002]). There are no iron-clad rules for how much delay constitutes late notice, and the inquiry is heavily dependent on questions of fact. ( Mighty Midgets, Inc. v. Centennial Ins. Co., 47 NY2d 12, 19-21). Rather, "when an insured complying with its duty to use due diligence in investigating potential claims against it would believe from the information available that its policy would be involved, the notice obligation arises." ( Christiania Gen. Ins. Corp. of NY v. Greater Am. Ins. Co., 979 F.2d 268, 275-76 [2d Cir. 1992] [applying New York law]; see also Home Mut. Ins. Co. v. Presutti, 78 AD2d 968, 969 [4th Dept. 1980], Paramount Ins. Co. v. Rosedale Gardens, 293 AD2d 235, 239 [1st Dept. 2002]).
A policy is implicated when the insured learns of an actual loss or injury covered by the policy, and not when the insured learns only of a potentially dangerous condition. ( Chama Holding Corp. v. Generali-US Banch , 22 AD3d 443 [2d Dep't 2005]; see generally 70A NY Jur2d Insurance § 1989). Similarly, "[w]hen the facts of an occurrence are such that an insured acting in good faith would not reasonably believe that liability on his part will result," ( Merchants Mut. Ins. Co. v. Hoffman, 56 NY2d 799), the contractual duty to give notice does not arise until the insured knows that a claim is being made due to that occurrence. ( Id.)
Before enactment of Insurance Law § 3420(a)(5) [effective January 17, 2009], New York courts have held that an insured's failure to provide timely notice of an occurrence is a material breach of the insurance contract, such that it vitiates coverage. ( See Security Mut. Ins. Co. of NY v. Acker-Fitzsimons Corp., 31 NY2d 436). In contrast, the home jurisdiction of several carriers who challenge Archstone's or Tocci's notice, require that an insurance carrier show prejudice in order to establish that late notice is a material breach of the insurance contract. ( See Allstate Ins. Co. v. State Farm Mut. Auto Ins. Co., 363 Md. 106, 122, State Farm Fire and Cas. Co. v. Walton, 244 Va. 498, 504, Transportes Ferreros de Venezuela II CA, 239 F.3d 555, 562 [3d Cir. 2001] [applying New Jersey law], Struna v. Concord Ins. Svcs., Inc., 11 SW3d 355, 359 [Tex. App. 1st Dist. 2000], Country Mut. Ins. Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 317, Vanderhoff v. Harleysville Ins. Co., 997 A2d 328, 333 [Pa. 2001], Aetna Cas. Sur. Co. v. Murphy, 206 Conn. 409, 417-18).
The differences between New York's no-prejudice rule and the prejudice rule of various carriers' home jurisdiction, would create a conflict of laws requiring an analysis to determine which law applies, since a prejudice rule and a no-prejudice rule are not generally reconcilable. However, the conflict only arises if an insured has in fact failed to provide notice of occurrence "as soon as practicable." Therefore, such an analysis is deferred until any determination is made that notice was not made "as soon as practicable."
2. November 2007 Notices to AI Carriers
Some time before any Tenant Actions were filed, Daniel C. Flannery of Tocci provided notice of occurrence to the AI carriers, and expressly demanded a defense of Archstone and Tocci from any related claims and losses. These letters from Mr. Flannery are dated sometime in November 2007 and state:
This letter shall constitute a demand for [you] to defend and indemnify Tocci Building Corp. of New Jersey, Inc. (Tocci-NJ') and the owner of the Project, Archstone-Smith Operating Trust (ASN') from any claims, losses, damages, costs, and expenses in connection with the defects and deficiencies alleged in ASN's November 21, 2007 letter to Tocci-NJ. . .
(Travelers-Shiroma Aff., Exs. 25-41; Travelers-Shiroma Reply Aff., Exs. 4, 8, 9). Out of all AI Carriers which contest notice, the following received this identically-worded letter, dated late November 2007: Delos f/k/a Sirius (Travelers-Shiroma Aff., Ex. 30), Farm Family ( id., Ex. 33), Ohio Casualty ( id., Ex. 38), Scottsdale ( id., Ex. 41), Continental Casualty (Travelers-Shiroma Reply Aff., Ex. 8), and Pennsylvania National ( id., Ex. 9). Merchants Mutual and American European formerly known as Merchants Mutual of New Hampshire, received an identically-worded letter, but it is dated December 18, 2007. ( Id., Ex. 4).
The AI Carriers who contest that these letters were notice of occurrence from Archstone, do not contest Mr. Flannery's authority to speak on behalf of Archstone. Rather, those AI Carriers contend that these letters cannot be "deemed" notice from Archstone. ( See Delco Steel Fabricators, Inc. v. Am. Home Assur. Co., 40 AD2d 647 [1st Dept. 1972] aff'd 31 NY2d 1014, Travelers Ins. Co. v. Volmar Const. Co., Inc., 300 AD2d 40 [1st Dept. 2002]). Such arguments miss the point that there is no need to "deem" Mr. Flannery's letter as anything other what it expresses to be. So long as the AI Carriers do not contest Mr. Flannery's authority, the letter by its very terms states that it provides notice and demands a defense on behalf of Archstone and Tocci. To this court's knowledge, the law does not forbid two insured parties from providing notice through the same document.Mr. Flannery's letters from November 2007 also attached a letter from Robert Crewdson, attorney for Archstone. (Travelers-Shiroma Reply Aff., Ex. 6). Mr. Crewdson's letter noted that Archstone had commissioned a forensic building expert in the prior month to investigate the extent of construction defects and water intrusion issues, and as a result, Archstone had learned that "[w]ater intrusion issues at the Project are pervasive and affect all residential buildings. . . ." ( Id.) Significantly, the letter acknowledged that Archstone would have to displace all tenants in order to address the water intrusion issues. The letter also identified various particular defects that can be linked to individual subcontractors, and finally, the letter invited Tocci and all liability carriers to a meeting to provide further information and opportunity to investigate the issues at the Project.
The first Tenant Actions were filed in December 2007. These were the Marchese (Archstone-Henderson Aff., Ex. 89), Francois (Archstone-Henderson Aff., Ex. 90), and DiGiovanna (Archstone-Henderson Aff., Ex. 92) complaints. Archstone filed its own action against Tocci and others in January 2008. (NYSCEF, Index. No. 601695/2009, Doc. No. 212-1).
The record establishes that all but five AI Carriers had received notice of occurrence from Archstone and Tocci in November 2007, and Merchants Mutual and American European were provided the same notice in December 2007. The notice letters informed the AI Carriers of the following: pervasive water-related damages and mold infestation were present at the Archstone Westbury Complex, all tenants would necessarily be displaced, and that liability for at least some of that litigation arose from the defective work of various contractors on the project, who are the AI Carriers' named insureds. Those AI Carriers which received the November 2007 letters, had notice well before the Tenant Actions or the Archstone Action were even filed, and they were invited to participate in the dialogue regarding investigation and settlement of all damages.
The November 2007 notice was made "as soon as practicable" after Archstone commissioned a forensics expert, and it discovered the extent of water intrusion issues and their cause. As to these AI Carriers, Tocci and Archstone complied with their duty to use due diligence in investigating potential claims against them and provided notice as soon as practicable after they learned that AI coverage by the subcontractors was implicated.
3. December 2007 Notice to Merchants Mutual and American European
There is little basis to argue that notice in December 2007 to Merchants Mutual and American European formerly known as Merchants Mutual of New Hampshire, was late as a matter of law. (Travelers-Shiroma Reply Aff., Ex. 4). In any case, these AI Carriers are unable to rely now on late notice, without more, because of their late disclaimer. There is no dispute that New York law applies as to these carriers. (Archstone reply m. p. 52). In New York, an insurer has a duty to provide timely notice of disclaimer, particularly if it denies coverage because of late notice. ( Matter of Firemen's Fund Ins. Co. v. Hopkins, 88 NY2d 836, 837, First Fin. Ins. Co. v. Jetco Contracting Corp. , 1 NY3d 64 ).
Merchants Mutual and American European had received notice by letter dated December 18, 2007, (Travelers-Shiroma Reply Aff., Ex. 4), and again by letter dated January 24, 2008 (Merchants-Krawczyk Aff., Ex. 6), and November 10, 2008. (Archstone-Henderson Aff., Ex. 102, Travelers-Shiroma Aff., Ex. 36). Yet Merchants Mutual and American European did not disclaimed coverage as to Tocci and Archstone until January 30, 2009. (Merchants-Krawczyk Aff., Ex. 8; American European-Krawczyk Aff., Ex. 9).
Because timeliness of notice is generally self-evident from the face a notice letter, courts look back to the time that the late notice was made, in order to measure the timeliness of an insurer's disclaimer for late notice. ( First Fin. Ins. Co. v. Jetco Contr. Corp. , 1 NY3d 64 , 69). The Court of Appeals has held that delays as short as 48 days without lawful explanation are late as a matter of law, and such late disclaimer would estop the insurer from relying on late notice as a ground for denying coverage. ( First Fin. Ins., 1 NY3d at 70).
In this case, Merchant Mutual's and American European's disclaimers were over a year late as to the December 2007 notice letter, and even as to the November 2008 notice, the disclaimers were 81 days late. Merchants Mutual and American European have not offered any lawful explanation for their delay in disclaiming coverage. They only contend that Insurance Law § 3420(d) [effective Sep. 24, 2002 to Jan. 16, 2009] does not apply to Tocci or Archstone's notices. However, Insurance Law § 3420(d), before amendment effective January 17, 2009, has applied to commercial liability policies when any personal injury is alleged, even if such injury might be excluded from coverage. ( See Osohowsky by Kacer v. Romaniello, 201 AD2d 473 [2d Dept. 1994]). In the underlying Tenant Actions, various complaints alleged personal injury from mold and water intrusion, and those allegations are "passed through" to the Archstone Action in the common law indemnity claims against Tocci. Therefore, Insurance Law § 3420(d) [effective Sep. 24, 2002 to Jan. 16, 2009] applies to Merchant Mutual's and American European's disclaimers of coverage as to Archstone and Tocci.
As Travelers states in its reply brief, the opinion in Meridian Mutual Ins. Co. v. James Gilligan Builders ( 2008 US Dist LEXIS 109018, *1-2 [ED Pa. June 18, 2009]) illustrates how common law indemnity works to "pass through" allegations of negligence and injury asserted from the position of the original claimants.
Merchant Mutual's and American European's late disclaimers estop these insurers from denying coverage at least on the ground of late notice. ( First Fin. Ins. Co. v. Jetco Contracting Corp. , 1 NY3d 64 , Hunter Roberts Const. Group, LLC v. Arch Ins. Co. , 75 AD3d 404 [1st Dept. 2010]).Although a late disclaimer might also estop an insurer from denying coverage on the basis of any exclusion ( Cont. Cas. Co. v. Stradford , 46 AD3d 598 [2d Dept. 2007], see 70A NY Jur2d Insurance § 2049), Archstone and Travelers have not contended that any late disclaimers in this case would estop the AI Carriers from disclaiming coverage on the basis of exclusions in their policies.
4. American States' and Ohio Casualty's Evidentiary Submissions
American States and Ohio Casualty submit some deposition testimony and other evidence to suggest that Archstone or Tocci may have known of tenants' property damage prior to November 2007. The evidence indicates only that tenants made continuous complaints of water entering leaking through their windows and in some cases staining Archstone's Venetian blinds. ( See Ohio-Spira Aff., Exs. 25-28; American States-Fuerth Aff., Exs. B-D, J-N). To the extent that an inference should be made that some tenants may have suffered property damage from those leaks, American States and Ohio Casualty do not cite any case law that such circumstantial evidence may establish late notice so as to vitiate coverage. The law appears to be to the contrary. In cases where a landlord has received an order of abatement for lead paint, courts have held that knowledge of the presence of lead paint, without knowledge of actual injury, did not trigger the obligation to give notice. ( Chama Holding Corp., 22 AD3d at 444-45, and cases cited therein). The court is similarly unconvinced that it must infer that Tocci or Archstone had knowledge of property claims against them, from knowledge of defective conditions that might lead to damage to personal property.
Archstone has objected to Ohio Casualty's and American States' submissions on the ground that an insurer may not rely on extrinsic evidence to deny coverage. (Archstone's Response to Ohio Cas. Rule 19A Statement; Archstone's Response to American States Rule 19A Statement). The issue of notice is a question of fact that is antecedent to any coverage question ( Security Mut. Ins. Co. of NY v. Acker-Fitzsimons Corp., 31 NY2d 436). It is not clear to what extent, if any, the judicial policy favoring quick resolution of the duty to defend would limit the use of circumstantial evidence on the question of timely notice. It is, however, clear that an insurer can deny coverage on grounds of late notice only to the extent that it specified those grounds in its disclaimer. ( Matter of Firemen's Fund Ins. Co. v. Hopkins, 88 NY2d 836, 837, General Acc. Ins. Gr. v. Cirucci, 46 NY2d 862).
Here, Ohio Casualty and American States have waived late notice as a ground to deny coverage. Ohio Casualty issued a disclaimer in response to Mr. Flannery's letter on September 24, 2008. (Ohio Cas.-Spira Aff., Ex. 21). That disclaimer did not state late notice as a ground for denying coverage. ( Id.) Since Ohio Casualty had repudiated any coverage obligations it had by its September 2008 disclaimer, it could not "thereafter attempt to create other grounds for refusal to pay by demanding compliance by the insured with other incidental provisions of the policy with which it had not demanded compliance prior to its repudiation of liability." ( Beckley v. Otsego County Farmers Co-op. Fire Ins. Co., 3 AD2d 190, 194 [3rd Dep't 1957]; State Farm Ins. Co. v. Domotor, 266 AD2d 219, 220 [2d Dep't 1999]). Thus, while Ohio Casualty did cite late notice in its disclaimer letter of January 26, 2009, (Ohio Cas.-Spira Aff., Ex. 23), this disclaimer could not create further grounds for refusal to pay by demanding compliance with other provisions that it had not previously enforced. In any case, that disclaimer did not allege that notice was late by November 2007 or that Archstone had reason to know of tenants' property damage since 2005.
American States has similarly waived late notice as a ground to deny coverage. Its letters dated December 9, 2008 (American States-Fuerth Reply Aff., Ex. A), May 8, 2009 ( Id.), and October 1, 2009 ( Id., Ex. C) do not state that either Archstone's or Tocci's notice of occurrence was late. Notice as to American States is discussed further below.
5. Notice as to American States and Federated Mutual fn_
During oral argument, Archstone and Travelers conceded that American States and Federated Mutual did not receive notice from Mr. Flannery in November or December 2007. Moreover, Archstone concedes in its brief that only the law of New York can apply to these three carriers. (Archstone reply m. p. 52). The law of New York does not require a showing of prejudice to disclaim coverage when an insurer receives late notice of claim. ( American Home Assur. Co. v. International Ins. Co., 90 NY2d 433; cf. In re Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491). However, insurer has a corresponding duty to provide timely notice of disclaimer, particularly if it denies coverage because of late notice. ( Matter of Firemen's Fund Ins. Co. v. Hopkins, 88 NY2d 836, 837, First Fin. Ins. Co. v. Jetco Contracting Corp. , 1 NY3d 64 ). An insurer, moreover, may not later deny coverage on the ground of late notice unless it stated this ground in its disclaimer. ( Id., General Acc. Ins. Gr. v. Cirucci, 46 NY2d 862).
American States received notice of claim on behalf of Tocci regarding the Archstone Action in November 2008. (American States Rule 19-A Statement at ¶ 18). American States received notice of claim from Archstone in January 2009. (American States-Fuerth Reply Aff. at ¶ 14). American States first denied coverage to Tocci in a letter dated December 9, 2008, and it fully disclaimed coverage as to both Tocci and Archstone in a letter dated May 8, 2009 (American States-Fuerth Reply Aff. at ¶ 13). As already discussed, American States did not disclaim on the ground of late notice in any of these letters. (American States-Fuerth Reply Aff., Ex. A, B C). Because it did not disclaim on the ground of late notice, it may not now rely on that ground to deny coverage. ( Matter of Firemen's Fund, 88 NY2d at 837, First Fin. Ins. 1 NY3d at 70).
Federated, against whom only Archstone asserts coverage, first received notice of an occurrence from Archstone through a letter dated December 2, 2008. (Archstone-Henderson Aff., Ex. 100). In response, Federated disclaimed coverage to Archstone by a letter dated January 22, 2009. (Federated-DeSantis letter of Jan. 3, 2011) Federated's disclaimer included late notice as among the grounds for denying coverage. ( Id.) Because the first Tenant Actions were filed in December 2007, Archstone's notice to Federated in December 2008 is at least one year late. Archstone does not contend that Tocci's notice dated January 24, 2008 (Federated-DeSantis Aff., Ex. N), can be deemed notice from Archstone. Further, Archstone offers no explanation for the delayed notice to Federated. Therefore Archstone's delayed notice to Federated is late notice as a matter of law. ( Cf. Travelers Ins. Co. v. Volmar Const. Co., Inc., 300 AD2d 40 [1st Dept. 2002]).
6. Notice as to Interstate
Interstate claims that it received late notice, because the November 2007 letter was addressed to its agent/broker (Travelers-Shiroma Aff., Ex. 34), and that the agent/broker failed in its duty to forward the notice to Interstate's claims department. When a broker does not forward a notice of claim to the carrier's claims department, the insurer might disclaim coverage if the broker is not an agent of the carrier and the notice provision in the policy explicitly requires that the notice of claim be forwarded to a particular entity, rather than "to us" or such similar ambiguous language. ( Jeffrey v. Allcity Ins. Co. , 26 AD3d 355 [2d Dep't 2006]). In this case, Interstate's notice provision does not specify who must be notified in the event of an occurrence, using only ambiguous language including "we are notified" or "notify us." (Interstate-Breen Sur-reply Aff., Ex. A at Section IV[2]). Thus, the notice to the broker at most creates an issue of fact. However, Interstate did not disclaim on the ground of late notice. (Interstate-Breen Sur-reply Aff., Ex. B). Therefore, Interstate may not rely now on the ground of late notice to deny coverage. ( Matter of Firemen's Fund, 88 NY2d at 837, First Fin. Ins. 1 NY3d at 70).
(B.) Periods of Coverage and Known or Continuing Loss Provisions
Regarding: American States; Continental Casualty; Everest; Liberty Mutual; Navigators; Ohio Casualty; Pennsylvania National 1. Navigators Policy for Houston Stafford
It is not disputed that Navigators insured Houston Stafford beginning on November 1, 2006, after Houston Stafford had terminated its operations for Tocci and Archstone on July 15, 2006. (Archstone reply m. p. 22). Archstone and Travelers contend that Navigators' Additional Insured endorsement providing coverage "for any person or organization for whom you are performing operations. . ." is ambiguous without the addition of the phrase "during the policy period." The Navigators policy provides coverage to an additional insured under a particular policy only if "you are performing operations" for that additional insured, and the "bodily injury or property damage occurs during the policy period." (Navigators-Minetto Aff., Ex. 5 "Navigators Policy" Section I.b.2). Any loss that may have occurred during the policy period beginning November 1, 2006 would not have arisen while Houston Stafford was performing operations for Archstone or Tocci. Alternatively, any covered "occurrence" that may have arisen while Houston Stafford was performing operations for Archstone or Tocci, would not have occurred during the policy period. Therefore, there can be no coverage for Archstone or Tocci from Houston Stafford's Navigators policy that began November 1, 2006. Since there can be no coverage for Archstone or Tocci under Navigators' policies issued to Houston Stafford, Navigators' other arguments need not be addressed.
2. Known or Continuing Loss Provisions
Everest, Ohio Casualty, and Pennsylvania National contend that a provision which excludes a "known loss" from coverage, bars coverage as to Tocci and Archstone in the Tenant Actions and the Archstone Action. These policies contain identical language, stating:
SECTION I COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
* * *
b. This insurance applies to "bodily injury" and "property damage" only if:
* * *
(3) Prior to the policy period, no insured listed under Paragraph 1 of Section II — Who is an Insured . . . knew that the "bodily injury" or "property damage" had occurred, in whole or in part. If such a listed insured . . . knew, prior to the policy period, that the "bodily injury" or "property damage" occurred, then any continuation, change or resumption of such "bodily injury" or "property damage" during or after the policy period will be deemed to have been known prior to the policy period.
* * *
c. "Bodily injury" or "property damage" will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. Of Section II — Who is an Insured . . .:
(1) Reports all, or any part, of the "bodily injury" or "property damage" to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the "bodily injury" or "property damage"; or
(3) Becomes aware by any other means that "bodily injury" or "property damage" has occurred or has begun to occur.
In addition, some AI Carriers contain an endorsement amending this language or creating an additional exclusion for continuing loss. For example, Everest issued an endorsement (ECG 21 501 05 00) that states similar language regarding a known loss, and indicating that a known loss is considered known regardless of "continuation during the policy period of the occurrence'" or regardless whether the" occurrence' that caused such bodily injury' or property damage, [sic] causes new or additional bodily injury' or property damage' during the policy period."
The periods of coverage from Ohio Casualty for Apro Construction Group, include 8/8/04 to 8/8/05, 8/8/05 to 8/8/06, and 8/8/06 to 8/8/07. (Archstone-Henderson Aff. ¶¶ 47-49, Exs. 20-22). The periods of coverage from Everest for Stat Fire Suppression, include 8/8/04 to 8/8/05, 8/8/05 to 8/8/06, 8/8/06 to 8/8/07and 8/8/07 to 8/8/08. (Archstone Henderson Aff. ¶¶ 92-95, Exs. 65-68). The earliest that Ohio Casualty and Everest contend Archstone or Tocci knew of any water intrusion issues, let alone damage to any tenants' personal property, is sometime in 2005. Assuming at this point that the "known loss" exclusion might apply on the facts, both Everest and Ohio Casualty provided coverage during and prior to 2005; and so, the "known loss" exclusion does not eliminate coverage under at least some of Everest or Ohio Casualty's policies. Ohio Casualty and Everest may therefore be subject to a duty to defend Archstone or Tocci, despite any application of their "known loss" exclusions.
The periods of coverage from Pennsylvania National for Mid Atlantic Stone, include only 3/28/06 to 3/28/07 and 3/28/07 to 3/28/08. (Archstone-Henderson Aff. ¶¶ 78-79, Exs. 51-52). Therefore, there is a possibility that coverage might be barred by Pennsylvania National's "known loss" exclusion, if in fact Archstone or Tocci knew of tenants' personal injuries and property damage before March 28, 2006. There is no dispute among the parties that this "known loss" provision is an exclusionary clause or an exclusion, even though it is not described as such by the insurance contract. Thus, it is Pennsylvania Nationa's burden to disprove coverage under this provision and to do so only by the terms of the insurance contract and the allegations in the underlying complaint, since the duty to defend is at issue. ( Seaboard Curety Co. v. Gillette Co., 64 NY2d 304, Fitzpatrick v. Am. Honda Motor Co., 78 NY2d 61, 65-66). While Pennsylvania National has submited some evidence suggesting that Archstone and Tocci knew by late 2005 that there was a pattern of water leaks from around windows in many apartments, such evidence does not meet Pennsylvania National's heavy burden to disprove coverage by relying only on the terms of the policy and Complaint allegations.
Unlike Navigators, Pennsylvania National does not contend that coverage does not apply because Mid Atlantic Stone's operations for Tocci or Archstone had been completed before the commencement of its policies.
Because of the judicial policy for quick resolution of disputes involving the duty to defend, an insurer may not generally go beyond the pleadings or the terms of its policy to prove that an exclusionary clause bars coverage for the defense of an insured. ( Petr-All Petr. Corp. v. Fireman's Ins. Co. of Newark, NJ, 188 AD2d 139 [4th Dept. 1993]). To overcome this judicial policy and the four corners rule, Pennsylvania National's "known loss" provision is quite precise in setting out when an insured "knows" that bodily injury or property damage has occurred: when the insured reports the loss to the insurance carrier, when there is a written or verbal demand or claim, or when the insured learns through "any other means"-that is, a source beside written or verbal demand-that" bodily injury' or property damage' has occurred or has begun to occur. Here, Pennsylvania National has not submitted any documentary evidence to show that Archstone or Tocci had received any written or verbal demand by tenants for bodily injury or property damages. Neither has it offered evidence of any other source advising Archstone or Tocci that the tenants had suffered personal injury or property damage. Instead, Pennsylvania National has submitted only evidence of tenant "work order" complaints that water was entering through their windows, and circumstantial evidence that a pattern of water intrusion issues had developed by late 2005. This is not evidence of a written or verbal demand, claim, or other similar source, which may have informed Archstone or Tocci of any property damage or bodily injury to the tenants.
3. Liberty Mutual's Prior Damage Exclusion in Its Policy to Superseal
The period of coverage from Liberty Mutual's policy to Superseal includes only 7/1/07 to 7/1/08 (Archstone-Henderson Aff. at ¶ 102, Ex. 75). This policy provides completed operations coverage but limits coverage for" bodily injury' or property damage' within the products-completed operations hazard' if the injury or damage first occurred prior to the effective date of the policy." The Tenant Actions allege that Archstone's tenants suffered property damage and personal injury at least untill November 2007, with some tenants continuing to reside at the Archstone Westbury Complex as late as March 2008. Therefore, there is a reasonable possibility that some tenants suffered different or new property damage or new personal injury after Liberty Mutual's policy to Superseal became effective.
The court notes, however, that the periods of coverage under Liberty Mutual's policies to Patti Roofing include 2/28/05 to 2/28/06 and 2/28/06 to 2/28/07 (Archstone-Henderson Aff. ¶¶ 85-86, Exs. 58-59). Like in Ohio Casualty's and Everest's policies, any known loss limitation does not apply because coverage was provided during 2005, when Tocci or Archstone allegedly first were aware of some water intrusion issues.
4. Continental Casualty's "More than One Policy Period" Provision
The periods of coverage from Continental Casualty include 11/1/03 to 11/1/04, 11/1/04 to 11/1/05, and 11/1/05 to 11/1/06 for Houston Stafford (Archstone-Henderson Aff., Exs. 36-38), and 2/28/04 to 2/28/05 for Patti Roofing (Archstone-Henderson Aff., Ex. 57). Continental Casualty contends that an idiosyncratic provision in its policies provides coverage only if the damages sought to be covered under the insurance are discovered under a policy period and damages discovered after the policy period are only covered if they occurred during no more than one policy period, and did not continue after the policy period ended. (Continental Casualty mem. at 22-23).Although Continental repeatedly refers to the"clear language"of the provision in contending for its strict construction and enforcement, the provision's language is verbose, convoluted, self-contradicting, and ambiguous. It states:
Paragraph 1. Insuring Agreement of SECTION I-Coverage A-Bodily Injury and Property Damage Liability is replaced by the following:
1. Insuring agreement
* * *
b. This insurance applies to "bodily injury" and "property damage" only if:
* * *
(3) With respect to "bodily injury" or "property damage" that continues, changes or resumes so as to occur during more than one policy period, both of the following conditions are met:
(i) Prior to the policy period, no Authorized Insured knew that the "bodily injury" or "property damage" had occurred, in whole or in part; and
(ii) During the policy period, an Authorized Insured first knew that the "bodily injury" or "property damage" had occurred, in whole or in part.
For purposes of this Paragraph 1.b.(3) only, if (a) "bodily injury" or "property damage" that occurs during this policy period does not continue, change or resume after the termination of this policy period; and (b) no Authorized Insured first knows of this "bodily injury or "property damage" until after the termination of this policy period, then such first knowledge will be deemed to be during this policy period.
(Continental Casualty-Vigliano Aff., Ex. C).The judicial policy of interpreting ambiguous language against the drafter is intended to discourage precisely this sort of impenetrable language in adhesion contracts ( see County of Broome v. Travelers Indemnity Company, 58 NY2d 753), yet this policy has obviously had doubtful success. Though the court is capable of dissecting and diagraming the clauses and each condition in the above-quoted language, it will not do so, at least while Continental Casualty itself has not contended in detail for its own plausible reading, and neither has it cited to any case that has interpreted this language. Simply put, this provision has no "plain and ordinary meaning" that this court would be bound to enforce, since it is not plain English. Such impenetrable language does not logically lend itself to any argument of a contractual bargain or parties' reasonable expectations. Language in a contract is ambiguous if there are two plausible competing interpretations for the same language, and both interpretations are reasonable. The language referring to "property damage . . . that continues, changes or resumes during more than one policy period" plausibly refers only to a particular area of "property damage," which starts then continues, or it starts, stops, then resumes. Thus, property damage, even of the same type, that occurs in a new area or to some different personal property, would be "new" property damage, rather than property damage that starts and continues, or starts, stops, and then resumes. The allegations in the underlying complaints do not allege in their entirety only damage to some particular site on tenants' personal property, which suffered continuing damage throughout more than one of the policy periods. Because only the duty to defend is at issue, Continental Casualty has a duty to defend whenever there is a "reasonable possibility" of coverage.
In any case, even under Continental Casualty's reading, which presumably lumps all damage to any one tenant's personal property as continuing damage, this provision is of doubtful applicability. There is a reasonable possibility that at least one tenant in the tenant class actions suffered property damage or personal injury only during one of Continental Casualty's policy periods.
(C.) Provisions Regarding "Other Insurance"
Regarding: American States, Everest, Hartford Fire*, Scottsdale, Liberty Mutual, Interstate
Several AI Carriers contend that any coverage extended to Archstone or Tocci is excess coverage, and that their policy bars any duty to defend when the policy provides only excess coverage. Generally, "coverage for additional insureds [is] primary coverage unless unambiguously stated otherwise." ( Pecker Iron Works of New York, Inc. v. Traveler's Ins. Co. 99 NY2d 391, 393). Most AI carriers, including American States, contain the same provision in their policies regarding other insurance and priority of coverage:
SECTION IV — COMMERCIAL GENERAL LIABILITY CONDITIONS
* * *
4. Other insurance
a. Primary Insurance
This insurance is primary except when b below applies. . .
b. Excess Insurance
This insurance is excess over:
(1) Any of the other insurance, whether primary, excess, contingent or on any other basis:
(a) That is Fire, Extended Coverage, Builder's Risk, installation Risk or similar coverage for "your work";
* * *
When this insurance is excess, we will have no duty under Coverages A or B to defend the insured against any "suit" if any other insurer has a duty to defend the insured against that "suit". . .
No AI Carriers contend that the Archstone entities or Tocci have other Fire, Extended Coverage, Builder's Risk, installation risk or similar insurance. However, Scottsdale has amended this provision through an endorsement contained in all its policies to Knight Waterproofing, including 5/24/04 to 5/25/05 (Henderson Aff., Ex. 41), 5/24/05 to 5/24/06 ( id., Ex. 42), 5/24/06 to 5/24/07 ( id., Ex. 43) and 5/24/07 to 5/24/08 ( id., Ex. 44). This provision states:
Condition 4. Other Insurance of SECTION IV — COMMERCIAL GENERAL LIABILITY CONDITIONS is deleted in its entirety and is replaced by the following
4. Other Insurance
a. Primary Insurance
This insurance is primary except when b. below applies.
b. Excess Insurance
This insurance is excess over any other insurance, whether primary, excess, contingent or on any other basis:
* * *
(4) That is valid and collectible insurance available to you under any other policy.
When this Insurance is excess, we will have no duty under Coverages A or B to defend the insured against any "suit" if any other insurer has a duty to defend the insured against that "suit". . .
Throughout the policy, "you" or "your" is used to refer to the trade contractor who is the signer on the insurance contract and is the primary beneficiary. This use of "you" and "your" is particularly evident in the language of any additional insured endorsements, which distinguish between "you" as named insured and "any person or organization . . . whom you are required to add as an additional insured in this policy." In contrast, any provisions that plainly refer to all insured parties, including third-party beneficiaries of the insurance contract, specifically refer to "insured" or to "any insured listed under Section II — Who is an Insured," since any additional insured endorsements amend "Section II-Who is an Insured." For example, the "known loss" provision in the insurance contracts of several AI Carriers, refer to "when any insured listed under Paragraph b of Section II — Who is an Insured. . ." Moreover, the fact that Scottsdale's blanket additional insured endorsement contains a separate "excess insurance" provision, supports the inference that the provision quoted above was not intended to apply to any additional insured.
Scottsdale contains an "excess insurance" provision in its additional insured endorsement which reads:
Any coverage provided hereunder will be excess over any other valid and collectible insurance available to the additional insured whether primary, excess or contingent or on any other basis unless a contract specifically requires that this insurance be primary.
When this insurance is excess, we will have no duty under Coverage A or B to defend the additional insured against any "suit". . .
(Scottsdale-Kaminska Aff., Ex. D). Every Trade Agreement or Subcontract contains a "Standard Amendment Rider to Standard Trade Contract." (Archstone-Henderson Aff., Exs. 3-16, 18). The Rider to the Trade Agreements refers to the "Insurance requirements set for this Agreement" and states in clause R.24:
The following language is required on certificates of insurance to be provided by the Trade Contractor to the Construction Manager for General Liability and Worker's Compensation Policies:
"Per project aggregate applies to General Liability Policy. Tocci Building corporation of New Jersey, Inc., the Owner and all other parties as required by Contract are named as Additional Insured on a Primary and Non Contributory Basis. . .( Id.) The Trade Agreements, including one signed by Knight Waterproofing (Scottsdale-Kaminsa Aff., Ex. A), require that additional insured coverage provided by Scottsdale and other AI Carriers be primary. Under Scottsdale's provision, a contract requires that Scottsdale's additional insured coverage be primary, and it is therefore so.
Interstate contends that its policy endorsement declaring that its policies will be excess to any "Owner Directed Insurance Program," means that Interstate's policies would be excess to any other policies purchased by Archstone and Tocci. Interstate's provision reads:
Navigators presented a similar argument, however it need not be addressed since this court has already determined that no coverage exists under Navigators' policy.
DIFFERENCE IN CONDITIONS — CONTRACTORS
WE UNDERSTAND THAT CERTAIN CONSTRUCTION PROJECTS ARE REQUIRED TO BE INSURED UNDER AN OWNER DIRECTED INSURANCE PROGRAM AND INSURED ON POLICIES OTHER THAN THOSE OBTAINED BY THE INSURED. IN THE EVENT THAT SUCH INSURANCE COVERAGE IS NOT AVAILABLE, IT IS AGREED THAT THE PROVISIONS AND CONDITIONS IN THIS POLICY APPLY TO SUCH PROJECTS. HOWEVER, IF VALID AND COLLECTIBLE INSURANCE IS APPLICABLE TO SUCH PROJECTS, THIS COVERAGE SHALL APPLY AS EXCESS. The provision does not define "Owner Directed Insurance Program." On its face, the phrase is not a clause or sentence with a grammatical subject, verb, and object, such as the court can seek to decipher as plain English; rather, the phrase is patently the title for a type of insurance policy. As an undefined and ambiguous phrase in the provision, this court cannot apply the exclusionary language to deny coverage. Neither has Interstate offered any documentary evidence that titles itself an "Owner Directed Insurance Program" that protects Archstone or Tocci. Interstate has not met its burden in proving that its policy is unambiguously excess coverage. In any case, the provision does not indicate that Interstate would have no duty to defend if it were excess to any "Owner Directed Insurance Program."
In its reply brief, Travelers proffers that one interpretation of Owner Directed Insurance Program is a type of policy that "afford[s] all participants in a construction project coverage under a single insurance policy purchased for the project." (Travelers reply m. p. 42)
Liberty Mutual's argument regarding its policies' "self-insured retention" or $750,000 "deductible" are premature at this stage, as this court is not asked to decide any allocation of defense costs. Liberty Mutual's provision does not suggest that it has no duty to defend when the "self-insured retention" or "deductible" applies.
(D.) Summary
As discussed, Archstone's notice to Federated was late as a matter of law, and therefore Federated's policy to Manning Plumbing and its other arguments, including a multi-residential unit exclusion, will not be discussed in the remainder of this decision. Similarly, Navigators' policies cannot provide additional insured coverage to Archstone or Tocci, because of the effective dates of the policies. Federated's cross-motion (sequence no. 23) for summary judgment in Archstone's Third-Party Complaint is granted. Travelers' and Archstone's motions for partial summary judgment are denied in part as to Federated and Navigators.
III. INTERPRETATION AND APPLICATION OF ADDITIONAL INSURED ENDORSEMENTS (A.) Express Coverage Regarding: Delos; Farm Family; Erie
Delos admits that at least its Policy IRS 400765 (8/20/05 to 8/20/06) did list Tocci Building Corporation of New Jersey, ASN Roosevelt Center, LLC, and Archstone-Smith Operating Trust as additional insureds." (Delos mem. p. 4; Delos Suppl. Aff. at ¶ 5). The other Delos policies do not appear to contain a broad form additional insured endorsement, requiring instead that any additional insured be added by an amendment schedule. (Henderson Aff. Exs. 31-32). Thus, at least as to its 2005 to 2006 policy to DaVinci Construction, Delos may owe a duty to defend ASN Roosevelt, Archstone-Smith Operating Trust, and Tocci.
Similarly, Farm Family admits that its "Contractors Advantage Special policies issued to Sipala by Farm Family provided that Tocci and Archstone were additional insureds, but only with respect to liability arising out of Sipala's work for Tocci or Archstone. . ." (Farm Family mem. p. 9). The policies' specifically named Tocci Building Corporation of New Jersey, ASN Roosevelt Center (misspelled "SN Roosevelt Center"), and Archstone Smith Operating Trust. (Henderson Aff., Ex. 60).Erie Insurance Group's policies to Mid Atlantic Stone contain a blanket additional insured endorsement that expressly incorporates a Certificate of Insurance naming an Additional Insured:
A. Section II — Who Is An Insured is amended to include as an insured any person or organization for whom you are performing operations and for whom a Certificate of Insurance with additional insured status has been issued. . .
Certificates of Insurance were issued on Erie's policies to Mid Atlantic Stone, and those Certificates name "Tocci Building Corporation of New Jersey, ASN Roosevelt Center, LLC, and Archstone-Smith Operating Trust as additional insureds." (Henderson Aff., Exs. 55-56). Therefore, those entities are expressly named additional insureds under Erie's policies.
(B.) Blanket Endorsements Extending Coverage as Required in Written Contract
1. General Discussion and Standard Language
Most AI Carriers contain similar language in a blanket additional insured endorsement. One such typical additional insured endorsement reads:
WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization, including any person or organization shown in the schedule above, (called additional insured) whom you are required to add as additional insured on this policy under a written contract or written agreement. . .
All contracts between Tocci, the general contractor, and the subcontractors included clauses requiring the subcontractor to procure insurance that would protect Tocci and the "Owner":
14.1.1 The Trade Contractor shall purchase and maintain such insurance as will protect him and the Construction Manager, Owner and Architect/Engineer from claims set forth below which may arise out of or result from the Trade Contractor's operations under the Contract, whether such operations be by himself or by any of his Trade Subcontractors or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable, which shall include but not necessarily be limited to insurance against:
* * *
.3 Claims for damages because of bodily injury, sickness or disease or death of any person other than his employees;
* * *
.4 Claims for damages insured by usual personal injury liability coverage which are sustained . . . (2) by any other person;
.5 Claims for damages other than to the work itself because of injury to or destruction of tangible property, including loss of use resulting therefrom;
* * *
STANDARD AMENDMENT RIDER TO STANDARD TRADE CONTRACT
* * *
R.24INSURANCE: PROOF OF CONTINUING COVERAGE
* * *
The following language is required on certificates of insurance to be provided by the Trade Contractor to the Construction Manager for General Liability and Worker's Compensation Policies:
"Per project aggregate applies to General Liability Policy. Tocci Building corporation of New Jersey, Inc., the Owner and all other parties as required by Contract are named as Additional Insured on a Primary and Non Contributory Basis. . ."
The content of the Trade Agreements, including the quoted clauses, is not disputed. The Trade Agreements required each subcontractor to procure additional insured coverage for Tocci and the "Owner." Most AI Carriers do not dispute that the "Owner" includes the Archstone parties that initiated the second Third-Party Action in this case. The "Owner" issue is addressed further below.
2. Written Agreement by the Named and Additional Insured
ACE American, Interstate, and the 2007-2008 Merchants Mutual and 2006-2007 American European policies contain a blanket additional insured endorsement that they contend does not add Archstone as an additional insured unless Archstone wrote a contract directly with the subcontractor that was insured on these policies. These policies contain the same relevant language. ACE American's policy, for example, states: Section II — Who Is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. . .
Initially, Merchants Mutual and American European cannot rely on this language to relieve them entirely of any duty to defend. Merchants Mutual's policies prior to 2007 and American European's policies prior to 2006, contain the similar language to that discussed in the previous section, requiring only that some contract call for the additional insured coverage. Since these insurers do not contend that their named insured performed operations for Archstone and Tocci only during the policy periods for which the more restrictive language applies, there is a reasonable possibility that coverage exists under the prior policies. In other words, if Merchants Mutual and American European otherwise have a duty to defend under their prior policies, the more restrictive language in the later policies would not relieve them of a duty to defend.
For example, American European's policies for 2004-05 and 2005-06 state: "Any person or organization you are required by a written contract, agreement or permit to name as an insured in an insured. . ." (American European-Krawczyk Aff., Exs. 1 2).
ACE American and Interstate contain the more restrictive language in all the applicable policies. It is not clear to the court that the language was intended to require strict contractual privity between, say, any subcontractor and the Archstone entities. The language only requires that both, the insured subcontractor and Archstone, have manifested an agreement to procure additional insured coverage for Archstone, and that such manifestation of agreement be in writing. Even though some AI Carriers point to language in the Trade Agreements to the effect that no language will be interpreted to create a contractual relation between Archstone and any subcontractor, such language is only salutary in nature, intended to protect Archstone from some liability, such as vicarious liability for the acts of the subcontractors. The language, "when you and such person or organization have agreed in writing. ." does not manifest a requirement that there be such a contractual relation, only that they have "agreed in writing." The subcontractors' and Archstones' mutual intent to procure additional insured coverage for Archstone under the subcontractors' liability coverage, is evidenced by the language in Sections 14.1.1 and R.24 of the Trade Agreements, as quoted previously. Moreover, the Trade Agreements contained a clause incorporating Archstone's Agreement with Tocci as it related to Archstone's requirements for the subcontractors:
Although identical language beginning, "when you and such person or organization. . ." was present in the insurance policy at issue in BP Air Cond. ( 8 NY3d at 712), the Court of Appeals did not interpret that language in its decision, since the additional insured status for BP Air Cond. arose from its direct subcontract with Alfa.
17.8.1 The Contract Documents which constitute the entire Agreement between the Construction Manager and the Trade Contractor, are listed in Article 3 and, except for Modifications issued after execution of this Agreement are enumerated as follows
* * *
.2 Incorporated by reference: All obligations required of the Subcontractor as set forth in the Standard Forms of Agreement Between Tocci Building Corporation of New Jersey, Inc. and Archstone-Smith for Tocci Building Corporation of New Jersey, Inc. No. 0342. Copies are available upon request.
(Archstone-Henderson Aff., Exs. 3-16, 18). The Archstone-Tocci contract documents required that all subcontractors procure coverage for Archstone:
10.6 Insurance. All Subcontractors shall be required to maintain the insurance coverages required to be maintained by the Contractor under the Contract Documents. . .
* * *
EXHIBIT J
* * *
* * * Owner shall be named as additional insured on all policies.
(Archstone-Henderson Aff., Ex. 2).
11.1.1 The Contractor shall purchase . . . such insurance as will protect the Contractor and Owner from claims set forth below . . .
* * *
.3 claims for damages because of bodily injury . . . of any person other than the Contractor's employees
* * *
.4 claims for damages insured by usual personal injury liability coverage which are sustained . . . (2) by any other person;
.5 claims for damages, other than to the Work itself, because of injury to or destruction of tangible property, including loss of use therefrom;
* * *
11.1.4.2 The Additional Insured endorsement shall state that the coverage afforded the Additional Insured shall be primary insurance for the Additional Insureds with respect to claims arising out of the operations performed by or on behalf of the Contractor. . .
(Interstate-Breen Aff., Ex. H). The incorporation in the Trade Agreements of Archstone's requirements for subcontractors, certainly manifests that the subcontractors and Archstone have agreed to procure coverage for Archstone, and that such agreement is evidenced in writing. Even in the absence of such incorporation, the language in Sections 14.1.1 and R.24 quoted previously, and the Certificates of Insurance, would at least create a question of fact whether the subcontractors and Archstone entities had manifested an intent to procure coverage for the Archstone entities and whether that intent was manifested in writing. ( The Ins. Co. of NY v. Cent. Mut. Ins. Co. , 47 AD3d 469 [1st Dept. 2008]). There is no such question of intent in this case. All parties had agreed that the Archstone "Owner" and Tocci would be additional insureds under the subcontractors' policies.
3. Endorsements in the Pennsylvania National and Ohio Casualty Policies
The policies of Pennsylvania National and Ohio Casualty also contain language in their policies which they contend requires contractual privity between any named insured and any additional insured. The relevant language reads: "any person or organization . . . with whom you are required in a written contract or agreement to name as an additional insured. . ." Pennsylvania National and Ohio Casualty do not cite any cases that have interpreted this language. On its face, the language is grammatically ambiguous, since the verb "require" does not normally take a predicate with the preposition "with." Thus, the clause, "with whom . . . you are required to name" might only be interpreted by the common use of "with" as "together with" or "along with. One might speculate that the language should have read, either "whom you are required . . . to name," or "with whom you have agreed . . . to name." Construing the language against the drafter, Tocci and the Archstone "Owner" are additional insureds under this language.
4. Hartford Fire's* and Liberty Mutual's* Policies to Superseal
These AI Carriers contend that Superseal was not required to name Tocci or Archstone as additional insureds. The Purchase Order which Superseal signed with Tocci contained the following language: 4) Insurance — Supplier will supply evidence of insurance in accordance with Article 14 of the Contract Documents.
* * *
18) Thoroughly examine all contract documents. Failure to be acquainted with the entire set of Contract Documents will in no way relieve Trade Contractors from any obligations with respect to this work.
(Archstone-Henderson Aff., Ex. 17). Further, the Archstone-Tocci Contract provided:
10.6 Insurance. All Subcontractors shall be required to maintain the insurance coverages required to be maintained by the Contractor under the Contract Documents. . .
* * *
14.4 Insurance Requirements. The insurance required to be maintained by the Contractor under the General Conditions shall be written for not less than the limits set forth in Exhibit "J" hereto, or greater if required by law.
* * *
EXHIBIT J
* * *
* * * Owner shall be named as additional insured on all policies.
(Archstone-Henderson Aff., Ex. 2).By the plain terms of the language quoted, Superseal was required to procure insurance coverage which named the "Owner" as an additional insured. Therefore, under Hartford Fire's and Liberty Mutual's blanket additional insured endorsements, the Archstone "Owner" qualifies as an additional insured.
5. Archstone "Owner" Which Is an Additional Insured As Required by Contract
The Trade Agreements define the "Owner" as "Archstone-Smith" in the cover page (Henderson Aff., Exs. 3-16, 18) and the Archstone-Tocci Agreement identifies the "Owner" as "Archstone-Smith Operating Trust," ( id., Ex. 2). Some AI Carriers contend that because the contract documents identify the "Owner" as "Archstone-Smith" or "Archstone-Smith Operating Trust," other subsidiary entities of the Archstone-Smith Operating Trust, such as "ASN Roosevelt," are not entitled to any coverage for any costs they incurred in defending the Tenant Actions, apart from any costs incurred directly defending the Archstone-Smith Operating Trust.
Archstone seeks to introduce the Certificates of Insurance, which identify both the Archstone-Smith Operating Trust and ASN Roosevelt as additional insureds. However, a Certificate of Insurance which contains a clause informing the holder that it "confers no right upon the certificate holder . . . [and] does not amend, extend, or alter the coverage afforded. . ." is generally not conclusive proof of coverage, without more. ( McGill v. Polytechnic University, 235 AD2d 400 [2d Dept. 1997]). Moreover, Archstone has not shown how the Archstone-Tocci Agreement or the various Trade Agreements are ambiguous as to the term "Owner," such that this court must look to any extrinsic evidence of intent. While Archstone cites to a case which held that an "Owner" was an additional insured as identified in the Certificate of Insurance, that case is not precisely on point. There was no real dispute between the parties as to who was understood as the "Owner," and the issue arose only because of an omission in the contract documents which failed to define the "Owner," so that extrinsic evidence was necessary as a matter of contract interpretation. In this case, the "Owner" is clearly identified as "Archstone-Smith" and "Archstone-Smith Operating Trust," so that extrinsic evidence is not necessary to determine intent of the Trade Agreements or Archstone-Tocci contract. Moreover, the parties in this case dispute whether "Archstone-Smith Operating Trust" would include any other entities, such as "ASN Roosevelt Center LLC," or they argue that even if Archstone-Smith Operating Trust's status as an additional insured would include an entity of which it is a member, such as ASN Roosevelt Center LLC," their policies exclude coverage "with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations." (Hartford Fire mem. pp. 11-12). Finally, the Certificates of Insurance in this case were issued by Archstone's broker, rather than an agent of the insurers. Because of these factual issues, summary judgment as to any Archstone entities other than "Archstone-Smith Operating Trust" is inappropriate at this time, except as to those AI Carriers (discussed above in section III. A of this decision) which provided express additional insured coverage to "ASN Roosevelt LLC" and "Archstone-Smith Operating Trust."
That case is Gofranullah v. 630 Realty, LLC ( 16 Misc 3d 1122[A], 2007 NY Slip Op. 51544[U] [Kings Cty. Sup. Ct. 2007]).
(C.) Provisions Limiting Coverage to "Liability Arising out of Your Ongoing Operations" and Similar Language
1. General Discussion and Standard Language
Language extending coverage to an "additional insured" in commercial liability policies generally provides that coverage is provided to the additional insured "only with respect to liability arising out of your ongoing operations performed for that insured." Some variations on this language are not significant, and those insurers have not contended for any different interpretation of such minor variations. For example, Hartford Fire's* early policies to Clem's Ornamental and Superseal provide coverage to an additional insured "with respect to" the insured's operations or work, and Ohio Casualty's policies to Apro provide coverage to an additional insured for bodily injury or property damage "resulting from your ongoing operations performed for that insured."
New York cases applying this language have followed Consolidated Edison Co. of New York v. Hartf. Ins. Co. ( 203 AD2d 83 [1st Dep't 1994]). That case held that the focus of analysis in interpreting such language is "not . . . the precise cause of the accident . . . But upon the general nature of the operation in the course of which the injury was sustained." ( Id. at 84). This language was adopted by the Court of Appeals in Regal Constr. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburg, PA ( 15 NY3d 34 , 38) and Worth Constr. Co. Inc. v. Admiral Ins. Co. ( 10 NY3d 411 , 416).
See, e.g., Tishman Constr. Corp. of New York v. CNA Ins. Co., 236 AD2d 211 (1st Dep't 1997), William Floyd School Dist. v. Maxner , 68 AD3d 982 (2d Dep't 2009), Turner Constr. Co. v. American Manufacturers Mutual Ins. Co., 485 F.Supp.2d 480 (SDNY 2007)
Before 2007, some cases in the Appellate Division were reaching the conclusion that the complaints which alleged liability against a qualifying additional insured, did not provide sufficient information to determine whether such additional insured's liability arose out of the operations of the named insured. ( See, e.g., AIU Ins. Co. v. Am. Motorist Ins. Co. , 8 AD3d 83 [1st Dept. 2004], 83 Kajima Const. Svcs., Inc. v. Caiti, Inc., 302 AD2d 228 [1st Dep't 2003]. In BP Air Cond. Corp. v. One Beacon Ins. Group ( 8 NY3d 708 ), however, the Court of Appeals held that "additional insured coverage is not contingent upon a liability finding [of the insured subcontractor]." ( 8 NY3d at 711). Because the duty to defend is broader than the duty to indemnify, it is sufficient that the facts in the underlying complaint suggest a reasonable possibility that there is "some causal relationship between the injury and the risk for which coverage is provided." ( Regal Const., 15 NY3d at 38). Indeed, the judicial policy favoring quick determination of the duty to defend calls a liberal interpretation of allegations in the underlying complaint. ( See Rhodes, 67 AD3d at 882; see generally 70 NY Jur2d Insurance §§ 1628, 2079).
The decision of the Court of Appeals in Regal Const., supra, clarified the Court's view of the coverage afforded by a blanket additional insured endorsement. In Regal Const., an employee of Regal, a "prime contractor" which performed demolition and renovation operations for URS, slipped on a recently painted metal joist, which Regal alleged had been painted by employees of the construction manager URS. The underlying complaint only alleged negligence by URS. The Court of Appeals held that "[i]f a complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend. This standard applies equally to additional insureds and named insureds." ( Regal, 15 NY3d at 37). The Court relied for its reasoning on the language from Consolidated Edison, supra, which indicates that courts will focus on the general nature of the operation when the accident was sustained, rather than speculate as to the precise cause of the accident. In Regal Const., the employment relation between the injured claimant and the named insured satisfied this basic causation standard. Finally, the Court clarified: "That the underlying complaint alleges negligence on the part of URS and not Regal is of no consequence, as URS's potential liability for LeClair's injury arose out of' Regal's operation." ( Id., 15 NY3d at 39). Neither was it significant that the named insured, Regal, had not been named as a defendant in the underlying action. ( Id., 15 NY3d at 37).
Only two reported New York cases decided after BP Air Cond., supra, appear to favor the Third-Party Defendants, Worth Constr. Co. Inc. v. Admiral Ins. Co. ( 10 NY3d 411 ) and Stellar Mech. Svc. of NY v. Merchants Ins. of NH ( 74 AD3d 948 [2d Dept. 2010]). Both are exceptions to the general rule and are limited to their facts. As the First Department has explained, the facts of Worth, which it had reviewed at an intermediate level, are as follows ( See Bovis Lend Lease LMB Inc. v. Garito Contracting, Inc. , 65 AD3d 872 , 874 [1st Dept. 2009]): The general contractor Worth sought contribution for its defense costs as an additional insured in the insurance policy of its subcontractor Pacific. In the underlying action against it, Worth had impleaded Pacific, alleging that the claims against Worth arose from Pacific's own negligence. However, Worth later conceded that its third-party claims against Pacific were without merit. It had thus been established as a matter of law that there was no factual or legal basis upon which Pacific's insurer would be required to indemnify the general contractor for any negligence by Pacific. ( Worth Constr. Co. Inc. v. Admiral Ins. Co., 2005 WL 5749129, No. 118180/03 [NY Cty. Sup. Ct. June 6, 2005, J. Freedman], aff'd 10 NY3d 411). On such limited facts, the Court of Appeals held that Pacific's insurer had no duty to defend the general contractor Worth.
The second case favoring the third-party defendants, Stellar, supra, is similarly limited to its facts. The Court noted that "Stellar and American established, prima facie, that Merchants was obligated to defend Stellar in the underlying action." ( 74 AD3d at 952). However, the general nature of the operations were such that there was no reasonable possibility that liability arose out of Serge's operations until the second amended complaint made such allegations, however groundless: "Those allegations suggested, for the first time, a reasonable possibility of coverage in the underlying action. . ." ( Id.). Thus, the determining factor for coverage was the allegations, and not the fact that Serge was not a named defendant until the Complaint was amended a second time. Beyond those allegations, there was no reasonable possibility of coverage from the general nature of the operations: "Merchants submitted certain deposition testimony showing that Serge's employees did not create the opening through which [the injured claimant] fell, and were not responsible for protecting construction workers from falling through that opening." ( 74 AD3d at 953). Therefore, Stellar does not stand for the proposition cited, and it does not reverse the holding in Regal, supra, that it is of no significance for these types of cases, that the named insured is not a named defendant. ( See also Lim v. Atlas Gem Erectors, Inc., 225 AD2d 304 [1st Dept. 1996], Structure Tone, Inc. v. Comp. Assembly Sys., 275 AD2d 603 [1st Dept. 2000], Bedford Cent. Sch. Dist. v. Comm. Union Ins. Co., 295 AD2d 295 [2d Dept. 2002]).
Finally, some AI Carriers suggested at oral argument that the language, "arising out of your ongoing operations," should be applied to exclude from coverage any damages which first occurred after a named insured's work for the additional insured had been completed. This argument has little weight, the AI Carriers did not argue this point in their papers, and in any case the court need not decide whether this language limits coverage to damages occurring during the course of the named insured's operations. As a matter of interpretation, bodily injury or property damage need not occur during the course of a trade contractor's "ongoing operations," for that bodily injury or property damage to "arise out of" that trade contractor's work or its ongoing operations performed for the additional insured. ( Cf. Pardee Const. Co. v. Ins. Co. of the West, 77 Cal. App. 4th 1340 [Cal. App. 4th Dist. 2000]). For instance, defects or other dangerous conditions created during the course of ongoing operations, may cause bodily injury or property damage to occur at a later date. ( See, e.g., Perez v. NYC Housing Auth., 302 AD2d 222 [1st Dept. 2003]). Moreover, the fact that many AI Carriers use similar "ongoing operations language," and separately exclude coverage for completed operations, strongly suggests that the word "ongoing" is not sufficient to limit coverage only to those damages that occur during the course of the contractor's operations. For example, even though Erie uses this very same language-"only with respect to liability arising out of your ongoing operations"-its endorsement also provides: "This insurance does not apply to*** bodily injury' or property damage' occurring after*** [a]ll work . . . has been completed." In other words, if such coverage for completed operations were already outside the scope of coverage provided by the "ongoing operations" language, there would be no need to exclude completed operations coverage by another provision. A more plausible interpretation of the phrase "ongoing operations," is that this language is analogous to language in other endorsements, which provides coverage to an additional insured "for whom you are performing operations" during a policy period. In any case, the court need not decide the legal interpretation of "ongoing operations," since the AI Carriers do not contest that their named insureds performed ongoing operations for Archstone and Tocci sometime during 2003 through 2007. And, as is discussed more fully in this court's discussion of the completed operations exclusion, the Tenant Actions allege that damages occurred between 2003 and 2007. The completed operations exclusion is discussed in section IV. A of this decision.
2. Coverage Limited to Liability Caused by Insured's Acts or Omissions
The policies of ACE American, American European, Merchants Mutual (only for the 1/28/07-1/28/08 policy period), Hartford Fire* (only for 2006-07 policy periods), Pennsylvania National, and Scottsdale (only for the 5/24/07 — 5/24/09 policy periods), substitute the "arising out of" language with:
Such person or organization is an additional insured only with respect to liability for bodily injury, property damage' 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 performance of your ongoing operations for the additional insured
Pennsylvania National contends that this language was interpreted in a Pennsylvania case to mean that the coverage for the additional insured was limited to the additional insured's vicarious liability for the acts or omissions of the named insured. ( See Lafayette College v. Selective Ins. Co., 2007 U.S. Dist. LEXIS 88001, No. 06-5459 [E.D.Pa. Nov. 29, 2007, J. Sanchez]). The language in the policy of that case, however, contained materially different language: "That person or organization is only an insured with respect to liability caused by your negligent acts or omissions at or from your ongoing operations. . ." In contrast, the language at issue here omits the word "negligent."
The phrase "caused in whole or in part" does not materially alter the general phrase, "arising out of," as such expression is contended to apply in this case. In other words, while "arising out of" might accept an employment relation as a sufficient causal nexus, ( see Regal Const., 15 NY3 at 38), and the expression "caused in whole or in part by" might exclude employment as sufficient nexus, neither Archstone nor Travelers contend that the causal nexus bringing the allegations against them within coverage is an employment relation. Rather, Archstone and Travelers contend that the allegations against them implicate various subcontractors' acts or omissions as contributing, at least in part, directly to the damages that the tenants suffered. Such a casual nexus is more direct than "but for" causation. Thus, the case of Dale Corp. v. Cumberland Mut. Fire Ins. Co. (No. 09-1115, 2010 U.S. Dist. LEXIS 127126 [E.D. Pa. Nov. 30, 2010, J. O'Neill]), which interpreted the language, "caused in whole or in part** by your acts or omissions," as requiring a "proximate cause" nexus, does not particularly favor Pennsylvania National in this case, since Archstone and Travelers contend that a more direct causal nexus implicates the acts or omissions of Pennsylvania National's named insured. In any case, Dale is not binding precedent for Pennsylvania law, since it is an unpublished case from a federal court, and it acknowledges that its interpretation of this language was one of first impression
In sum, the causal connection required by, "caused in whole or in part . . . by your acts or omissions," is consistent with the causal connection that Archstone and Travelers contend applies to the trade contractors' contribution to the damages in the Tenant Actions. Therefore, the analytical approach to these policies will not vary from the analysis undertaken for those policies which contain the more common, "arising out of your ongoing operations" language.
3. Coverage Limited to Liability for Which Insured Can Be "Held Liable"
The language in American States' additional insured endorsement states: "The person or organization added as an insured by this endorsement is an insured to the extent that you [the named insured] are held liable due to: *** (2) your ongoing operations for that insured, whether the work is performed by you or for you." On first impression, this language is unclear and ambiguous. Without any additional insured endorsement, American States would have to pay any damages won by Archstone or Travelers, if they sued Metro Painting on any basis related to its ongoing operations for Archstone and Travelers. Therefore, the endorsement's language appears, on the one hand, to confer no separate coverage at all for an additional insured, and on the other hand, the endorsement purports to provide coverage to such additional insureds. On its face, the language is ambiguous and the ambiguity is interpreted against American States as drafter of its adhesion contracts. ( Tishman Const. Corp. of NY v. CNA Ins. Co., 236 AD2d 211 [1st Dept. 1997]). This ambiguity is more egregious where, as here, the duty to defend is at issue. American States contends, in essence, that it provides no additional insured coverage, because some other action must determine that its named insured, Metro Painting, is liable directly to any plaintiff, or liable to Archstone or Tocci in indemnity. However, American States does not exclude coverage for defense in a lawsuit. American States' liability policies, therefore, provide "litigation insurance" to all insureds, and the policies afford any insured, such as Archstone and Tocci, "the expectation of receiving the right to an immediate defense by [American States] rather than being indemnified for defense costs at a later date." ( BP Air Cond. Corp. v. One Beacon Ins. Grp., 33 AD3d 116, 124 [1st Dept. 2006], aff'd 8 NY3d 708). This ambiguity in the context of the duty to defend must be interpreted against American States in order to protect Archstone's and Tocci's reasonable expectation of receiving their right to an immediate defense by American States.
American States' endorsement is ambiguous in other ways. The language requiring that "you [the named insured] are held liable," does not specify how or to whom the named insured must be "held liable." In other words: Must Metro Painting be a named or joined defendant in any covered action? Can a third-party or separate action for contractual or common law indemnity (or any other derivative or contingent liability) hold Metro Painting liable for the covered action? Or, can a determination in an action for insurance indemnity also hold Metro Painting liable? Neither does this additional insured endorsement specify on what legal basis the named insured must be "held liable." On the one hand, coverage could be limited to damages held to have been caused by Metro Painting actual negligence. On the other hand, the endorsement does not limit its additional insured coverage only to Metro Painting's liability for negligence. Thus, for example, Metro Painting's liability under its indemnity and hold-harmless agreements with Tocci and Archstone, would be sufficient to trigger coverage for Archstone and Tocci.
Therefore, American States' additional insured endorsement provides broader coverage than an endorsement requiring that damages be "caused in whole or in part by your negligence," which is discussed below in section III.C.4. Put differently, because American States' language does not specify that an additional insured has coverage only to the extent that Metro Painting can be held liable for negligence, coverage is also afforded if Metro Painting might be found liable on contractual indemnity or on any basis that is broader in scope than negligence and is related to the covered action.
An impleader action against American States' insured, Metro Painting, exists, and a finding of this court on the question of insurance indemnity could also find that Metro Painting can be liable to Archstone and Tocci by reason of contractual indemnity. Therefore, a duty to defend Archtone or Tocci will lie under American States' policy "to the extent" that allegations in the Tenant Actions and the Archstone Action implicate the possibility that Metro Painting might be "held liable" to Tocci or Archstone in contractual indemnity or any other basis of contingent or derivative liability.
4. Coverage Limited to Liability Due to Insured's Negligence
Language contained in Continental Casualty's policies to Houston Stafford (Archstone-Henderson Aff., Exs. 36-37) and Patti Roofing ( id., Ex. 57), affords coverage to an additional insured "solely for liability due to your negligence specifically resulting from your work' for the additional insured which is the subject of the written contract. "The opinion in International Business Machines v. U.S. Fire Ins. Co. ( 17 Misc 3d 1108[A] [NY Cty. Sup. 2007]) interpreted similar language which required that the additional insured's liability be "caused by your negligent acts or omissions. . ."For such language, "it is not enough for [an additional insured] to show merely that the underlying action arose out of' [the named insured's] work, but rather they point to allegations or evidence of [the named insured's] negligent acts or omissions." ( Id., 17 Misc 3d 1108 *6; cf. Boise Cascade Corp. v. Reliance Nat. Indem. Co. Inc., 129 F. Supp. 2d 41 [D. Me. 2001]). Therefore, Continental Casualty's policies to Houston Stafford and Patti Roofing will provide coverage to Archstone and Tocci for liability in the Tenant Actions and Archstone Action, only if those actions allege or imply actual negligence by their named insureds that caused the harm. Thus, allegations which only might imply that damages arose from Patti Roofing's operations, regardless of fault in negligence, are insufficient. Indeed, "negligence" has a very particular meaning of legal fault within the law of torts, and therefore only particular facts will support an inference that a particular complaint alleges liability for Archstone or Tocci, due to the named insured's legal fault in negligence. ( Cf. Lafayette College v. Selective Ins. Co., 2007 U.S. Dist. Lexis 88001, No. 06-5459 [E.D.Pa. Nov. 29, 2007, J. Sanchez]).
Liberty Mutual's policy to Superseal similarly provides additional insured coverage only for damages "incurred as a result of some negligent act or omission of" Superseal. Therefore, Liberty Mutual's policy to Superseal will provide coverage to Archstone and Tocci, only if the underlying actions allege or imply actual negligence by Superseal, which resulted in imputed liability to Archstone or Tocci.
(D.) Method for Inferring Causal Nexus from Complaint Allegations
The Tenant Actions and Archstone Action in various ways allege negligent construction by subcontractors (as servants, agents or licensees of Archstone and Tocci), but the allegations are otherwise incomplete and provide only limited information to determine whose construction operations are relatable to the injuries and property damage claimed in the Tenant Actions and Archstone Action. Several AI Carriers contend that this court cannot make any inferences regarding whose construction operations are relatable to, or are implicated by allegations in the Tenant Actions or Archstone Action. However, various legal principles regarding the duty to defend suggest otherwise, at least where the additional insured endorsement provides coverage whenever a claimant's damages "arise out of" or are "caused in whole or in part by" the named insured's work. First, it is certainly clear that a named insured need not be a named defendant in the underlying suit, in order to trigger coverage for an additional insured under endorsements similar to those of the AI Carriers. ( Regal, 15 NY3d at 37 39). Next, incomplete allegations cannot relieve an insurer from its defense obligations. ( Ruder Finn, 52 NY2d at 672; cf. Montrose Chem. Corp. v. Sup. Court, 6 Cal. 4th 287, 296, 861 P.2d 1153). Also, any evidence provided to the insurer which supports coverage, can give rise to a duty to defend, despite incomplete allegations in the complaint. ( Paul v. Grenier, 277 AD2d 681 [3d Dept. 2001]). Lastly, to the extent that the language, "arising out of" or "caused in whole or in part," suggests that a complaint must make specific accusations against a named insured, the language is ambiguous, and in accordance with common law interpretation of adhesion contracts, the ambiguity should be resolved in favor of the insured. ( See Bedford Cent. Sch. Dist. v. Comm. Union Ins. Co., 295 AD2d 295 [2d Dept. 2002]). Put differently, if the AI Carriers intended to limit coverage only to cases where a claimant made express accusations against the named insured, or where the named insured was made a defendant, the AI Carriers could have so specified. For these reasons, the court will infer a causal nexus wherever it finds a reasonable possibility that liability arose out of or was caused in whole or in part by operations of a named insured, in accordance with the AI Carrier's blanket additional insured endorsements. ( Travelers Indem. Co. v. Commerce Indus. Ins. Co. of Canada , 28 AD3d 914 [3d Dept. 2006], Lim v. Atlas-Gem Erectors Co., Inc., 225 AD2d 304 [1st Dept. 1996], Turner Const. Co. v. Kemper Ins. Co., 198 Fed.Appx. 28, 2006 WL 2942525 [2d Cir. 2006]).
Indeed, under Regal, if the causal nexus is otherwise satisfied by some other circumstance or extrinsic fact, such as an employment relation between the claimant and the named insured, "[t]hat the underlying complaint alleges negligence on the part of [the additional insured] and not [the named insured] is of no consequence." ( 15 NY3d at 39). The AI Carriers therefore have a difficult task in showing that their additional insured endorsements expressly require specific allegations of wrongdoing against their named insureds.
In this case, it is clear that beside the Complaints themselves, the court must examine at least the Trade Agreements, which are incorporated by reference in the AI Carriers' blanket additional insured endorsements. The blanket endorsements provide coverage to an additional insured only to the extent that a written agreement requires such coverage related to the named insured's operations. By defining additional insured coverage with relation to the named insured's "operations" or "work," undefined terms within the four corners of the policies, the court must by necessity look to the totality of the Trade Agreements which define the scope of such operations or work. ( See William Floyd Sch. Dist. v. Maxner , 68 AD3d 982 [2d Dept. 2009], Bedford Cen. Sch. Dist. v. Comm. Union Ins. Co., 295 AD2d 295 [2d Dept. 2002], Travelers Indem. Co. v. Commerce Indus. Ins. Co. of Canada , 28 AD3d 914 [3d Dept. 2006], Roberts Taylor Sensabaugh Inc. v. Lexington Ins. Co., 2007 U.S. Dist. Lexis 65524, No. H-06-2197 [SD Tex. Sept. 5, 2007, J. Rosenthal]). Moreover, each AI Carrier presumably already examined the Trade Agreements for evidence of a requirement to procure additional insured coverage for Tocci and Archstone. Therefore, this court can confidently impute knowledge of these Trade Agreements to the AI carriers. This court will examine all Trade Agreements' terms that define the scope of a subcontractor's operations for which it was required to obtain additional insured coverage.
This court can also examine any independent evidence which was made known to the AI Carriers, and which may clarify whether any alleged damages "arise out of" or were "caused in whole or in party by" the operations of any subcontractors. Certainly in New York, permissible extrinsic evidence in a duty-to-defend analysis includes evidence of liability which an insured provides to its insurer. ( Pahl v. Grenier, 277 AD2d 681 [3d Dep't 2000], Fitzpatrick v. American Honda Motor Co., Inc., 78 NY2d 61). However, a putative additional insured cannot simply fabricate coverage with transparent, unsubstantiated allegations. ( See Village of Newark v. Pepco Contractors, Inc., 99 AD2d 661 [4th Dept. 1984], aff'd 62 NY2d 772). The basis for additional insured coverage that the putative additional insured communicates to the insurer must be based on real evidence that raises the prospect of liability which arises out of the named insured.
The only evidence which Archstone and Travelers have submitted, regarding what information was made known to the AI Carriers, consists of Mr. Crewdson's November 2007 letter ("the Crewdson letter"). (Travelers-Shiroma Reply Aff., Ex. 6). This letter was attached to all November and December 2007 notice letters sent by Mr. Flannery to the AI Carriers. (Travelers-Shiroma Aff., Exs. 25-41; Travelers-Shiroma Reply Aff., Exs. 4, 8, 9). The Crewdson letter details various construction defects that were reportedly discovered by a forensic building expert and that are relatable to the widespread water intrusion issues in the Archstone Westbury complex. Archstone has re-alleged these defects in its "Affirmation of Interim Defects" that was filed on this case. Thus, the defects identified in the Crewdson letter were made known to the AI Carriers before any tenant litigation even began, they were ostensibly based on an available expert report, and all insurers were invited to investigate and examine the defects and damages in the Archstone Westbury Complex. For those reasons, this court can impute knowledge of facts stated in the Crewdson letter to the AI Carriers. No AI Carrier has disputed the validity of the forensic building expert's findings or whether any reported construction defects are related to the water intrusion and mold issues at the Archstone-Westbury complex.
Some AI carriers strenuously argue that their jurisdiction, such as Texas, does not permit any extrinsic evidence when determining the duty to defend, often citing Pine Oak Builders, Inc. v. Great American Lloyds Ins. Co. ( 279 SW3d 650 [Tex. 2009]). In fact, a close reading of Pine Oaks reveals that the decision addressed a very narrow problem of interpretation, and this problem of interpretation arose from the effect of two previous interpretations that appear unique to Texas: an interpretation that an "occurrence" includes property damage to the faulty work product itself ( see Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 SW3d 1, 4-5, 16 [Tex. 2007]); and a "subcontractor exception" to the "your work" (or work/product) exclusion, which holds that this exclusion does not apply to warranty damages for faulty work, if the work was performed by a subcontractor of the insured, ( Crow-Williams, I v. Federal Pacific Electric Co., 683 SW2d 523 [Tex App. Dallas 1984]). Therefore, the Pine Oak court was focused on the very narrow issue whether the party seeking coverage, whose faulty work product alone was alleged to have caused warranty-type damages, could create coverage for such warranty or contractual claims, by bringing in facts that would raise the "subcontractor exception" to the "your work" exclusion. The decision held that a contractor could not allege such extrinsic facts in order to circumvent the "your work" exclusion. Otherwise, Pine Oaks did not reverse the Texas Supreme Court's previous discussion of extrinsic evidence in GuideOne Elite Ins. Co. v. Fielder Road Baptist Church ( 197 SW3d 305 [Tex. 2006]). There, the Texas Supreme Court held only that an insurer could not use extrinsic evidence to deny coverage, and it suggested that extrinsic evidence was appropriate where it was not offered to contradict allegations in the underlying action. More recent cases have refused to clarify this issue any further, but have held that extrinsic evidence must always be examined for the duty to indemnify, and have thus created some anomalous results where an insurer may be held to a duty to indemnify, but not necessarily to any duty to defend. ( D.R. Horton-Texas, Ltd. v. Markel Internat. Ins. Co., Ltd., 300 SW3d 740 [Tex. 2009], The Burlington Norther and Santa Fe Railway Co. v. National Union Fire Ins. Co of Pittsburg, PA, 2011 Tex. LEXIS 130, No. 10-0064 [Tex. Feb. 25, 2011]).
Because of the indeterminate state of Texas law on this issue, no clear conflict of laws emerges. To the extent that any clear law is suggested on the issue, Texas appears to admit extrinsic evidence on the issue of duty to defend, so long as the extrinsic evidence only goes to the issue of coverage and is not introduced to contradict allegations of the underlying complaint. ( GuideOne Elite Ins. Co. v. Fielder Road Baptist Church 197 SW3d 305 [Tex. 2006]). Some intermediate courts in Texas are particularly open to extrinsic evidence when the coverage issues cannot be resolved due to incomplete or ambiguous allegations. ( See, e.g., State Farm Fire Cas. Co. v. Wade, 827 SW2d 448 [Tex. App. Corpus Christi 19992] pet. denied, Mid-Cont. Cas. Co. v. Safe Tire Disposal Corp., 16 SW3d 418 [Tex. App. Waco 2000] pet. denied, Martinez v. State Farm Lloyds, 2000 WL 35729222, No. 13-98-466-CV [Tex. App. Corpus Christi Aug. 31, 2000, J. Hinojosa]; see also Ooida Risk Retention Grp., Inc. v. Williams, 579 F3d 469 [5th Cir. 2009] [examining Texas law and concluding that Texas Supreme Court would support the limited exception to the "8 corners" rule reflected in these cases]). Moreover, the Texas insurers' arguments concerning the use of extrinsic evidence are belied by the fact that their own policies incorporate extrinsic documents by providing coverage "as required by written contract," and they rely on the undefined terms "operations" or "work" to determine coverage. This court's method for inferring some causation, by examining the allegations of each complaint and any facts made known to the AI Carriers in the Crewdson letter, is not in conflict with Texas law.
Pennsylvania National makes a related argument, that the four corners rule in Pennsylvania requires that a complaint must explicitly allege acts by a named insured, in order to implicate any liability that arises out of, or was "caused in whole or in part" by that named insured. However, Pennsylvania National relies on a case that is not binding precedent for the law of Pennsylvania. ( See Dale Corp. v. Cumberland Mut. Fire Ins. Co., No. 09-1115, 2010 U.S. Dist. LEXIS 127126 [E.D. Pa. Nov. 30, 2010, J. O'Neill]). Moreover, the decision does not broadly support the proposition that Pennsylvania National asserts from it. The decision was narrowly focused on its interpretation that "caused in whole or in part" requires proximate causation from the named insured's negligence; so, the court concluded that the mere fact that the named insured had provided the aerial lift that was the situs of the claimants' accident, did not implicate any negligence or fault by the named insured, since the accident did not arise from alleged defects in the aerial lift. On the other hand, there is a possibility that the underlying complaint would have implicated the named insured's acts or omissions, even without actually identifying the named insured, by allegations that the aerial lift was itself defective.
Finally, this court believes it important to consider the fact that all subcontractors, Tocci, and Archstone, together entered into hold-harmless and indemnification agreements for any damages that might arise out of their construction operations for the Archstone Complex. This consideration is particularly relevant in applying additional insured endorsements that broadly provide coverage for damages "arising out of" or "caused in whole or in part by" the named insured's "operations" or "work." Indeed, the coverage afforded by an insurance policy must be understood with an eye to "common speech . . . and the reasonable expectation and purpose of the ordinary businessman." ( Ace Wire Cable Co. v. Aetna Cas. Sur. Co., 60 NY2d 390, 398). A blanket additional insured endorsement which provides broad and open-ended coverage to any damages "arising out of" or "caused in whole or in part by" the named insured's "operations" or "work," essentially allows the named insured and any entity for which it is performing operations, to define the terms of coverage by identifying the operations and responsibilities of the named insured. Thus, several cases suggest that the risk allocation and indemnification agreement between the parties is an important factor in determining the nature of the coverage afforded by the "arising out of your operations" language. For example, Travelers Indem. Co. v. Comm. Indus. Ins. Co. of Canada , 28 AD3d 914 [3d Dept. 2006], considered the risk allocation and responsibilities of the named insured and putative additional insured, in order to determine whether the "operations" of the named insured as defined by contract, incorporated responsibility for the risk that had materialized in the underlying lawsuit. The Court of Appeal's decision in BP Air Cond. also interpreted a blanket additional insured endorsement by relying at least in part on the existence of a hold-harmless and indemnification agreement:
[T]he purchase order's indemnification/hold-harmless clause indicates that BP sought broad protection against any liability that may be attributable to Alfa's activities as insured by One Beacon . . . ***
Denying BP a defense in the underlying matter would rewrite the policy without regard to BP's reasonable expectations as expressed in the purchase order, and provide a windfall for One Beacon.
( 8 NY3d at 715-16). Therefore, this court will find a reasonable possibility of coverage whenever the allegations in the underlying complaints, read liberally, indicate that the damages may be attributable to the scope of work of the insured subcontractor, regardless whether the allegations actually identify particular subcontractors.
(E.) Allegations in the Tenant Actions Which Create a Reasonable Possibility of Coverage
The underlying actions for which Archstone claims a breach of the duty to defend, and whose claims Archstone seeks to pass through to Tocci in the Archstone Action, include: Hunter v. ASN Roosevelt Center d/b/a Archstone Westbury (Archstone-Henderson Aff., Ex 84); Gedenken v. ASN Roosevelt ( id., Ex. 85); DiGiovanna v. ASN Roosevelt Center d/b/a Archstone Westbury ( id., Ex. 92); and In re Archstone Westbury Tenant Litigation ( id., Ex. 87), which consolidated the Francois ( id., Ex. 90), Marchese ( id., Ex. 89), Sorrentino ( id., Ex. 88), and Ventimiglia ( id., Ex. 91)actions. While its papers also seek a defense on the Hughes action ( id., Ex., 86) Archstone abandoned that claim during oral argument.
This court will examine all consolidated Complaints as one action, since all plaintiffs and members of the consolidated class actions joined onto the In re Archstone Complaint. However, the court must treat the non-consolidated Complaints in Hunter, DiGiovanna, and Gedanken individually for purposes of finding any coverage for a duty to defend Archstone. The court notes, however, that it need not analyze how any allegations in the non-consolidated complaints might affect any duty to defend Tocci in the Archstone Action, since only some allegations from any of the Tenant Actions would need to "pass through" to Tocci by the common law indemnity claims, in order to invoke a duty to defend Tocci in the Archstone Action.
Although the allegations in all Tenant Actions arguably stem from the same course of events, a liability policy provides coverage only for particular "bodily injury" or "property damage" that arises from a covered "occurrence." A plaintiff is entitled to choose her remedies, and seek recovery only for some legal claims available. Thus, the Court of Appeals in Ruder Finn Inc. v. Seaboard Sur. Co. ( 52 NY2d 663), examined two related Complaints independently, even though they stemmed from the same course of conduct:
[T]he suit in our State courts is another story. Although the complaint there was based upon the same chain of events which precipitated the Federal complaint, it was more narrowly focused. The gap between the two complaints was material, and, in the present context, is decisive.
( 52 NY2d at 673). On the other hand, "[a] policy protects against poorly or incompletely pleaded causes as well as those artfully drafted." ( Id. at 670). Therefore, allegations which are merely incomplete or ambiguous, but nonetheless raise the potential for coverage by stating a covered "occurrence," should be read alongside more complete allegations of another complaint that allege damages from the same "occurrence." This is particularly justified where, as here, extrinsic evidence known by the insurer confirms that both complaints state qualifying damages which stem from the same "occurrence," and the more complete allegations are not frivolous. ( Cf. Lancer Ins. Co. v. STA Parking Corp., 2010 NY Slip Op. 30682[U], *8-9, 2010 NY Misc. LEXIS 1638 [NY Cty. Sup. Ct. March 22, 2010, J. Edmead]). In such a context, the more complete allegations of a related complaint merely provide further information to the insurer regarding coverage, and such information made known to the insurer can raise a reasonable possibility of coverage.
1. Archstone v. Tocci Complaint
Travelers seeks a declaration that the AI Carriers have a duty to defend Tocci in this Archstone Action. Because the claims against Tocci include indemnification for what Archstone paid or will pay in the Tenant Actions, the allegations in the Tenant Actions become relevant. The Archstone Action generally alleges negligent construction by Tocci and that "Tocci entered into various subcontract agreements and purchase orders with subcontractors and/or suppliers to obtain various labor, material and services on the Project." (¶ 16).
2. In re Archstone Complaint and Consolidated Complaints
Although In re Archstone does not identify "Archstone-Smith Operating Trust" as a defendant, it consolidated several actions which did, including the Marchese and Sorrentino actions. To this court's knowledge, no party contends that Archstone-Smith Operating Trust was no longer involved in the class actions because the Second Amended In re Archstone Complaint did not identify "Archstone Smith Operating Trust" in the caption. Therefore, all AI Carriers under whose policies "Archstone Smith Operating Trust" qualifies as an additional insured, may owe a duty to defend with respect to these consolidated actions.
The complaint acknowledges that other entities employed by Archstone contributed to their damages: damages "were caused by the joint, several and concurrent negligence of the Defendant and/or said Defendant's agents, servants, employees and/or licensees in the ownership, operation, management, design, construction, supervision, maintenance and control of the aforesaid premises." (Henderson Aff., Ex. 87 at ¶ 107).
The complaint alleges damages to property from water infiltration and damages from mold, mildew, or bacteria:
Plaintiffs and the other members of the Class have sustained and will continue to incur significant property damage and other economic damages as a result of the water damage and mold infestation present in their apartments. Such losses may include but are not limited to the costs of replacing or restoring property damaged by water and/or exposed to toxic mold, the need to have their apartments, clothing and personal possessions inspected for the presence of harmful molds or water-borne bacteria and professionally cleaned, moving expenses and other expenses necessary or incidental to finding new apartments and the costs of diagnostic, curative and preventive medical care for illnesses related to mold exposure.
( Id. at ¶ 88).
Archstone and Travelers contend, and this court agrees, that the following allegations implicate the work of particular subcontractors:
The allegation that "Davinci and FJR worked on the construction and/or renovation of the buildings . . . Archstone Westbury claims that the contractors performed substandard work" (¶ 45) implicates Davinci and FJR.
The allegation that "leaks usually came from the windows of exterior walls and through the front doors of apartments leading from the common breeze ways" (¶ 37) implicates subcontractors who provided and installed exterior wall windows and doors leading from the breeze ways, as well as subcontractors who worked on water-proofing the breeze ways.
The allegation that, "water intrusion in many buildings and severe leaks in many apartments due to water intrusion from inclement weather and plumbing problems," (¶ 36) is vague as to the source of leaks, but does implicate subcontractors who worked on plumbing systems.
The allegation, "tenants observed water pooling in the common breeze ways during rainstorms and noted that such pools of water often take days to drain or evaporate away,"(¶ 41) implicates, on its face, any subcontractor who worked on laying and grading of breeze way floors and any storm drainage systems.
The allegation that "a defective product was used on the exteriors of all the Buildings" (¶ 45) implicates any subcontractors who supplied and installed the defective exterior product used on the buildings in the complex.
The broad allegation that "the premises . . . saturated and infiltrated by water entering the premises through cracks, crevices, and other openings" (¶ 105) implicates subcontractors who worked on sealing and caulking joints and openings.
Three B's is a named defendant in the Marchese complaint, and therefore Three B's is implicated in the consolidated In re Archstone Action.
3. Hunter Complaint
The Hunter Complaint names "ASN Roosevelt LLC" as defendant, but not "Archstone Smith Operating Trust" as a defendant. Therefore, at this stage, this court can only determine whether Delos, Farm Family, and Erie owed "ASN Roosevelt LLC" any duty to defend as to this action.
The complaint alleges that "Defendant, its agents, servants, representatives and/or employees were negligent in the ownership, operation, management, maintenance, design and construction, of the Archstone Complex." (¶ 17). It also alleges that "the water intrusion and mold infestation created conditions which were contrary to reasonable residential habitation and were dangerous, hazardous and detrimental to the life, health, safety, and property of the Plaintiffs." (¶ 10). It alleges "bodily injury" and "property" damage from such negligence: "As a result and by virtue of the Defendant's negligence as aforesaid, the Plaintiffs have suffered and sustained property damage and/or economic loss and/or personal injuries and/or mental anguish and/or psychological injuries." (¶ 23).
While the allegations in the Hunter Complaint are generally vague and incomplete as to what aspect of "construction" was negligent or where water intrusion occurred, the allegation of negligent construction implicates the work of at least some contractors on site. In fact, the hold-harmless and indemnification agreements which all contractors signed, would confirm that some contractors would undoubtedly be asked to indemnify Archstone, for damages it must pay due to their negligent construction. The Crewdson letter as forwarded to the AI Carriers, informed these insurers of various defects that had been found in the Archstone complex, and which would likely be attributed to particular contractors. Moreover, the allegations of In re Archstone, which like those in Hunter, identify damages from water intrusion and mold due to negligent construction, informed the AI Carriers of additional facts that could be added to Hunter by an amended complaint or be adduced at trial, and which would implicate the work of their insureds. Therefore, any duty to defend "ASN Roosevelt LLC" in the Hunter action should be examined together with the more complete allegations of In re Archstone, and the information provided to the AI Carriers in the Crewdson letter. ( Cf. Lancer Ins. Co. v. STA Parking Corp., 2010 NY Slip Op. 30682[U], *8-9, 2010 NY Misc. LEXIS 1638 [NY Cty. Sup. Ct. March 22, 2010, J. Edmead]).
4. DiGiovanna Complaint
Like the Hunter Complaint, the DiGiovanna Complaint names "ASN Roosevelt LLC" as defendant, but not "Archstone Smith Operating Trust." Therefore, at this stage, this court can only determine whether Delos, Farm Family, and Erie owed "ASN Roosevelt LLC" any duty to defend as to this complaint.
The complaint alleges that "beginning in October, 2006, plaintiffs experienced water leaks inside of the leased apartment. . ." (¶ 7), and that "the apartment continued to leak, most leaking coming from the window inside the master bedroom and other leaks were locate [sic] in the breakfast room. . ." (¶ 10). Plaintiffs claim that they "were exposed to unhealthy air and during the months of April, May, June and July of 2007, plaintiff's apartment was infested with worms. . ." (¶ 17) and "[t]he spraying did not deter the caterpillars" (¶ 18). It is also alleged that "plaintiff Farideh DiGiovanna has become sick, sore, lame and disabled as a result of being exposed to mold, insect infestation and water leaks." (¶ 26). The Complaint does not allege any damage to personal property, although the Complaint seeks economic damages for restitution of rent, other expenses, and fraud damages.
Critically, the Complaint does not allege any damages from negligent construction or other "occurrence" or conduct that might be attributable to any contractors. Instead, the only conduct that the Complaint alleges, relates to Archstone's duties as landlord:
defendants were negligent and careless in failing to provide plaintiffs with a safe place to live; in failing to properly maintain apartment 803; in failing to properly remove water damage and mold and foul smelling insect spray; in failing to remove insect infestation in a timely manner; in allowing infestation by insects to exist; by failing to maintain the surrounding hallways of apartment 803 in a safe manner and free of insect infestation; by failing to properly remove mold; in causing mold of apartment 803; in causing plaintiff to be exposed to unhealthy air and mold; in failing to provide plaintiff with a habitable apartment.
(¶ 27). Because the Complaint does not allege any conduct related to construction operations, it does not implicate liability that arises out of, or was caused by the work of any subcontractors. It will not be examined with respect to each subcontractors' operations (sections III. F-G below).
5. Gedenken Complaint
The Gedenken Complaint names "ASM [sic] Roosevelt Center LLC," "Archstone Smith Operating Trust," and "Archstone Smith Communities LLC" as defendants, among others. It involves only two plaintiffs who took possession of a unit in the Archstone-Westbury complex on October 24, 2006.
The Complaint appears to allege only damages from exposure to mold and bacteria, with no allegations of property damage: "notwithstanding the obligations imposed upon the defendants to maintain safe and habitable living quarters for the plaintiffs, they failed [sic] neglected and refused to do so, allowing instead a mold condition to develop. . ." (¶ 8). Moreover, the Complaint does not allege any conduct related to construction operations, but only conduct related to Archstone's failure to inspect for and remedy mold conditions and permitting tenants to reside in mold-infested apartments: "by reason of the failure of the defendants to properly maintain the premises and to take appropriate steps to inspect for mold and to remove the mold condition when they should have known of its existence. . ." (¶ 9).Because the Complaint does not allege any occurrence or conduct related to construction operations, it does not implicate liability that arises out of, or was caused by the work of any subcontractors. It will not be examined with respect to each subcontractors' operations (section III. F-G below).
(F.) Trade Contractors' Work That Is Implicated by Tenant Actions Where the Additional Insured Endorsements Require That Liability "Arise out of Your Ongoing Operations" or Be "Caused . . . by Your Acts or Omissions" or That Insured Be "Held Liable"
The allegations in the underlying complaints, together with the "scope of work" defined in the Trade Agreements, and the reported defects in the Crewdson letter, give rise to a reasonable possibility that the insurers of several subcontractors may have to indemnify Archstone and Tocci for damages alleged in the Tenant Actions and the Archstone Action. As discussed in sections I.C, I.D, III.C.1 and III.D of this decision, the court will apply a broad "some causation" nexus requirement, and the court can rely on following to find a reasonable possibility that the tenants' damages arose out of, or were caused in whole or in part by the work of various subcontractors: allegations in the Tenant Actions regarding where water intrusion issues occurred; the trade contractors' scope of work which might relate their operations to the areas where water intrusion occurred; and defects alleged in the Crewdson letter. ( Cf. Turner Const. Co. v. Am. Manuf. Mut. Ins. Co., 485 F.Supp.2d 480, 487-89 [SDNY 2007] aff'd 341 Fed.Appx. 684 [2d Cir. 2009] [summarizing cases holding that "liability of [an additional insured] can arise from the non-negligent work of a [named insured]where [its] work is involved or implicated in the injury"], Lim v. Atlas-Gem Erectors Co., Inc., 225 AD2d 304 [1st Dept. 1996] [inferring causal nexus from trade agreements and location of injury], Travelers Indem. Co. v. Commerce Indus. Ins. Co. of Canada , 28 AD3d 914 [3d Dept. 2006] [same], Vitton Const. Co., Inc. v. Pacific Ins., Co., 110 Cal. App. 4th 762 [Cal. Ct. App. 1st Dist. 2003] [discussing minimal causal nexus needed to be inferred from location of injury and named insured's work]). There is nothing in Regal, or other decisions, to suggest that the broad "some causation" standard applied to the additional insured endorsements, is limited to the context of injuries that occur to contractors' employees during the course of construction operations. ( Cf. Regal Homes Inc. v. CNA Ins., 217 Ariz. 159, 164, 171 P.3d 610, 615 [Ariz. Ct. App. Div. 1 2007] [discussing the duty to defend with respect to similar residents' litigation arising from various construction defects], Pardee Const. Co. v. Ins. Co. of the West, 77 Cal. App. 4th 1340 [Cal. App. 4th Dist. 2000][same], Village of Brewster v. Virginia Sur. Co., Inc. , 70 AD3d 1239 [3d Dept. 2010] [discussing the duty to defend in residential litigation which identified the operations of the named insured]).
1. Adjo's Operations as Insured by QBE
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arose out of Adjo's work for Archstone and Tocci. Adjo was responsible, among other things, for: "sitework, site clearing and grubbing, earthwork, erosion/sediment control, water distribution system, sanitary sewage collection system, [and] storm drain systems. . ." (Henderson Aff., Ex. 3 "Adjo Trade Agreement at p. 1a).
As noted above, allegations in the In re Archstone complaint that water pooled in the common breeze ways during rainstorms and it would take days to drain or evaporate, reasonably implicate Adjo's work in creating the storm drainage system at the Archstone-Westbury Complex. Also, there is a reasonable possibility that allegations of water leaks occurring from doors leading off the common breeze ways, implicate Adjo's work in causing water to pool in the breeze ways during rainstorms. Moreover, the Crewdson letter reports "[a]t certain building perimeters, the site does not adequately drain away from the foundation. Water directed toward the foundation edge is generally problematic, is likely a building code violation, and contributes to the long-term water-intrusion issues." (Travelers-Shiroma Reply Aff, Ex. 6).
There is still a question of fact whether QBE provided coverage to "ASN Roosevelt," therefore this court need not examine whether there is a reasonable possibility that liability in the Hunter action arose out of Adjo's work.
2. Apro's Operations as Insured by Ohio Casualty
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions resulted from Apro's ongoing operations for Archstone and Tocci. Apro was hired to "provide vinyl siding," "provide cement fiber reinforced siding including . . . moisture barrier. . .," "provide air infiltration barrier at all exterior walls shown . . . Lap barrier with barrier installed by others at simulated stone," and "provide ice and water shield . . . including but not limited to at windows, doors, vents, inside and outside corners," among other things. (Henderson Aff., Ex. 4 "Apro Contracting Trade Agreement" at p. 1e). Various allegations, including those referring to the exterior wall product and leaks through windows and doors, undoubtedly implicate Apro's work. Moreover, the Crewdson letter indicates various defects related to the installation of the moisture barrier behind the stone product used on the exteriors of buildings.
There is still a question of fact whether Ohio Casualty provided coverage to "ASN Roosevelt," therefore this court need not examine whether there is a reasonable possibility that liability in the Hunter action resulted from Apro's ongoing operations.
3. Atlas Air Conditioning's Operations as Insured by ACE American and Zurich*
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions was caused in whole or in part by Atlas Air Conditioning's acts or omissions. Atlas Air Conditioning installed the HVAC systems used in the apartment complex. (Henderson Aff., Ex. 5 "Atlas Air Conditioning Trade Agreement"). This work included: among other things ". . . ductwork, . . . vents . . . exhausts. . ." and "[t]his subcontractor includes supply and installation of all prefabricated roof curbs, vents and caps for roof penetrations for equipment or vents incorporated in this scope" and "[i]t is the responsibility of this subcontractor to supply and install all . . . dryer vents and/or dampers. Includes all exterior hoods (vent terminals) or caps to match exterior siding. Seal penetrations through siding." ( Id. at p. 1e)
The Crewdson letter reports the forensic building expert's finding that"[e]xhaust ducktwork (for dryers, etc.) were not flashed properly and permits water to intrude behind the WRB [water-resistant barrier], which will cause deterioration." (Travelers-Shiroma Reply Aff., Ex. 6). This information known by the insurers, combined with general allegations in the In re Archstone Complaint that water entered through various cracks and crevices, creates a reasonable possibility that Atlas Air Conditioning's work contributed to the damages of the tenants.
There is still a question of fact whether ACE American and Zurich provided coverage to "ASN Roosevelt," therefore this court need not examine whether there is a reasonable possibility that liability in the Hunter action was caused in whole or in part by Atlas Air Conditioning's work.
4. Clem's Ornamental's Operations as Insured by Hartford Fire*
This court must analyze whether there is a reasonable possibility that damages in the Tenant Actions are claimed "with respect to" the operations or work of Clem's Ornamental. Clem's Ornamental performed all "aluminum fence and gates and metal fabrications work." (Henderson Aff., Ex. 6 "Clem's Ornamental Trade Agreement"). There are no allegations in the underlying complaints that indicate leaks or other issues that may have contributed to tenants' damages, from the particular areas where Clem's Ornamental worked. Further, the Crewdson letter does not report any defects from installations of metal fabrications. Therefore, Archstone has not met its burden of establishing coverage, by linking allegations in the underlying complaints or presenting evidence that was made known to Hartford Fire.
5. DaVinci's Operations as Insured by Delos Formerly Known as Sirius
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arose out of DaVinci's ongoing operations performed for Archstone and Tocci. The In re Archstone complaint specifically identifies DaVinci as a possible source of defects that led to the tenants' water-related damages. According to the Trade Agreement between itself and Tocci, DaVinci was hired to "install flashing furnished by others where shown through exterior walls" and "install exterior Vinyl Windows," among other things. (Henderson Aff., Ex. 7 "DaVinci Trade Agreement" at pp. 1f-1g). Allegations in the underlying complaints regarding leaks through the exterior windows, implicate DaVinci's work and operations.
Delos expressly named "ASN Roosevelt LLC" as an additional insured, therefore this court must consider whether Delos also owes a duty to defend "ASN Roosevelt LLC" in the Hunter non-consolidated complaint. As discussed earlier, Hunter also alleges negligent construction. The Crewdson letter, which identifies various defects in the installation of the windows, and more specific allegations in the In re Archstone consolidated complaints regarding leaks from windows, put Delos on notice that DaVinci's work had likely contributed, at least in part, to the rampant water-related problems in the Archstone Westbury complex.
6. Houston Stafford's Operations as Insured by Interstate
This court must analyze whether there is a reasonable possibility that damages alleged in the Tenant Actions arose out of Houston Stafford's work for Archstone and Tocci. Houston Stafford provided all electrical wiring and installation work. This work included: "Provide all fixtures, devices, wiring, equipment, systems and components as indicated on the plans, described in the specification and/or required to provide complete and functioning electrical systems including site light fixtures, poles and bases"; "Supply access panels (fire rated where applicable, and consistent with assemblies) necessary for the Work and coordinate installation by others"; and "All related excavation and back-fill, along with furnishing and installing site lighting conduit, cables, wires, precast or cast in place pole bases, concrete equipment pads . . . required by the Electrical Work." (Archstone-Henderson Aff., Ex. 8 "Houston Stafford Trade Agreement" at pp. 1f-1g).
The Crewdson letter reports the forensic building expert's finding that "[e]xterior lighting fixtures and other throughwall penetrations were improperly sealed, or not sealed at all. This condition permits water to intrude behind the WRB, which will cause deterioration." (Travelers-Shiroma Reply Aff., Ex. 6). Interstate disputes that it received the November 2007 notice letter, along with the attached Crewdson letter. Therefore, factual questions remain whether the defects reported in the Crewdson letter and other defects found by forensic building experts were communicated to Interstate and when Interstate learned of these defects.
7. Knight Waterproofing's Operations as Insured by Scottsdale
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions may arise out of Knight Waterproofing's ongoing operations performed for Archstone and Tocci. Knight Waterproofing provided caulking and sealing of joints, including "filling of . . . the interior joint at windows to gypsum board." (Archstone-Henderson Aff., Ex. 9 "Knight Waterproofing Trade Agreement" at p. 1e). Allegations in the In re Archstone Complaint regarding leaks from crevices in the buildings and from windows reasonably implicate Knight Waterproofing's work. There is still a question of fact whether Scottsdale provided coverage to ASN Roosevelt in the Hunter action.
8. Metro Painting's Operations as Insured by American States
This court interpreted American States' unique additional insured endorsement in section III.C.3 of this decision. This court must analyze whether there is a reasonable possibility that Metro Painting may "be held liable" in any impleader action, insurance indemnity action, or otherwise, for Archstone's and Tocci's liability in the Tenant Actions. In its Trade Agreement, Metro Painting agreed to indemnify and hold harmless Tocci and Archstone "from and against all claims, damages, losses and expenses . . . arising out of, relating to, or resulting from the performance of the Work and/or Trade Contractor's operations under this Agreement." (Archstone-Henderson Aff., Ex. 11 "Metro Painting Trade Agreement" at § 7.18). Because Metro Painting may be "held liable" to Archstone or Tocci for contractual indemnity whenever Archstone's or Tocci's liability in the Tenant Actions or Archstone Action may relate in any way to Metro Painting's work, American States will owe a duty to defend Archstone or Tocci in the Tenant Actions and the Archstone Action to the extent that liability in those cases relate in any way to Metro Painting's work.
Metro Painting provided some caulking in the interior and on the exterior cladding including: "caulking of . . . windows, doorframes, and wood trim. . ." ( Id. at p. 1e). Metro Painting's work is reasonably implicated by allegations regarding leaks through various crevices in the building, including leaks around windows. Because there is a reasonable possibility, from such allegations, that Metro Painting's work relates to Archstone's or Tocci's liability in the Tenant Actions or the Archstone Action, the allegations satisfy the causal nexus required by the additional insured endorsement in the American States policies. The court need not look to the reported defects in the Crewdson letter, since Archstone and Travelers admit that the November 2007 letters sent to the AI Carriers did not include a letter to American States. There is still an issue of fact whether American States provided additional insured coverage to ASN Roosevelt in the Hunter action.
9. M.I. Concrete's Operations as Insured by Merchants Mutual
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arises out of M.I. Concrete's work performed for Archstone and Tocci. M.I. Concrete laid the concrete slab foundations and performed all concrete work for the buildings, including "water stops" and "slope breezeway and balcony slabs as shown." (Archstone-Henderson Aff., Ex. 12 "M.I. Concrete Trade Agreement" at pp. 1e-1f). Allegations in the In re Archstone Complaint regarding water pooling in the breeze ways reasonably implicate MI Concrete. Moreover, the Crewdson letter reported defects regarding "[w]ater directed toward the foundation edge. . ." which may reasonably implicate M.I. Concrete's work. A question of fact remains whether Merchants Mutual provided additional insured coverage to ASN Roosevelt in the Hunter action.
10. Mid Atlantic Stone's Operations as Insured by Erie and Pennsylvania National
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arises out of Mid Atlantic Stone's ongoing operations (under Erie's policy) or was caused in whole or in part by its work (under Pennsylvania National's policy). Mid Atlantic Stone installed the Eldorado Stone manufactured stone veneer (MSV) or "simulated stone" exterior product that was applied to most of apartment buildings in the Archstone Westbury complex. (Archstone-Henderson Aff., Ex. 13 "Mid Atlantic Stone Trade Agreement" at pp. 1a 1e). The In re Archstone complaint allegations regarding the "exterior product" installed on the apartment buildings implicates the work of Mid Atlantic Stone.
Erie expressly named "ASN Roosevelt LLC" also as an additional insured, therefore this court must consider whether Erie also owes a duty to defend "ASN Roosevelt LLC" in the Hunter non-consolidated complaints. As discussed earlier, Hunter also alleges negligent construction. The Crewdson letter identifies numerous defects surrounding the installation of the Eldorado Stone simulated stone product. These defects and the more specific allegations in the In re Archstone consolidated complaints regarding the "exterior product" on the apartment buildings, informed Erie that some of the water intrusion issues in the Archstone Westbury complex were attributable or arose out of Mid Atlantic Stone's operations. There is still a question of fact whether Pennsylvania National provided additional insured coverage to ASN Roosevelt in the Hunter action.
11. Patti Roofing's Operations as Insured by Liberty Mutual
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arose out of Patti Roofing's work. Patti Roofing installed the asphalt shingles on roofs and sheet metal flashings and trim. (Archstone-Henderson Aff., Ex. 14 "Patti Roofing Trade Agreement" at p. 1a). The Crewdson letter reported that "[w]here shed roofs interface with the MSV at stairweels, the shingles terminate in the mortar joints and are not sealed or flashed adequately." (Travelers-Shiroma Reply Aff., Ex. 6). This information, known by Liberty Mutual, indicates there is a reasonable possibility that water-related damages suffered by the tenants arose out, at least in part, out of Patti Roofing's work. There is still a question of fact whether Liberty Mutual provided additional insured coverage to ASN Roosevelt in the Hunter action.
12. Sipala Landscaping's Operations as Insured by Farm Family
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arose out of Sipala Landscaping's work. Sipala Landscaping installed the irrigation system for the apartment complex. (Archstone-Henderson Aff., Ex. 15 "Sipala Landscaping Trade Agreement" at p. 1a). No allegations in the In re Archstone consolidated complaints indicate the tenants suffered damages because water from the irrigation systems sprayed on the buildings. While the Crewdson letter notes that water from the irrigation system was expected to spray on the buildings, and may have entered through gaps in the mortar joints of the manufactured stone veneer on the exteriors of buildings, Archstone and Travelers have made no effort to explain the causal nexus which relates Sipala's operations to Archstone's and Tocci's liability in the Tenant Actions and Archstone Action. Any water spraying on the buildings from the irrigation systems, would not be a "but for" cause of water intrusion issues, since water would be expected to spray or fall on the building from rain and other sources. Rather, Sipala's situational and incidental contribution to the source of water that may have entered the buildings in the Archstone-Westbury complex, is analogous to the "situs of the accident" nexus that was rejected as sufficient causal nexus in Worth, supra. ( Regal, 15 NY3d 38-39 [distinguishing Worth on the fact that the named insured had merely built the situs of the accident]).
Farm Family expressly named "ASN Roosevelt LLC" also as an additional insured, therefore this court must consider whether Farm Family also owes a duty to defend "ASN Roosevelt LLC" in the Hunter action. There are no additional allegations in this complaint that create a reasonable possibility of coverage under Farm Family's policy to Sipala Landscaping. Archstone and Travelers have not met their burden of establishing coverage by linking allegations in these complaints to any reasonable possibility of coverage.
13. Stat Fire Suppression's Operations as Insured by Everest
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions arose out of Stat Fire Suppression's work. State Fire Suppression installed the fire sprinkler systems in the apartment complex. (Archstone-Henderson Aff., Ex. 16 "Stat Fire Suppression Trade Agreement" at p. 1a). No allegations in the underlying complaints implicate any failure or leaks from sprinkler systems, and the Crewdson letter raised no defects regarding the sprinkler systems such that Everest would know of additional facts that indicate a reasonable possibility of coverage for Archstone and Tocci. Archstone and Travelers have not met their burden of establishing coverage by linking allegations in these complaints to any reasonable possibility of coverage.
14. Superseal's Operations as Insured by Hartford Fire*
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions is claimed "with respect to" the operations or work of Superseal. Superseal provided the vinyl windows that were used in the apartment complex. (Archstone-Henderson Aff., Ex. 17 "Superseal Purchase Order" at p. 1). The In re Archstone complaint alleges that water leaks came from windows in the exterior walls. There is a reasonable possibility that components of the windows, such as flashing, contributed to the damages that the tenants suffered. These allegations therefore reasonably implicate Superseal's windows, materials, and work. There is still a question of fact whether Hartford Fire provided additional insured coverage to ASN Roosevelt in the Hunter complaint.
15. Three B's Operations as Insured by American European
This court must analyze whether there is a reasonable possibility that liability in the Tenant Actions was caused in whole or in part by Three B's acts or omissions. Three B's was a named defendant in the Marchese complaint, which was consolidated into the In re Archstone action. Three B's installed some of the plumbing systems for the apartment complex. (Archstone-Henderson Aff., Ex. 18 p. 1a). Allegations regarding leaks from the plumbing system in the In re Archstone complaint reasonably implicate Three B's. There is still a question of fact whether American European provided additional insured coverage to ASN Roosevelt in the Hunter action.
(G.) Trade Contractors' Work That Is Implicated by Tenant Actions Where the Additional Insured Endorsements Require that Liability Be "Caused in Whole or in Part by Your Negligence" or "by Your Negligent Acts or Omissions"
This court's interpretation of the language "caused in whole or in part by your negligence" or "by your negligent acts or omissions" is discussed previously in this decision in section III.C.4.
1. Houston Stafford's and Patti Roofing's Operations as Insured by Continental Casualty
This court must analyze whether there is a reasonable possibility that Archstone's or Tocci's liability in the Tenant Actions is due to Houston Stafford's or Patti Roofing's negligence resulting from their work for Archstone or Tocci. In other words, the court must analyze whether Archstone's or Tocci's liability in the Tenant Actions was, at least in part, imputed negligence from Houston Stafford's or Patti Roofing's actual negligence. The Tenant Actions do not allege that either Houston Stafford or Patti Roofing was negligent in the course of working for Archstone and Tocci, and Archstone or Tocci are liable for such negligence. Neither does the Crewdson letter contain evidence that Archstone's potential liability in negligence is due to Patti Roofing's or Houston Stafford's own negligent conduct or dereliction of legal duty. Because negligence is a very specific concept of fault in the law of torts, measured by comparison to a legal duty and a standard of care, the possibility of a construction defect alone, regardless of fault or relation to harm, does not implicate negligence. Archstone and Tocci have not met their burden of demonstrating a reasonable possibility of coverage under Continental Casualty's policies to Houston Stafford or Patti Roofing.
2. Superseal's Operations as Insured by Liberty Mutual*
As with Continental Casualty's policies, this court must analyze whether there is a reasonable possibility that Archstone's or Tocci's liability in the Tenant Actions results from Superseal's negligent acts or omissions causing the tenants' damages. Again, because negligence is a very specific concept of fault in the law of torts, measured by comparison to a legal duty and a standard of care, the possibility of a defect alone, regardless of fault or relation to harm, does not implicate negligence. Superseal provided the vinyl windows that were used in the apartment complex. (Archstone-Henderson Aff., Ex. 17 "Superseal Purchase Order" at p. 1). Thus, Superseal's only potential involvement in allegations regarding leaks from windows, would be in supplying defective windows manufactured by others. While a product defect alone may be sufficient to recover damages from a supplier or producer in strict liability, Liberty Mutual's additional insured endorsement, which provided coverage for Superseal's " negligent acts or omissions," does not embrace strict liability. Archstone has not shown how allegations in the Tenant Actions or defects reported in the Crewdson letter lead to an inference that Superseal's actual negligence caused the tenants' damages, and such negligence was imputed to Archstone in the Tenant Actions. Archstone has not met its burden of demonstrating a reasonable possibility of coverage under Liberty Mutual's policy to Superseal.
(H.) Summary
Archstone and Travelers have sufficiently established coverage in the consolidated Tenant Actions and Archstone Action, for a duty to defend Archstone-Smith Operating Trust and Tocci, from QBE, Ohio Casualty, ACE American, Delos, Scottsdale, American States, Merchants Mutual, Erie, Pennsylvania National, Liberty Mutual's policies to Patti Roofing, and American European.
Archstone has also sufficiently established coverage in the consolidated Tenant Actions for a duty to defend Archstone Smith Operating Trust from Hartford Fire's policies to Superseal and Zurich. Archstone has sufficiently established coverage in the Hunter action for a duty to defend ASN Roosevelt Center, LLC, from Delos and Erie.
Archstone and Travelers have failed to establish coverage in any Tenant Actions or the Archstone Action, for any duty to defend from Everest, Farm Family, Hartford Fire's policies to Clem's Ornamental, Continental Casualty, and Liberty Mutual's policies to Superseal. Also, Archstone has failed to establish coverage from any Third-Party Defendant in the Gedenken and DiGiovanna actions.
A question of fact remains whether Archstone and Travelers may seek coverage for Archstone-Smith Operating Trust, ASN Roosevelt, or Tocci from Interstate. Questions of fact remain whether coverage exists for a duty to defend ASN Roosevelt in the Hunter action from QBE, Ohio Casualty, ACE American, Scottsdale, American States, Merchants Mutual, Pennsylvania National, Liberty Mutual's policies to Patti Roofing, and American European.
The court will not consider any further arguments by Everest, Farm Family, Continental Casualty, Interstate, Hartford Fire as regards its policies to Clem's Ornamental, and Liberty Mutual as regards its policies to Superseal.
IV. INTERPRETATION AND APPLICATION OF GENERAL POLICY LIMITATIONS AND EXCLUSIONS
(A.) Exclusion for Completed Operations Regarding: ACE American; American States; Delos; Erie; Merchants Mutual
A completed operations or products/completed operations hazard, is the term of art used in general commercial liability policies issued to contractors to differentiate the risk of harm after the work is complete and the contractor has surrendered control. On the other hand, the risk of harm from accidents that may occur during the contractor's work is referred to as the premises/operations hazard. ( See generally 70 NY Jur.2d Insurance § 1679, 3 Ins. Cl. D. 5th § 11:20).
ACE American's and Erie's additional insured endorsements, for example, contain the following language in their policies, excluding from coverage any damages which occur after the trade contractor's work for Archstone or Tocci has been completed:
B. With respect to the insurance afforded to these additional insureds, the following exclusions apply:
* * *
2. "Bodily injury" or "property damage" occurring after:
a. 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
b. 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.
In the context of the duty to defend, a completed operations exclusion is generally interpreted narrowly. For example, in Frontier Insulation Contr., Inc. v. Merchants Mutual Ins. Co. ( 91 NY2d 169), the duty to defend was at issue with respect to underlying asbestos litigation. The underlying litigation alleged that contractors' "negligent installation" caused their injuries. Although, logically, damages from exposure to asbestos would have occurred after the asbestos had been installed and the building occupied, the Court of Appeals held that a completed operations exclusion did not necessarily apply to all claims in the underlying litigation. The Court reasoned that claimants did not specify that their harm began only after the contractor had completed its operations and left the premises. ( Id. at 177). The doubt was resolved in favor of the insured. The AI Carriers' reference to Continental Cas. Co. v. Employers Ins. Co. of Wausau ( 60 AD3d 128 [1st Dep't 2008]) for a contrary proposition, is unavailing, since that case involved the duty to indemnify and the Court held that laches estopped the claimants from asserting negligent installation of asbestos insulation, which could have triggered the premises/operations coverage. ( Id. at 141).
Here, some AI Carriers contend that logically, no tenants would have moved into any apartments until they had been completed and any contractors had surrendered control of those units. However, much as in Frontier, supra, allegations in the Tenant Actions regarding the "negligence of the Defendants and/or said Defendant's agents, servants, employees and/or licensees in the . . . construction . . . of the aforesaid premises" (Archstone-Henderson Aff., Ex. 87 at ¶ 107), creates a doubt that is resolved in favor of the insured.
This is a stronger case than Frontier, however, for rejecting the application of the completed operations exclusion. It is plainly evident that all contractors performing operations on the Archstone-Westbury project, greatly increased their exposure to liability when tenants began to move into apartment units, even as their operations continued; that is, any injury by a tenant related to their construction operations would be a tort liability risk, rather than merely contractual or warranty-related liability . Of those AI Carriers contending for application of their completed operations exclusions, American States appears to have insured the earliest of the trade contractors, Metro Painting, to have completed its operations or have abandoned the construction site, by May 31, 2005. However, the In re Archstone Complaint alleges that tenants began moving into the Archstone Westbury complex no later than May 2005, while Metro Painting was admittedly still performing operations on the project:
Plaintiffs Steve Randall and Joyce Randall (the "Randalls") are former tenants of the Archstone Complex and resided there in Unit 216 from May 2005 until January 2008. . .
(Archstone-Henderson Aff., Ex. 87 at ¶ 5). Moreover, the Tenant Actions were class actions, and some class representatives do not identify their move-in dates. This court therefore cannot conclude that there is no reasonable possibility that some tenant began to suffer injury or property damage before Metro Painting abandoned the construction site. Faced with similar facts, the Appellate Division, First Department held that a contractor's presence on the site, even if the particular work from which the claimant had been injured had been completed, created a doubt in the application of the completed operations exclusion that was resolved in favor of the insured. ( Perez v. NYC Housing Auth., 302 AD2d 222 [1st Dept. 2003]).In other words, even if some particular apartment unit had been completed and surrendered, there is a distinct possibility that wrap-up work and testing might still be performed on such apartment units. Finally, insurers must defend whenever the four corners of the underlying complaint state allegations within the scope of coverage, regardless of any patent lack of merit: "If, liberally construed, the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, false or baseless the suit may be." ( Auto Ins. Co. of Hartford v. Cook , 7 NY3d 131 , 137). In this regard, the AI Carriers who exclude coverage for completed operations, cannot escape the fact that the underlying consolidated complaints allege that damages occurred beginning in 2003:
That on, about and between February 10, 2003 and continuing to and through November 2007, certain of the Plaintiffs and all members of the Personal Injury Subclass sustained serious and permanent injuries as a result of breathing, inhaling, being subjected to, and living in an environment infested with mildew, mold, bacteria and other contaminants.
(Archstone-Henderson Aff., Ex. 87 at ¶ 100). Similarly, the Hunter complaint alleges broadly:
6. That at all relevant times, the Defendant ARCHSTONE WESTBURY, its agents, servants, representatives and/or employees, constructed and built the Archstone Complex.
7. At all relevant times, Plaintiffs*** were tenants of ARCHSTONE WESTBURY and residents at the Archstone Complex.
* * *
9. That at all relevant times, the Archstone Complex had significant water intrusion, water damage and extensive mold infestation.
( Id., Ex. 84 at ¶¶ 6-7, 9). The AI Carriers which excluded coverage for completed operations may very well be able to prove by other evidence that their named insureds did not perform any further work on any buildings in which members of the plaintiff classes resided, since any date when units were surrendered to any and all members of the plaintiff classes. Those AI Carriers would then not owe any duty to indemnify Archstone or Tocci. However, for purposes of the duty to defend, those AI Carriers must accept as true the allegations in the complaints, and allegations regarding damages beginning in 2003 and occupation of apartment units beginning no later than May 2005, fall within the scope of coverage provided by the AI Carriers' litigation insurance.
(B.) Exclusion for Liability Assumed in Contract Regarding: American States; Pennsylvania National
Various insurance policies contain an exclusion for damages as to which the insured has liability only because of an indemnification agreement or similar assumption of liability:
This insurance does not apply to bodily injury or property damage for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.
However, this exclusion does not apply if there is another independent source of liability for such damages. ( O'Dowd v. American Sur. Co. of NY, 3 NY2d 347). These policies thus contain additional language indicating that this exclusion does not apply to liability "that the insured would have in the absence of the contract agreement." The Archstone Action involves claims for both, contractual and common law indemnification in connection with the Tenant Actions. Because common law indemnification is liability that Tocci "would have in the absence of the contract agreement" for contractual indemnity, there is a reasonable possibility of coverage for those indemnification claims.
Various AI carriers also rely on this language to contend that their policies expressly and unambiguously exclude purely contractual damages. In the context of the duty to defend, the Appellate Division, First Department, rejected the contention that this language excluded from coverage purely contractual damages. ( Hotel Des Artistes, Inc v. General Accident Ins. Co. of Am. , 9 AD3d 181 [1st Dep't 2004]). The Court reasoned that the insurer's interpretation was contrary to the provision's plain meaning, since "nothing in the coverage terms of the policy even implies a distinction between liability acquired by contract or in tort." ( Id. at 189). Indeed, the plain meaning of the provision is to exclude from coverage the insured's voluntary assumption of another's liability, such as by an indemnification agreement. It is axiomatic that contractual damages occur only upon breach of contract, and therefore there is no liability for such damages upon the signing of a contract, before they occur.
(C) Tort Injury Limitation on "Occurrence"; Work/Product Exclusion; and Premises Hazard (or "Damage to Property") Exclusion
Regarding: American European; American States; Delos; Erie; Liberty Mutual; Merchants Mutual; Ohio Casualty; Pennsylvania National; QBE; Scottsdale; Hartford Fire*
Various insurers argue that their policies exclude purely contractual damages from coverage, because the requirement of an "occurrence" is not satisfied. This argument is essentially an alternative manifestation of the work/product exclusion in many general commercial liability insurance policies, and the language should not be read to broaden that exclusion beyond its plain meaning. ( See Hotel Des Artistes, 9 AD3d at 189-191).
Insurers point to language in their policies that indicates that a covered "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The Appellate Division, First Department examined this language in George A. Fuller Co. v. United States Fid. Guar. Co. ( 200 AD2d 255, 259 [1st Dep't 1994]):
The [underlying] complaint does not allege an "occurrence" resulting in "property damage" as contemplated by the comprehensive general liability policy . . . The asserted claims arise out of a contract dispute between the insured, a general contractor, and Epurio, the property owner. . .[The contractor's] policy, however, does not insure against faulty workmanship in the work product itself but rather faulty workmanship in the work product which creates a legal liability by causing bodily injury or property damage to something other than the work product. The Court then reasoned that the claimant had only alleged economic damages, such as repair and reconstruction costs and diminution in property value, and that such allegations do not involve an accident or continuous exposure to a harmful condition, such as would represent an "occurrence." Because damage only to the work or product itself was alleged, stand-alone allegations of negligent installation or supervision (which, it is worth noting, would collapse into contractual or warranty causes of action under the economic loss doctrine), did not transform the nature of the exclusively contractual or warranty claims.
Subsequent decisions have adopted this holding and have more broadly concluded in dicta that general commercial liability policies, as a rule, provide coverage only for damages arising in tort and exclude purely contractual or warranty damages. ( See, e.g., Hartford Acc. Indem. Co. v. A.P. Reale Sons, Inc., 228 AD2d 935 [3d Dep't 1996], Pavarini Constr. Co., Inc. v. Continental Ins. Co., 304 AD2d 501 [1st Dep't 2003]). However, because each insurance policy is an agreement between the parties, it must be interpreted in accordance with the language of that policy. Thus, Hotel Des Artistes, supra, distinguished this line of cases to hold that there was a duty to defend for the contract damages at issue, because the specific policy at issue did not contain a work/product exclusion such as the one in Fuller, supra, or any language that would unambiguously exclude from coverage damages arising from contract. ( Hotel Des Artistes, 9 AD3d at 189-191).
Given facts such as in Hotel Des Artistes, where the parties did not bargain to acquire insurance only for damages arising in tort, it has become more advisable to apply the policy concerns articulated in Fuller, supra, in the context of the work/product exclusion. ( See, e.g., J. Lucarelli Sons, Inc. v. Mountain Valley Indem. Co. , 64 AD3d 856 [3rd Dep't 2009]). To this court's knowledge, there are no AI Carriers who are contending for the tort injury limitation imposed on "occurrence," and who do not also have a work/product (or "your work" or "damage to property") exclusion. Turning to the work/product ("your work" or "damage to property") and premises hazard ("damage to property") exclusions, several AI Carriers contend that language in these exclusions relieves them of any duty to defend Archstone or Tocci, because all allegations in the Tenant Actions relate to defects in their named insured's work. The work/product exclusion removes from coverage damage to "that particular part of any property that must be restored, repaired or replaced because your work was incorrectly performed on it," "property damage to your product' arising out of it or any part of it," and "property damage to your work' arising out of it or any part of it." The premises hazard exclusion removes from coverage damage to "property you own, rent, or occupy. . .," and damage to "that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the property damage arises out of those operations."
The premises hazard exclusion, as it might apply to any allegations in the Tenant Actions or the Archstone Action, is co-extensive with work/product exclusion in this case, since the products and work applied in the Archstone Westbury complex involved real property. The legal understanding and interpretation of a work/product exclusion has been explained numerous times. The fact that defective work is alleged, does not mean that the work/product exclusion applies. The exclusion applies only if the claimed damages relate only to the work or product itself, such that they make out only contractual or warranty type claims; if some defective work or product causes damage to persons or to property other than to any installed product or work performed, the exclusion does not apply. For a lucid explanation of the work/product exclusion, Insurance Claims Disputes 5th (Wint, 5 Ins. Cl. D. 5th § 11:10) quotes from Weedo v. Stone-E-Brick, Inc. ( 81 N.J. 233, 405 A.2d 788, 790-92):
The consequence of not performing well is part of every business venture; the replacement or repair of faulty goods and works is a business expense, to be borne by the insured-contractor in order to satisfy customers.
There exists another form of risk in the insured-contractor's line of work, that is, injury to people and damage to property caused by faulty workmanship . . . While it may be true that the same neglectful craftsmanship can be the cause of both a business expense of repair and a loss represented by damage to persons and property the two consequences are vastly different in relation to sharing the cost of such risks as a matter of insurance underwriting.
An illustration of this fundamental point may serve to mark the boundaries between business risks' and occurrence giving rise to insurable liability. When a craftsman applies stucco to an exterior wall of a home in a faulty manner and discoloration, peeling and chipping result, the poorly-performed work will perforce have to be replaced or repaired by the tradesman or by a surety. On the other hand, should the stucco peel and fall from the wall, and thereby cause injury to the homeowner or his neighbor standing below or to a passing automobile, an occurrence of harm arises which is the proper subject of risk-sharing as provided by the type of policy before us in this case . . . [The] injury to persons and damage to other property constitute the risks intended to be covered under the CGL.
(Accord Adler Neilson Col v. Ins. Co. of North America, 56 NY2d 540, 542, J. Lucarelli Sons, Inc. v. Mountain Valley Indem. Co. , 64 AD3d 856 [2d Dep't 2009]).
Cases which several AI Carriers cite to this court and which have held that water damage to a building involved only repair costs to the owner-cases including Nash v. Baumblit Constr. Corp. ( 72 AD3d 1037 [2d Dep't 2010]), Savik, Murray Auropa Constr. Mgmt. Co., LLC v. ITT Hartf. Ins. Group, et al. ( 26 Misc 3d 1237[A] [unreported], 2010 NY Slip Op. 50431[U] [Sup. Ct. New York Cty. 2010]), and Kvaerner Metals v. Comm. Union Ins. Co. ( 908 A.2d 888 [Pa. 2006])-are therefore distinguishable. Critically, the underlying complaints which those cases analyzed did not allege any other damages to persons or property, other than to the work or product itself. In contrast, the Tenant Actions in which Archstone seeks a duty to defend, and whose allegations pass through indemnity claims against Tocci in the Archstone Action, allege consequential damages to the tenants' personal property and health. Damage to the tenants' personal property is not damage only to the work or product itself.
(D.) Mold Exclusion
Regarding: American States; Delos; Erie; Hartford Fire*; Liberty Mutual; Ohio Casualty; Pennsylvania National; Scottsdale
Only Continental Casualty, Delos, Erie, Interstate, Liberty Mutual, Navigators, Ohio Casualty, Scottsdale, and Hartford Fire oppose or cross-move against Archstone and Travelers on the ground that their mold exclusion removes from coverage all allegations in the underlying actions. In fact, some AI Carrier policies do not exclude damages from mold, while others expressly provide coverage for damages arising from mold. As to those carriers, therefore, there is a reasonable possibility of coverage as to the tenants' alleged bodily injury related to mold exposure.
In relevant part, the AI Carriers' mold exclusions bar coverage for" bodily injury' [or] property' . . . which would not have occurred or taken place, in whole or in part, but for the . . . inhalation of, ingestion of, contact with, exposure to, existence of, or presence of any fungi' or bacteria'. . . regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage." These AI Carriers contend that all property damage and personal injury was related to mold, or concurrently to mold and water. Archstone and Travelers contend that the Tenant Actions allege damage to personal property that was not concurrently damaged by mold. Alternatively, there is a doubt as to whether tenants suffered some damage to personal property that was related only to water intrusion, and this doubt supports a reasonable possibility of coverage.
Judge Douglas P. Woodlock of the United States District Court of Massachusetts, decided that Virginia Surety's mold exclusion, with identical or similar wording to the AI Carriers' mold exclusions, did not apply to bar coverage for Tocci in the Archstone Action, because the Tenant Actions, including the In re Archstone complaint, alleged damages from water and/or mold. (Interstate-Breen Aff., Ex. L). This court agrees.
The In re Archstone complaint alleges that tenants have sustained "significant property damage and other economic damages as a result of the water damage and mold infestation present in their apartments. Such losses may include but are not limited to the costs of replacing or restoring property damaged by water and/or exposed to toxic mold. . ." (¶ 88).
(E.) QBE Policy Exclusion for "Multi Track Housing Development" Work
QBE contends that its exclusion for new construction "of any new residential single-family dwelling, townhouse, condominium, co-operative or multi-track housing development" applies to all the allegations against Archstone and Tocci. However, the court must ask, is an apartment complex consisting of multiple buildings a single-family dwelling, a townhouse, a condominium, a co-operative, or a multi-track housing development? The exclusion uses very precise terms, none of which appear to apply to rental apartment units, or complexes comprising buildings of such rental apartments. Therefore, the court cannot find that this exclusion applies to all the allegations against Archstone or Tocci.
(F.) Ohio Casualty's Exclusion for EIFS Work
Ohio Casualty contends that its exclusion for work involving Exterior Insulation Finish System (EIFS) applies to all the allegations against Archstone or Tocci. An EIFS system, however, is a unique, identifiable product, and thus the phrase does not apply in general to all exterior veneers or sidings applied onto buildings. Neither does the exclusion's definition embrace all exterior veneers or sidings applied onto buildings. The record reveals that the Archstone complex used only vinyl siding and a manufactured stone veneer, not an EIFS system. The exclusion does not apply to all the allegations against Archstone or Tocci.
CONCLUSION
In accordance with this decision, this court grants in part Archstone's motion (seq. no. 20) for partial summary judgment, denies it in part, and grants in part Travelers' motion (seq. no. 21) for partial summary judgment and denies it in part. This court also grants Federated Mutual's cross-motion (seq. no. 23) for summary judgment, Continental Casualty's cross-motion (seq. no. 33) for summary judgment, Farm Family's cross-motion (seq. no. 35) for summary judgment, and Everest's cross-motion (seq. no. 31) for summary judgment. This court grants in part Hartford Fire's cross-motion (seq. no. 25) for summary judgment and denies it in part. All other cross-motions are granted in part as to Archstone, only as regards a duty to defend in the DiGiovanna and Gedenken non-consolidated actions, and otherwise those cross-motions are denied as to Archstone and denied in whole as to Travelers.
The court further grants a partial declaration of the legal rights and obligations of all parties as follows:
Archstone and Travelers have sufficiently established coverage in the consolidated Tenant Actions and Archstone Action, for a duty to defend Archstone-Smith Operating Trust and Tocci, from QBE, Ohio Casualty, ACE American, Delos, Scottsdale, American States, Merchants Mutual, Erie, Pennsylvania National, Liberty Mutual's policies to Patti Roofing, and American European.
Archstone has also sufficiently established coverage in the consolidated Tenant Actions for a duty to defend Archstone-Smith Operating Trust from Hartford Fire's policies to Superseal and Zurich. Archstone has sufficiently established coverage in the Hunter action for a duty to defend ASN Roosevelt Center, LLC, from Delos and Erie.
Archstone and Travelers have failed to establish coverage in any Tenant Actions or the Archstone Action, for any duty to defend from Everest, Hartford Fire's policies to Clem's Ornamental, Continental Casualty, Farm Family, Liberty Mutual's policies to Superseal, and Navigators.
Archstone has failed to establish coverage in any Tenant Actions from Federated Mutual. Also, Archstone has failed to establish coverage from any Third-Party Defendant in the Gedenken and DiGiovanna actions.
A question of fact remains whether Archstone and Travelers may seek coverage for Archstone-Smith Operating Trust, ASN Roosevelt Center LLC, or Tocci from Interstate. Questions of fact remain whether coverage exists for a duty to defend ASN Roosevelt Center LLC in the Hunter action from QBE, Ohio Casualty, ACE American, Scottsdale, American States, Merchants Mutual, Pennsylvania National, Liberty Mutual's policies to Patti Roofing, and American European.
Finally, the court notes it did not address arguments regarding pre-tender defense costs, since the issue of allocation of defense costs is premature at this stage, and Archstone and Travelers did not move for a determination and allocation of past and continuing defense costs. Similarly, no judgment amount is awarded at this time on Archstone's breach of contract claims for the Second Third-Party Defendant's failure to defend, as issues regarding the allocation of defense costs and Archstone's actual damages from the Second Third-Party Defendants' failure to defend, were reserved and not argued on the present motions.
Enter partial judgment in accordance with this decision. So ordered.