Opinion
No. 03 Civ. 6575 (DLC).
July 9, 2004
Marshall T. Potashner, Esq., Darin S. Billig, Esq., Jaffe Asher LLP, New York, New York, for the Plaintiff.
Christopher T. Bradley, Esq., Kenneth Horenstein, Esq. Marshall, Conway Wright, P.C., New York, New York, for the Defendant.
OPINION AND ORDER
This insurance coverage dispute arises out of a personal injury lawsuit pending in the New York Supreme Court, Abidin Kandic v. 75 West Ltd., et al., Index Number 112833/02 (the "Underlying Action"). Discovery having been completed in this federal diversity action on February 27, 2004, plaintiff Employers Insurance Company of Wausau ("Wausau") now moves for an order pursuant to Rule 56(a), Fed.R.Civ.P., declaring that (1) defendant General Star National Insurance Company ("General Star") has a duty to defend and indemnify 75 West, Ltd., 75 West Construction Corp. ("75 West Construction"), and Leonard Wilf (collectively, the "75 West Entities") for the Underlying Action; (2) declaring that General Star's coverage of the 75 West Entities is primary and that the insurance coverage provided by Wausau to the 75 West Entities is excess over General Star's coverage; and (3) awarding damages in the amount of $27,727.16 to Wausau for legal fees and costs incurred in its defense of the 75 West Entities in the Underlying Action for the period from August 6, 2002 to March 17, 2004. For the reasons stated below, the motion is granted in part.
Background
The following facts are undisputed. In or about June 2002, Abidin Kandic ("Kandic") commenced the Underlying Action against the 75 West Entities in New York State court, alleging that he sustained "bodily injury" as a result of a June 15, 1999 fall down a staircase at 110 Washington Street in New York (the "Job Site"). At the time of the accident, Kandic was employed by RJ Construction Corp. ("RJ"), a subcontractor hired by 75 West Construction to perform carpentry work at the Job Site. According to the terms of the subcontract agreement pursuant to which RJ was performing work at the Job Site ("the Subcontract"), RJ agreed to provide workers' compensation, employers' liability, and comprehensive general liability insurance, and to name the "Owner/Contractor" as an additional insured. The "Owner/Contractor" is a defined term in the Subcontract and refers to 75 West Construction. The Subcontract provided, in relevant part:
Relying on a schedule of insureds attached to its own policy, and arguments about the parties' intent, Wausau contends that General Star has a duty to defend and indemnify the 75 West Entities in the Underlying Action. The Subcontract, however, provides that only the Owner/Contractor (i.e., 75 West Construction) is an additional insured under the General Star Policy. This Opinion will determine General Star's obligations under its policy only insofar as they apply to 75 West Construction.
Prior to the start of the Subcontractor's Work, the Subcontractor shall procure for the Subcontractor's Work and maintain in force Worker's Compensation Insurance, Employer's Liability Insurance, Comprehensive General Liability Insurance and all insurance required of the Owner/Contractor and the Contract Documents, attached hereto, . . .
The Owner/Contractor shall be named as an additional insured on each of these policies except for Worker's Compensation.The General Star Policy
Pursuant to the Subcontract, RJ obtained the necessary insurance coverage for itself and 75 West Construction from General Star (the "General Star Policy"). The General Star Policy, which ran from January 1, 1999 to January 1, 2000, provides in pertinent part:
We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies. We will have the right and duty to defend the insured against any `suit' seeking those damages even if the allegations of the `suit' are groundless, false or fraudulent.
(Emphasis supplied.) Under the policy, "bodily injury" is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time."
The General Star Policy defines who is an insured under the policy in a clause entitled "Additional Insured — Blanket Form." The clause provides that the policy will cover:
any person or organization whom you have agreed, by written contract prior to an `occurrence' or offense, to include as additional insured, but only for liability arising out of your premises and operations and not for liability arising out of the sole negligence of the aforementioned person or organization.
(Emphasis supplied.) General Star does not dispute that, pursuant to the Subcontract, 75 West Construction is an additional insured under its policy. The General Star Policy contains an "other insurance" clause that reads as follows:
a. Primary Insurance
This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share [pro rata] with that other insurance. . . .
Clause (b) of the General Star Policy's "other insurance" provision does not apply to the facts in this case.
Clause (b) of the General Star Policy's "other insurance" provision does not apply to the facts in this case.
(Emphasis supplied.)
The Wausau Policy
For the period during which Kandic's injuries were sustained, 75 West Construction was also insured by Wausau (the "Wausau Policy"). The Wausau Policy's "other insurance" clause provides that it is "excess" over:
Wausau issued to the 75 West Entities, including 75 West Construction, a policy which ran from May 15, 1998 to May 15, 2000.
Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.
When this insurance is excess, we will have no duty . . . to defend the insured against any `suit' if any other insurer has a duty to defend the insured against that `suit.' If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.
(Emphasis supplied.)
On or about June 28, 2002, Wausau received notice from 75 West Construction of the Underlying Action. By letter dated the same day, Wausau accepted its defense for the Underlying Action. On August 1, on behalf of 75 West Construction, Wausau tendered the defense and indemnification for the Underlying Action to General Star. General Star received Wausau's tender letter on August 6. In a facsimile dated August 9, General Star represented that "[b]ased on the limited information we have been provided to date, we will handle this matter under a complete reservation of rights." On September 11, General Star sent Wausau a facsimile stating that the "investigation is ongoing and consideration to [the] prior tender is still being evaluated." Wausau did not receive any further communication from General Star regarding the tender.
Wausau appointed the law firm of Robin, Schepp, Yuhas, Doman Harris to defend the 75 West Entities in the Underlying Action.
By letter dated April 7, 2003, Wausau again requested that General Star provide 75 West Construction with a defense and indemnification for the Underlying Action. Wausau repeated its request in a letter dated July 29. According to Wausau, despite these requests, General Star "has failed and refused to defend and indemnify" 75 West Construction for the claims alleged in the Underlying Action.
Wausau has been providing the 75 West Entities, including 75 West Construction, with a defense in the Underlying Action since June 28, 2002. Wausau asserts that it has incurred $27,727.16 in "necessary and reasonable" legal fees and costs between August 6, 2002, the date General Star received Wausau's first tender letter, to March 17, 2004. Wausau seeks to be reimbursed for this amount by General Star. It also seeks declaratory judgments that General Star has a duty to defend and indemnify 75 West Construction for the Underlying Action, and that General Star's coverage of 75 West Construction is primary and that the insurance coverage provided by Wausau is excess over General Star's coverage.
Discussion
Summary judgment may not be granted unless the submissions of the parties taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the Court must view all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial," and cannot rest on the "mere allegations or denials" of his pleadings. Rule 56(e), Fed.R.Civ.P.; accord Burt Rigid Box, Inc. v. Travelers Property Cas. Corp., 302 F.3d 83, 91 (2d Cir. 2002).
A. General Star's Duty to Defend and Indemnify
General Star contends that any determination of whether it has a duty to defend and indemnify 75 West Construction should be stayed pending the outcome of the Underlying Action. According to General Star, until it is determined whether Kandic's injuries were the result of 75 West Construction's "sole negligence," it is impossible to know whether 75 West Construction can recover under the General Star Policy.
Under New York law, "an insurer's duty to defend is `exceedingly broad' and is separate from and more expansive than the duty to indemnify." Commercial Union Assurance Co., PLC v. Oak Park Marina, Inc., 198 F.3d 55, 59 (2d Cir. 1999) (citation omitted); see also International Business Machines Corp. v. Liberty Mut. Fire Ins. Co., 303 F.3d 419, 424 (2d Cir. 2002) ("IBM Corp."). "[A] liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence, even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered." IBM Corp., 303 F.3d at 427 (citation omitted); see also Ogden Corp. v. Travelers Indemnity Co., 924 F.2d 39, 41 (2d Cir. 1991); Incorporated Village of Cedarhurst v. Hanover Ins. Co., 89 N.Y.2d 293, 298 (N.Y. 1996). In other words, the duty to defend exists unless "there is no legal or factual basis in the complaint upon which the insurer might eventually have to indemnify the insured." McCostis v. Home Ins. Co. of Indiana, 31 F.3d 110, 112 (2d Cir. 1994). See also Commercial Union, 198 F.3d at 59. An insurer seeking to avoid the duty to defend bears a "heavy burden." Avondale Industries, Inc. v. Travelers Indem. Co., 887 F.2d 1200, 1204 (2d Cir. 1989). Accordingly, General Star can be excused from its duty to defend "only if it can be determined as a matter of law that there is no possible basis in law or fact upon which [it] might be held to indemnify" 75 West Construction. Id. at 1205.
There is no dispute that New York law governs this action.
The complaint in the Underlying Action alleges that Kandic suffered "bodily injury" while working for RJ at the Job Site pursuant to its Subcontract with 75 West Construction. The allegations in the complaint do not preclude a finding at trial that Kandic's injuries were caused by the contributory negligence of others, such as RJ, or Kandic himself. Thus, there is a possibility in the Underlying Action that 75 West Construction will be found liable based on something other than its sole negligence. Accordingly, the complaint in the Underlying Action raises the possibility of coverage sufficient to trigger General Star's duty to defend 75 West Construction.
According to the complaint in the Underlying Action, 75 West Construction failed to, among other things, ensure that the stairwell was free of dirt, debris and other refuse, and that the stairwell was properly illuminated.
It is premature, however, to decide whether General Star has a duty to indemnify 75 West Construction. The General Star Policy provides that it will not indemnify an additional insured for an injury caused by its sole negligence. A trial in the Underlying Action will resolve this issue.
B. Primary or Excess Coverage
General Star contends that it is obligated to provide concurrent, not sole, primary coverage to 75 West Construction. It argues that, as a co-primary insurer, it is responsible for at most half of the legal fees incurred by Wausau in defending the Underlying Action.
Where an insured's defense is covered by two separate policies, "the `other insurance' provisions in the several policies determine the insurers' respective obligations." IBM Corp., 303 F.3d at 429 (citing State Farm Fire Cas. Co. v. LiMauro, 65 N.Y.2d 369, 372 (1985)). If one insurer's "other insurance" provision has a pro rata clause and the other an excess clause, the insurer with the pro rata clause "becomes the primary insurer and the insurer with the excess clause . . . is required to provide coverage only when the primary insurance has been fully exhausted." IBM Corp., 303 F.3d at 429 (citation omitted). See also Tishman Const. Corp. of New York v. American Mfrs. Mut. Ins. Co., 757 N.Y.S.2d 535, 537 (1st Dep't 2003).
The General Star Policy's "other insurance" clause establishes General Star as the primary insurer "unless the other insurer is also primary." If the other insurer is also primary, General Star will share the defense and indemnification costs with the other insurer on a pro rata basis. In contrast, the Wausau Policy's "other insurance" clause explicitly provides that its obligation is "excess" over "any other primary insurance" for which the insured has been added as an additional insured. There is no conflict between the two "other insurance" clauses in the two policies as they apply to 75 West Construction. Taken together, they unambiguously provide that General Star is the primary insurer of 75 West Construction and Wausau is the excess insurer. The obligation to pay for the defense, therefore, rests solely on General Star up to and until 75 West Construction's coverage under the policy is exhausted.
The scope of General Star's liability will also apply to the issue of indemnity once a determination of negligence in the Underlying Action has occurred.
C. Legal Fees
Wausau seeks damages from General Star in the amount of $27,727.16, the amount of legal fees and costs it has incurred in defending the Underlying Action through March 17, 2004. General Star requests an evidentiary hearing on the reasonableness and propriety of the fees incurred by Wausau, arguing that, because the Underlying Action is against the 75 West Entities, it is impossible to determine the fees incurred on behalf of 75 West Construction alone. General Star also challenges as insufficient the attorney time records submitted by Wausau in connection with its damages claim, calling them "computer generated summaries of bills it purportedly paid."
General Star does not show that there are genuine disputed issues of fact with respect to the reasonableness and necessity of the fees incurred by Wausau in defending the Underlying Action. General Star does not argue that the attorney time records submitted by Wausau in support of its request for damages are not of the type normally kept by law firms, or point to any evidence uncovered in discovery that creates an issue of fact requiring a hearing. The computer-generated printouts are contemporaneous records organized by date, attorney, type of work, hours billed, and fees charged. Wausau's records are sufficiently detailed to show the manner in which the legal fees were incurred, and the amount requested appears to be reasonable.
General Star also fails to raise a question of fact as to whether the fees associated with defending 75 West Construction individually in the Underlying Action would be lower than defending the 75 West Entities as a whole. Despite having an opportunity for discovery, General Star makes only conclusory statements in support of its argument, and does not point to any work done on behalf of defending the 75 West Entities that would be unnecessary or unreasonable in the defense of 75 West Construction.
To the extent that General Star's request for a hearing on the fees incurred by Wausau is one to reopen discovery, that request is denied. Discovery should not be extended when the party opposing summary judgment has had a "fully adequate opportunity for discovery." Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989); see also Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 927 (2d Cir. 1985) (denying plaintiff's request to reopen discovery when it had "ample time in which to pursue the discovery that it now claims is essential"). To reopen discovery at this stage in the litigation would cause substantial prejudice to the plaintiff.
General Star's opposition also fails to meet the requirements of Rule 56(f), Fed.R.Civ.P. A party opposing summary judgment will not be entitled to further discovery unless he submits an affidavit explaining:
1) the nature of the uncompleted discovery, i.e., what facts are sought and how they are to be obtained; and 2) how those facts are reasonably expected to create a genuine issue of material fact; and 3) what efforts the affiant has made to obtain those facts; and 4) why those efforts were unsuccessful.Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 926 (2d Cir. 1985). See also Kulkarni v. City University of New York, No. 01 Civ. 10628 (DLC), 2003 WL 23319, *4 (S.D.N.Y. Jan. 3, 2003). General Star has failed to submit such an affidavit, or indeed, any affidavit. It also did not make any specific statements in its submissions that might meet any of the Burlington factors. Accordingly, General Star is obligated to reimburse Wausau for the total amount of legal fees it incurred in defending the Underlying Action from August 6, 2002 to March 17, 2004.
Conclusion
For the reasons stated above, the plaintiff's motion for summary judgment is granted in part.
SO ORDERED.