Opinion
Index 500467/15
02-23-2017
EVEREST NATIONAL INSURANCE COMPANY, JC REALTY DEVELOPMENT CORP., AND NEIGHBORHOOD PARTNERSHIP HOUSING DEVELOPMENT FUND COMPANY, Plaintiffs, v. ILLINOIS UNION INSURANCE COMPANY, MECCA CONTRACTING, INC., SCOTTSDALE INSURANCE COMPANY AND SALCORA CONSTRUCTION CORP., Defendants.
Unpublished Opinion
HON. EDGAR G. WALKER, J.S.C.
The following e-filed papers read herein:
Papers Numbered
Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed __________
34, 36-51, 57-64, 99-101
Opposing Affidavits (Affirmations) __________
54, 69-72, 74-83, 103-114
Reply Affidavits (Affirmations)__________
90-91, 115
__________Affidavit (Affirmation) __________
Memoranda of Law __________
35, 84, 86-89 95
Upon the foregoing papers, in this declaratory judgment action by plaintiffs Everest National Insurance Company (Everest), JC Realty Development Corp. (JC Realty), and Neighborhood Partnership Housing Development Fund Company (NPHDF) (collectively, plaintiffs) against defendants Illinois Union Insurance Company (ILU), Mecca Contracting, Inc. (Mecca), Scottsdale Insurance Company (Scottsdale), and Salcora Construction Corp. (Salcora), plaintiffs move, under motion sequence number one, for an order, pursuant to CPLR 3212, granting them partial summary judgment in their favor with respect to their claim as to a duty to defend. Scottsdale cross-moves, under motion sequence number two, for an order: (1) pursuant to CPLR 3124, 3126, and/or CPLR 3120, striking plaintiffs' complaint and/or compelling plaintiffs to respond to its outstanding discovery demands, and (2) pursuant to CPLR 603, severing the insurance coverage claims against it from the contractual claims against the remaining defendants for both discovery and trial. Plaintiffs additionally move, under motion sequence number three, for an order vacating the CPLR 3214 (b) automatic stay of disclosure triggered by their service of their motion for partial summary judgment and compelling Scottsdale to respond to their April 7, 2016 discovery demands.
FACTS AND PROCEDURAL BACKGROUND
JC Realty was the owner of premises located at 49 Wilson Avenue, in Brooklyn, New York, and the manager/developer of a construction project on these premises. NPHDF was the sponsor of the construction project. Mecca was the general contractor for the construction project, pursuant to a contract dated June 29, 2007, entered into between it and JC Realty and NPHDF (the prime contract). Pursuant to a subcontract dated August 16, 2007 (the subcontract), Mecca hired Salcora as a subcontractor for the construction project to completely renovate the building on the premises. Salcora, in turn, entered into a sub-subcontract dated December 15, 2008, wherein it hired Odys General Construction (Odys), as a sub-subcontractor, to complete the siding work on the building for the construction project.
Section 7.8 of the prime contract provided that Mecca "assume[d] sole responsibility for appropriate safety measures with respect to the execution of the [w]ork and sole responsibility for the safety of all persons with respect to the performance of the work." Section 7.9 of the prime contract further provided that the presence of JC Realty at the work site did "not relieve [Mecca] of its obligations to supervise and monitor the [w]ork."
Section 10.1 of the prime contract made Mecca "responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the [prime c]ontract." Under section 10.2.1 of the prime contract, Mecca was required to "take reasonable precautions for [the] safety of, and [to] provide reasonable protection to prevent damage, injury or loss to ... employees on the [w]ork." In addition, section 10.2.12 of the prime contract specifically required Mecca to "at all times exercise all necessary precautions for the safety . . . of the employees on the work."
Under section 3.3 of the prime contract, Mecca agreed that it would supervise and direct the work and that it would be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the work. Section 3.3.2 of the prime contract required Mecca to be responsible to JC Realty for the acts and omissions of its employees, subcontractors (including Salcora), and its subcontractors' agents (including Odys) and employees. Under section 5.3.1 of the prime contract, Mecca agreed to require Salcora to be bound to it by the terms of the prime contact and to assume toward it all of the obligations and responsibilities which it assumed toward JC Realty.
Section 3.18 of the prime contract contained a broad indemnification clause requiring Mecca to indemnify and hold harmless JC Realty and NPHDF against all claims, causes of action, or costs and expenses, including attorneys' fees, arising out of any act, omission or negligence, whether real or alleged, of Mecca, Salcora, or Odys during the performance of the prime contract, regardless of whether or not such claim, demand, loss or expenses was caused in part by JC Realty and NPHDF, excepting only the gross negligence of JC Realty. This indemnification clause expressly provided that Mecca, "at its own expense, shall defend the Indemnified Parties [i.e., JC Realty and NPHDF] in court," and that "[n]o provision requiring the furnishing of insurance shall be construed to affect, impair, or excuse [Mecca's] obligation to indemnify and save [harmless] the Indemnified Parties [i.e., JC Realty and NPHDF]."
Section 11.1 of the prime contract required Mecca to purchase and maintain insurance to protect it from claims arising out of its operations under the prime contract, including operations by Salcora and Odys. Such insurance was to cover claims for damages due to bodily injury, and indemnification of JC Realty and NPHDF from and against all claims in connection with Mecca's obligations under section 3.18. Section 11.1.4 of the prime contract required Mecca to obtain a liability insurance policy that named JC Realty and NPHDF as additional named insureds. Section 11.1.4.2 of the prime contract provided that such insurance coverage was to apply on a primary basis for JC Realty and NPHDF and that any insurance maintained by JC Realty and NPHDF was to be in excess of Mecca's insurance and would not contribute with it.
Mecca obtained a commercial general liability insurance policy issued by ILU for the policy period from January 24, 2008 to January 24, 2009 (the ILU policy), under which Mecca was the named insured. The ILU policy contained an additional insured endorsement, which provided as follows:
"A. Section II - Who Is an Insured is amended to include as an additional insured the person(s) or organizations(s) shown in the Schedule (which states '[a]s required by written contract signed by both parties prior to loss'], but 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 the performance of your ongoing operations for the additional insured(s) at the location(s) designated above."
Under Section V - Definitions of the ILU policy, "insured contract" is defined, in subdivision (9) (f), as:
"That part of any other contract or agreement in your business ... under which you assume the tort liability of another party to pay for 'bodily injury' or 'property damage' to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement."
In addition, JC Realty and NPHDF were designated as additional insureds under the ILU policy on separate certificates of insurance dated January 28, 2008.
As to the subcontract between Mecca and Salcora, in section 1.1 of article 1, entitled "The Subcontract Documents," it incorporated the prime contract between JC Realty and NPHDF and Mecca by providing as follows:
"The Subcontract Documents consist of: (1) this Agreement; (2) the Prime Contract, consisting of the Agreement between [JC Realty] and [Mecca] and other Contract Documents enumerated therein; (3) Modifications issued subsequent to the execution of the Agreement between [JC Realty] and [Mecca], whether before or after the execution of this Agreement; (4) other documents listed in Article 16 of this Agreement; and (5) Modifications to this Subcontract issued after execution of this Agreement. These form the Subcontract, and are fully a part of the Subcontract as if attached to this Agreement or repeated herein. The Subcontract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Subcontract Documents, other than modifications issued subsequent to the execution of this Agreement, appears in Article 16."
Under article 16 of the subcontract, entitled "Enumeration of Subcontract Documents," section 16.1.2 specifically enumerated the subcontract documents as including "[f]he Prime Contract, consisting of the Agreement between [JC Realty] and [Mecca]... and the other Contract Documents enumerated in the Owner-Contractor Agreement."
Under article 2 of the subcontract, entitled "Mutual Rights and Responsibilities," in section 2.1, Salcora, to the extent that the provisions of the prime contract applied to its work, expressly assumed toward Mecca all obligations and responsibilities which Mecca assumed toward JC Realty.
Section 4.3.1 of the subcontract required that Salcora keep the job safe at all times, and that "all site workers must work safely at all times." Section 4.3.2 of the subcontract required Salcora to take reasonable safety precautions with respect to the performance of the subcontract. Section 4.3.3 required Salcora to provide safety devices for its portion of its work on the project.
The subcontract, in section 4.6.1, contained a broad indemnification clause which provided, in pertinent part, as follows:
"To the fullest extent permitted by applicable law, [Salcora] shall assume entire responsibility and liability for all damages .. . and/or injury of any nature (including death) to persons and property . . . arising out of, or in any manner relating to, its performance of work at the Project, and [Salcora] agrees to defend (if requested by [Mecca] or [JC Realty]), indemnify and hold harmless [Mecca], [JC Realty]... and others identified by [Mecca] or [JC Realty] [i.e., NPHDF], and their respective agents, servants and employees, from all demands, claims, causes of action (even though they may be groundless, false or fraudulently asserted), losses, costs and expenses, including reasonable counsel fees, arising out of, or in any manner relating to, the execution of the work at the Project, or asserted against one or more indemnitees under this paragraph, by reason of the acts or omissions of [Salcora], or of any entity directly or indirectly engaged by [Salcora, including Odys, ] in connection with the work at the Project, regardless of whether the acts or omissions complained of were caused, in whole or in part, by an indemnitee under this Article."Section 13.1 of the subcontract required Salcora, prior to the commencement of work on the project, to purchase and maintain liability insurance. This section also required such liability insurance policy to name both JC Really and NPHDF as additional named insureds by providing as follows:
"All such policies shall [name] [Mecca], [JC Realty] . . . and others (as may be named by [Mecca, who named NPHDF]) as additional named insureds and shall contain a waiver of subrogation rights against all additional named insureds."
Salcora obtained a commercial general liability insurance policy issued by Scottsdale for the policy period from August 3, 2008 to August 3, 2009 (the Scottsdale policy), under which Salcora was the named insured. The Scottsdale policy contained a blanket additional insured endorsement, which provided that it amended Section II - Who is an Insured to include as an additional insured:
"any person or organization whom [Salcora was] required to add as an additional insured on this policy under a written contract, written agreement or written permit, which [had to] be: a. Currently in effect or becoming effective during the term of the policy; and b. Executed prior to the 'bodily injury.'"
This blanket additional insured endorsement in the Scottsdale policy further provided that the additional insured coverage was limited to liability for "bodily injury," "property damage," or "personal and advertising injury" "caused in whole or in part by: a. [Salcora's] acts or omissions; or b. The acts or omissions of those acting on [Salcora's] behalf [such as Odys]."
This blanket additional insured endorsement in the Scottsdale policy also stated that coverage was not provided for "bodily injury" "arising out of the sole negligence of the additional insured." In addition, it set forth that "[a]ny coverage provided hereunder w[ould] be excess over any other valid and collectible insurance available to the additional insured whether primary, excess, contingent or on any other basis unless a written contract specifically require[d] that this insurance be primary." It further set forth that "[w]hen this insurance is excess, [Scottsdale would] have no duty under Section 1 - Coverages to defend the additional insured against any 'suit' if any other insurer ha[d] a duty to defend the additional insured against that 'suit,' but that "[i]f no other insurer defends, [Scottsdale would] undertake to do so, but [Scottdale would] be entitled to the additional insurer's rights against all those other insurers."
Section V - Definitions of the Scottsdale policy, in subdivision (9), as amended by an Amendment to Insured Contract Definition endorsement, defined "insured contract" to mean:
"That part of any other contract or agreement pertaining to your business ... under which you assume the tort liability of another party to pay for 'bodily injury' or 'property damage' to a third person or organization, provided the 'bodily injury' or 'property damage' is caused, in whole or in part, by [Salcora] or by those acting on [Salcora's] behalf. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement."JC Realty and NPHDF were also designated as additional insureds under the Scottsdale policy on separate certificates of insurance dated August 8, 2008.
On January 13, 2009, Jorge Amaya (Amaya), who was employed by Odys, while working at the construction project, was injured when a fire escape ladder fell and trapped his arm between its rungs. This accident occurred after Amaya had been directed by a supervisor from Odys to access a lower roof level by means of an extension ladder which led to the fire escape platform. At the end of the work day, when Amaya climbed the extension ladder as he had been doing throughout the course of the day, his extension ladder started to sway and he grabbed onto the fire escape platform. When he had steadied the extension ladder on which he was standing and while his hand was still on the fire escape platform, the fire escape ladder (a different ladder than the extension ladder) suddenly fell down onto his arm. The fire escape had been installed by one of Mecca's subcontractors other than Salcora.
Consequently, on September 15, 2010, Amaya commenced an action against NPHDF and Mecca, seeking to recover damages for his personal injuries (the Amaya action), in the Supreme Court, New York County, and on June 17, 2011, Amaya amended his complaint to add JC Realty as a defendant. Amaya's amended complaint in the Amaya action alleges claims of negligence and violations of the Labor Law. On February 25, 2011, Mecca filed a third-party action against Salcora, seeking contractual indemnification, common-law indemnification, and contribution.
With respect to insurance coverage for liability in connection with the construction project, JC Realty and NPHDF were named insureds under an insurance policy issued by Everest for the policy period from June 29, 2008 to June 29, 2009 (the Everest policy). Section IV - Commercial General Liability Conditions of the Everest policy provided, in subdivision (4) (b) (1) (b), that this insurance was excess over "[a]ny other primary insurance available to you covering damages arising out of the premises or operations, and the products and completed operations, for which you have been added as an additional insured by attachment of an endorsement."
JC Realty and NPHDF, asserting that they are additional insureds under the ILU policy and the Scottsdale policy, repeatedly sought defense and indemnification in connection with the Amaya action from ILU and Scottsdale, but they refused to provide any defense or indemnification to them. As a result, Everest was compelled to undertake JC Realty and NPHDF's defense, incurring legal costs and expenses. JC Realty and NPHDF also assert that Mecca, in the prime contract, and Salcora in its subcontract, had agreed to defend, indemnify, and hold them harmless, but have refused to do so.
Consequently, on January 14, 2015, plaintiffs filed this action against defendants, seeking a declaratory judgment that ILU has a duty to defend and indemnify JC Realty and NPHDF in the Amaya action pursuant to the terms of the prime contract and the ILU policy, that such obligation is on a primary basis, and that ILU has breached its obligations to defend and indemnify them. Plaintiffs also seek a declaratory judgment that Scottsdale has a duty to defend and indemnify JC Realty and NPHDF in the Amaya action pursuant to the terms of the prime contract, the subcontract, and the Scottsdale policy, that such obligation is on a primary basis, and that Scottsdale has breached its obligations to defend and indemnify them. Plaintiffs further seek a declaration that if ILU and Scottsdale do not have a duty to defend and indemnify JC Realty and NPHDF in the Amaya action, Mecca and Salcora have breached their contractual obligations by failing to procure insurance coverage in which JC Realty and NPHDF were covered as additional named insureds, and Mecca and Salcora must, therefore, provide a defense and indemnification to JC Realty and NPHDF with respect to the Amaya action. In addition, Everest seeks reimbursement of the fees and costs that it has incurred in defending JC Really and NPHDF to date. Defendants have interposed their respective answers.
On August 14, 2015, plaintiffs filed their instant motion for partial summary judgment declaring that JC Realty and NPHDF are entitled to a defense