Opinion
106628/2008.
Decided October 19, 2009.
Firm: Goldberg Associates, New York, New York, Attorney for the Plaintiff.
Firm: Jeffrey Katz, Esq., Brooklyn, NY, Attorney for the Defendant.
Firm: Jeffrey Samel Partners, New York, New York, Attorney for the Defendant.
Defendant Continental Insurance Company a/k/a Continental Casualty Company (Continental) moves for an order, pursuant to CPLR 3211, dismissing the complaint for failure to state a cause of action, or, in the alternative, for summary judgment, pursuant to CPLR 3212, against plaintiff New York University (NYU) for a declaration that it is not obligated to defend and indemnify NYU in the underlying personal injury action, entitled Michal Namatiev v New York University, Supreme Court, Queens County, Index No. 25355/05 (Namatiev Action).
NYU cross-moves for summary judgment, seeking a declaration that defendants American Building Maintenance (ABM) and Continental have a duty to defend and indemnify NYU in the Namatiev Action. NYU also moves to strike ABM's affirmative defenses.
For the reasons discussed below, Continental's motion for dismissal is denied and NYU's cross motion for summary judgment is also denied.
Facts
Continental is an insurance company licensed to transact insurance business in New York State. ABM provides janitorial services to various entities in the state of New York. On December 19, 2000, ABM and NYU executed a contract titled: "Agreement Between New York University and ABM Building Maintenance Company" whereby ABM agreed to perform janitorial services and maintenance for various NYU academic, administrative, and residential facilities (Agreement) (Exhibits E to Affirmation of David T. Kuk, dated December 1, 2008) (Kuk Aff.). Article 10 (b) of the Agreement obligated ABM to obtain a commercial general liability policy, at a minimum of $2 million per occurrence for personal injury (including mental anguish and emotional distress), bodily injury (including death) and property damage. The Agreement further provides that:
"The Contractor . . . shall indemnify and hold safe and harmless the University from and against any and all loss, expense, liability, damage or injury that the University may sustain as a result of any claim, demand, action or proceeding asserted by any third party, whether or not an employee, agent, subcontractor, representative or servant of the Contractor, that may be made or had against the University caused by, resulting from, arising out of or occurring in connection with the performance of the work or services specified in this Agreement. . . ."
"The Contractor and each subcontractor also shall assume, on behalf of the University, the defense of any action or proceeding at law or equity that may be brought against the University as aforesaid and shall pay all costs and expenses, including reasonable attorneys fees"
(Exhibit E to Kuk Aff.).
In the Namatiev Action, plaintiff Michal Namatiev claims that, on March 6, 2003, she sustained severe injuries when she slipped and/or tripped while at an NYU building located at Pless Hall, 82 Washington Square East in New York City (Premises) (Exhibits A and D to Kuk Aff.). In October 2005, NYU was served with a summons and verified complaint in the Namatiev Action. The complaint alleges that Namatiev sustained injuries as a result of NYU's negligent ownership, operation, maintenance and control of the Premises and that NYU had actual notice of this defective condition for at least 15 days prior to the incident (Exhibit D to Kuk Aff.). On February 14, 2006, NYU interposed an Answer and a demand for a bill of particulars. On February 28, 2006, Namatiev served her bill of particulars wherein she claims that NYU, its agents, servants, and/or employees:
In the present action, plaintiff's name appears as Michael Namatiev but it is listed as Michal Namatiev, a woman, in the underlying action.
"were negligent, careless, and reckless in causing, permitting and allowing the floor and stairs in the building become and remain wet and spewed with unknown substances; in failing to display any warning signs of the dangerous conditions; in failing to provide lighting, proper lighting and/or adequate lighting; in failing to place barricades and other warning devices at the place aforesaid to prevent Plaintiff and others from traversing threat"
(Exhibit D to Kuk Aff.).
By letter dated April 25, 2006, NYU tendered defense of the Namatiev Action to ABM. On June 5, 2006, after receiving no response from ABM, NYU dispatched a second letter to tender defense of the Namatiev Action, along with a copy of its first correspondence. On January 4, 2007, ABM, through its counsel Jeffrey Samel Partners, provided a letter which stated that, on behalf of its general liability carrier, ACE USA (ACE), "we hereby reserve all rights with regard to the policy's late notice' provision" (Exhibit H to Kuk Aff.). The letter further designated that "we note that your tender letter and the transmittal of a Summons and Verified Complaint filed in the office of the Kings County Clerk on November 23, 2005, represents the first notice of this claim to ABM and its carrier" (Exhibit H to Kuk Aff.). ABM informed NYU in that letter that it was conducting a factual investigation into Namatiev's claim and that it would require additional documentation and or information before going forward ( id.).
NYU waited several months for ABM to disclose the results of its factual investigation, but never received any correspondence on the matter. On May 15, 2007, NYU sent a letter to ACE tendering defense of the Namatiev Action. On February 21, 2008, after receiving no response from ABM or ACE regarding the Namatiev Action, NYU commenced this declaratory judgment action against ABM and ACE. On May 27, 2008, NYU was notified by ABM that ACE was sued in error and that the correct carrier for the aforementioned loss was Continental (Exhibit K to Kuk Aff.). Pursuant to its obligations under the Agreement, ABM purchased a general liability insurance policy from Continental, number 95963239 (Policy). The coverage was effective from November 1, 2000 to November 3, 2003. Under the Policy, ABM was the insured and NYU was named as an additional insured. On August 14, 2008, NYU filed an amended complaint to add Continental as a defendant in this action.
Discussion
Continental's motion to dismiss is denied. The allegations in the Namatiev Action state a cause of action that gives rise to a reasonable possibility of recovery under the Policy ( Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65). NYU has submitted evidence of an Agreement executed between it and ABM. There is also evidence that NYU was named as an additional insured on an insurance policy procured by ABM and issued by Continental (Exhibits G and I to Affirmation of David H. Allweiss, dated January 26, 2009).
Continental argues that it is entitled to dismissal because: (1) under Endorsement 61 of the Policy, it has no obligation to defend any insured when the value of the underlying claim fails to approach the $1 million self insured retention (SIR), and (2) NYU's claim is time-barred because NYU failed to provide timely notice of the occurrence as required under the Policy.
NYU argues that Continental is not entitled to summary judgment because: (1) it provided timely notice of the Namatiev Action, (2) Continental failed to establish that the value of the Namatiev Action cannot be greater than the SIR value, and (3) the value of damages stemming from the underlying action should be determined by the fact-finder.
Continental has failed to establish as a matter of law that it has been relieved of its duty to defend NYU in the Namatiev Action.
It is well settled that an insurer's duty to defend its insured arises whenever the allegations within the four corners of the underlying complaint potentially give rise to a covered claim, or where the insurer has actual knowledge of facts establishing a reasonable possibility of coverage ( BP A.C. Corp. v One Beacon Ins. Group , 8 NY3d 708 , 714; Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 443).
It is uncontroverted that ABM entered into a contract with NYU to perform work on and near the Premises, that ABM obtained general liability coverage pursuant to the Agreement, and in the complaint, Namatiev alleges that while on the Premises "she was caused to slip and fall and that said fall was caused by NYU, its agents, servants, employees, licensees, in the ownership, operation, management, maintenance and control of the Premises" (Exhibit A to Kuk Aff.). Namatiev further alleges that, as a result of said actions, she was "caused to sustain severe injuries, pain, shock and mental anguish" ( id.). Accordingly, these allegations put this occurrence within the coverage of the Policy (Exhibits C, G, H, and I to Allweiss Aff.).
Continental argues that the damages asserted in the Namatiev Action fail to meet the SIR requirement, and thus it is not obligated to defend NYU in said action. The relevant inquiry here is whether the allegations fall within the risk of loss undertaken by the insured, and 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 A.C. Corp. v One Beacon Ins. Group , 8 NY3d 708 , supra). An insured's right to representation and the insurer's correlative duty to defend suits, however groundless, false, or fraudulent, are in a sense litigation insurance expressly provided by the insurance contract ( Atlantic Mut. Ins. Co. v Terk Tech. Corp., 309 AD2d 22, 29 [1st Dept 2003]; Servidone Constr. Corp. v Sec. Ins. Co. Of Hartford, 64 NY2d 419, 423-24). The Policy provides that: "We will pay sums that the insured becomes legally obligated to pay as damages because of bodily harm' or property damage' to which this insurance applies" (Exhibit I to Affidavit of Marian S. Hertz, dated October 23, 2008) (Hertz Aff.). Hence, the allegations set forth in the complaint state a cause of action that gives rise to a reasonable possibility of recovery under the Policy ( BP A.C. Corp. v One Beacon Ins. Group , 8 NY3d 708 , supra).
Continental further argues that there is insufficient evidence in the record to determine whether ABM's janitorial services were the proximate cause of Namatiev's injuries. It should be noted that the duty of an insurer to provide a defense for its insured is distinct from, and far broader than its duty to indemnify ( Atlantic Mut. Ins. Co. v Terk Tech. Corp., 309 AD2d 22, supra). An insurer may be required to defend under the contract even though it may not be required to pay once the litigation has run its course ( BP A.C. Corp. v One Beacon Ins. Co of Hartford, 64 NY2d 419, supra). The duty to indemnify is determined by the actual basis for the insured's liability to a third person and does not turn on the pleadings, but rather on whether the loss, as established by the facts is covered by the policy; but an insured's duty to defend is triggered when allegations set forth in the complaint state a cause of action that gives rise to a reasonable possibility of recovery under the policy ( id. at 28-29). While the duty to defend is measured against the possibility of a recovery, the duty to pay is determined by the actual basis for the insured's liability to a third person ( Frontier Insulation Constr. v Merchants Mut. Ins. Co., 91 NY2d 169, 175-178). Given the existence of multiple issues of fact concerning the liability of ABM and NYU, the resolution of Continental's duty to defend and indemnify NYU, which in this case are inextricably woven, should await the determination of liability, if any, in the underlying personal injury action ( Vyadro v City of New York , 2 AD3d 519 , 521 [2d Dept 2003]). Following judgment or settlement in this action, the burden of proof will rest with the insurer to demonstrate that the loss compromised by the insured was not within the policy coverage( Servidone Constr. Corp v Security Ins. Co. of Hartford, 64 NY2d at 424).
Continental argues that an insurer's obligation to defend or cover its insured's loss is not triggered unless the insured gives timely notice of loss in accordance with the terms of the insurance contract ( Great Canal Realty Corp. v Seneca Ins. Co. , 5 NY3d 742, 743-44); see also Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42 [1st Dept 2002]) and that NYU has failed to do so. The notice provision in a policy is a condition precedent to coverage and, absent a valid excuse, the failure to satisfy the notice requirement vitiates the policy ( Great Canal Realty Corp., 5 NY3d 742, supra). Here, the Policy required that notice be given "as soon as practicable of an occurrence, offense, act, error or omission, or pollution incident which may result in a claim" (Exhibit J to Hertz Aff.). This standard provision in liability policies has been interpreted to require notice within a reasonable time under the circumstances ( Great Canal Realty Corp., 5 NY3d 742, supra).
The Court of Appeals has also held, however, that there may be circumstances that excuse a failure to give timely notice, such as where the insured has a "good-faith belief of non-liability," provided that the belief is reasonable ( id.). Moreover, where an excuse or explanation is offered for delay in furnishing notice, the reasonableness of the delay and the sufficiency of the excuse are matters to be determined at trial ( Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, supra). In the absence of an excuse or mitigating factor, the issue poses a legal question for the court ( id. at 43).
NYU submits that it had a good faith belief of non-liability until it received service of Namatiev's bill of particulars on February 28, 2006. Thereafter, it relied upon ABM's 2007 representation that its insurer was ACE. NYU avers that it could not provide timely notice to Continental because it did not learn that ACE was not the proper insurer until 2008, when it sought a declaratory judgment in this matter (Exhibit K to Kuk Aff.).
Although NYU has proffered an excuse for failing to provide timely notice in accordance with the Policy provisions, it has not demonstrated its entitlement to summary judgment on its cross motion. As stated above, where an excuse or explanation is offered for delay in furnishing notice, the reasonableness of the delay and the sufficiency of the excuse are matters to be determined at trial ( Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40 at 42).
Notwithstanding its failure to demonstrate its entitlement to summary judgment on its cross motion, NYU has successfully offered sufficient evidence to demonstrate a triable issue of fact in opposition to Continental's motion for summary judgment ( Zuckerman v City of New York, 49 NY2d 557). As previously discussed, given the broad nature of the duty to defend, an insurer can only be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual legal basis on which it might eventually be obligated to indemnify the insured under any policy provision ( Allstate Ins. Co. v Zuk, 78 NY2d 41, 45). Here, Continental has not established that it has been relieved of its duty to defend NYU as a matter of law. Furthermore, NYU has produced evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial ( Zuckerman v. City of New York, 49 NY2d, supra).
NYU also moves pursuant to CPLR 3211 (b) to dismiss ABM's 21 affirmative defenses.In reviewing a motion to dismiss an affirmative defense, the court must liberally construe the pleadings in favor of the party asserting the defense and give that party the benefit of every reasonable inference (Fireman's Fund Ins. Co. v Farrell , 57 AD3d 721 , 723). Moreover, if there is any doubt as to the availability of a defense, it should not be dismissed ( id.). Under the statute, a "party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit" (CPLR 3211 [b]).
ABM's first affirmative defense alleges that the cause of action asserted herein fails to state facts sufficient to constitute a claim against the answering defendant upon which relief may be granted (Exhibit G to Hertz Aff.). Courts have held that an affirmative defense of failure to state a cause of action should survive dismissal due to the fact that it is "harmless surplusage" ( D'Agostino v Harding, 217 AD2d 835, 836 [1995).
The third affirmative defense alleges that this action is barred to the extent that NYU is not insured under the policy at issue. The record demonstrates that NYU is named as an additional insured under the Policy (Exhibit K to Kuk Aff.); (Exhibits E, F, G, H, and I to Allweiss Aff.). The fifth and sixth affirmative defenses are redundant as they replicate the fourth affirmative defense. The eighth affirmative defense is identical to the seventh. The eleventh, fifteenth, sixteenth and seventeenth affirmative defenses mirror the second affirmative defense, and the thirteenth affirmative defense is exactly the same as the first. As a result, the aforementioned affirmative defenses are without merit and are stricken.
The eighteenth affirmative defense is predicated upon CPLR 3211 (a) (4) and alleges that there is another action pending among the parties. Under this statute, courts enjoy broad discretion in considering whether to dismiss an action on the ground that another is pending between the same parties ( see D'Agostino v Harding, 217 AD2d 835, 836). The record shows that the cause of action in question is a third-party complaint which seeks to obtain damages under a breach of contract theory. Accordingly, this court exercises its discretion dismissing the eighteenth affirmative defense ( id.).
The twentieth affirmative defense alleges that the indemnification agreement upon which plaintiff relies violates General Obligations Law § 5-322.1, and therefore has no force or effect.
This court rejects plaintiff's contention that the Agreement does not run afoul of General Obligations Law § 5-322.1. The statute provides that:
"[a] covenant, promise, agreement or understanding in, or in connection with . . . a contract or agreement relative to the construction, alteration, repair or maintenance of a building . . . purporting to indemnify or hold harmless the promisee against liability for damage arising out of bodily injury to persons or damage to property contributed to, caused by or resulting from the negligence of the promisee, his agents or employees, or indemnitee, whether such negligence be in whole or in part, is against public policy and is void and unenforceable."
Although an indemnification clause that purports to insulate the indemnitee from liability for its own negligence is void under General Obligations Law § 5-322.1, the statute does not apply if the indemnitee is found to have been free of negligence ( Haynes v Estate of Goldman , 62 AD3d 519 , 522 [1st Dept 2009]). Moreover, courts have held that the absence of a recitation in the clause that the obligation to indemnify is limited to what the law allows does not dictate a contrary conclusion ( id.; Crouse v Hellman Constr. Co., Inc. , 38 AD3d 477 , 478 [1st Dept 2007]).
Finally, to the extent that NYU raises any issues on its cross-claims to recover damages for an alleged breach of contract against ABM, this court notes that such issues are not properly before this court. That element of NYU's motion remains pending and undecided in a separate third-party action ( see George v Marshalls of MA, Inc. , 61 AD3d 925 , 931 [2d Dept 2009]).
Accordingly, it is
ORDERED that Continental's motion to dismiss is denied; and it is further
ORDERED that Continental's motion for summary judgment is denied; and it is further
ORDERED that New York University's motion for summary judgment is denied; and it is further
ORDERED that New York University's motion is granted to the extent that the third, fifth, sixth, eighth, eleventh, thirteenth, fifteenth, sixteenth, seventeenth, eighteenth and nineteenth affirmative defenses of defendant American Building Maintenance are stricken and dismissed.
Counsel for the parties are directed to contact the Court for a day to appear for a conference.