Opinion
21-cv-2205 (GBD) (JW)
08-15-2023
TREMONT RENAISSANCE HOUSING DEVELOPMENT FUND COMPANY, INC., TREMONT RENAISSANCE LLC, TREMONT RENAISSANCE AFFORDABLE LLC, MASTERMIND DEVELOPMENT LLC, and JOY CONSTRUCTION CORPORATION, Plaintiffs, v. LEXINGTON INSURANCE COMPANY AND INTERNATIONAL INSURANCE COMPANY OF HANNOVER SE, Defendants.
REPORT & RECOMMENDATION
JENNIFER E. WILLIS, UNITED STATES MAGISTRATE JUDGE
To the Honorable Gregory B. Daniels, United States District Judge:
On February 7, 2022, this case was referred for a Report and Recommendation on all motions, including the instant motion for summary judgment and cross-motion to dismiss. Dkt. No. 24. On October 11, 2022, Plaintiffs Tremont Renaissance Housing Development Fund Company, Inc., Tremont Renaissance LLC, Tremont Renaissance Affordable LLC, Mastermind Development LLC, and Joy Construction Corp. (“Plaintiffs”) filed a Motion for summary judgment, Dkt. No. 33 (“Motion” or “Mot.”), as well as a memorandum of law in support of their motion, Dkt. No. 35 (“Memo”), a Rule 56.1 Statement of Material Facts, Dkt. No. 36 (“Pl. SMF”), and a Declaration from Deborah Lewis. Dkt. No. 34 (“Lewis Decl.”). On March 14, 2023, Defendant Lexington Insurance Company (“Lexington”) filed a Cross-Motion to dismiss or stay the action, Dkt. No. 43 (“Cross-Motion”), as well as a supporting memorandum of law, Dkt. No. 42 (“Lex. Memo”), a response to Pl. SMF, Dkt. No. 42 Ex. 1 (“Lex. Reply SMF”), a supplemental statement of material facts, Dkt. No. 43 Ex. 2 (“Lex. SMF”) and Declarations from Julia Mann. Dkt. Nos. 44-51 (“Mann Decl.”). On March 28, 2023, Plaintiffs filed a reply memorandum of law in further support of Plaintiffs' Motion. Dkt. No. 52 (“Pl. Reply”). Finally, on May 18, 2023, with leave from this Court, Lexington filed a sur-reply in further support of Lexington's Cross-Motion. Dkt. No. 59 (“Lex. Sur-reply”).
BACKGROUND
This case concerns an insurance coverage dispute. Plaintiffs are being sued in New York State court for personal injury claims in a case captioned Gregory Weidtman v. Tremont Renaissance Housing Development Fund Company, Inc., Tremont Renaissance LLC, Tremont Renaissance Affordable LLC, Mastermind Development LLC, KZA Realty Group, and Joy Construction Corp. (Sup. Ct. Bronx Co., Index No. 20106/2018E) (the “Weidtman Action”). Plaintiffs' instant Motion for summary judgment seeks a declaration that defendant Lexington must defend and indemnify Plaintiffs in the Weidtman Action on a primary and non-contributory basis as additional insureds under Lexington's insurance policies. Memo at 15.In contrast, through their Cross-Motion, defendant Lexington argues that this matter should be dismissed or stayed pending the Weidtman Action. Lex. Memo at 8. The following facts are taken from the parties' submissions, attached exhibits, declarations, and statements of material fact, and are presumed true for the purposes of the motions at issue.
References to page numbers and exhibit numbers of docketed items refer to those generated by ECF.
This action involves multiple parties and insurance companies as illustrated below:
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In 2015, Plaintiffs Tremont Renaissance Housing Development Fund Company, Inc., Tremont Renaissance LLC, and Tremont Renaissance Affordable LLC (the “Tremont Plaintiffs”) contracted with Plaintiff Joy Construction Corporation (“Joy”) for Joy to be the general contractor for construction at a project located at 4215 Park Avenue, Bronx, New York 10457 (the “Project”). Lex. Reply SMF at 1-2. The Tremont Plaintiffs were owners of the Project premises. Id. at 1. In September 2016, Plaintiff Joy entered into a subcontract with Urban Precast LLC (the “Urban Precast Contract”) for Urban Precast LLC to “[s]upply and install all labor and material associated with the supply and erection of the concrete plank as per drawings and specifications” for the Project. Id. at 2. The Urban Precast Contract contained an addendum “Hold Harmless Agreement,” and provisions §§3.2(a) and 3.2(e) required Urban Precast LLC to maintain insurance coverage including commercial general liability (“CGL”) coverage and umbrella/excess liability coverage. Lewis Decl. Ex. 4 at 22-23. The Hold Harmless Agreement §3.2(a) states the commercial general liability policy coverage must include, “[a]dditional [i]nsured coverage for Owner, Contractor, its director, officers, employees, subsidiaries and affiliates on a [p]rimary & [n]on-[c]ontributory basis.” Id. at 22. Finally, the Urban Precast Contract Hold Harmless Agreement also requires “[u]mbrella/[e]xcess [l]iability coverage with minimum limits of $5,000,000 for all coverages outlined in the Commercial General Liability . . . insurance requirements.” Id. at 23.
Defendant Lexington issued a CGL policy, with a policy number 015375542 (the “Lexington CGL Policy”) and a commercial liability umbrella policy, with a policy number 023627250 (the “Lexington Umbrella Policy” and, collectively with the Lexington CGL Policy, the “Lexington Policies”) to Urban Precast LLC covering August 1, 2017, to August 1, 2018. Lex. Memo at 12. The Lexington CGL Policy includes an endorsement #006 titled “Additional Insured Required by Written Contract,” which states:
ADDITIONAL INSURED REQUIRED BY WRITTEN CONTRACT
A. Section II - Who Is An Insured is amended to include any person or organization you are required to include as an additional insured on this policy by a written contract or written agreement in effect during this policy period and executed prior to the “occurrence” of the “bodily injury” or “property damage.”
B. The insurance provided to the above described additional insured under this endorsement is limited as follows:
1. COVERAGE A BODILY INJURY AND PROPERTY DAMAGE (Section I - Coverages) only.
2. The person or organization is only an additional insured with respect to liability arising out of “your work” and “your product” for that additional insured.
* * *
6. Any coverage provided by this endorsement to an additional insured shall 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 or written agreement specifically requires that this insurance apply on a primary or non-contributory basis.
Lewis Decl. Ex. 10 at 11 (emphasis added). The Lexington Umbrella Policy includes an endorsement #007 titled “Additional Insured Required by Written Contract,” which has identical language. Lewis Decl. Ex. 11 at 41. The Lexington CGL Policy “Section IV - Definitions” defines “your work,” in part, as “[w]ork or operations performed by you or on your behalf.” Lex. Reply SMF at 5. The Lexington Umbrella Policy includes the same definition. Id. at 6. Plaintiffs and Defendant Lexington do not dispute that the Lexington CGL Policy is subject to a $1 million per-occurrence limit and the Lexington Umbrella Policy is subject to a $10 million per-occurrence limit. Id. at 4. The Lexington Umbrella Policy lists the Lexington CGL Policy as a scheduled underlying insurance, and the Lexington Umbrella Policy defines “Insured” as “[a]ny person or organization, other than the ‘[n]amed [i]nsured', included as an additional ‘Insured' under ‘scheduled underlying insurance', but not for broader coverage than would be afforded by such ‘scheduled underlying insurance'.” Id. at 5.
On November 28, 2016, Urban Precast LLC entered into a sub-subcontract (the “NYC Crane Contract”) with NYC Crane Hoist & Rigging LLC (“NYC Crane”), for NYC Crane to perform work at the Project. Lewis Decl. Ex. 5. The NYC Crane Contract required NYC Crane to obtain CGL insurance and excess liability insurance. Id. at 3-4. The NYC Crane Contract further required that the NYC Crane CGL insurance policy provide additional insured coverage to certain parties on a primary and non-contributory basis. Id. Defendant International Insurance Company of Hannover SE (“Hannover”) issued a CGL policy to NYC Crane covering the period from August 29, 2017, to August 29, 2018 (the “Hannover Policy”). Lex. Memo at 13.
On November 30, 2017, Gregory Weidtman was allegedly injured at the Project during the course of his employment for NYC Crane when he fell from an elevated height. Lex. Reply SMF at 3. On January 3, 2018, Gregory Weidtman filed suit against the Plaintiffs, among others, in New York State Supreme Court alleging negligence and violations of New York Labor Law. Id. Urban Precast LLC was impleaded into the Weidtman Action, and on October 26, 2018, Urban Precast LLC filed a third-party action against NYC Crane. Id. On October 31, 2019, Gregory Weidtman amended his complaint to include Urban Precast LLC as a direct defendant and the amended complaint alleged causes of action for negligence and violations of New York Labor Law by all defendants. Id. at 3-4.
RLI Insurance Company (“RLI”) issued a CGL insurance policy to Plaintiff Joy that was in effect on the date of the accident and RLI is defending Plaintiffs in the underlying Weidtman Action. Memo at 4. On January 16, 2018, RLI issued a letter to Defendant Lexington on behalf of Joy demanding that Lexington defend and indemnify Joy and “the building owners” in the Weidtman Action on a primary and non-contributory basis. Lewis Decl. Ex. 12. On April 10, 2018, Lexington issued a letter to RLI rejecting the requested additional insured coverage. Lewis Decl. Ex. 13 at 4.
On May 30, 2018, Plaintiffs filed a third-party complaint in the Weidtman Action against Urban Precast LLC, seeking common law indemnification and contribution, contractual indemnification, and breach of contract for failure to obtain insurance as required by the Urban Precast Contract. Lex. SMF at 3. On October 26, 2018, Urban Precast LLC filed a second third-party complaint in the Weidtman Action against NYC Crane seeking common law indemnification and contribution, contractual indemnification, and breach of contract for failure to obtain insurance as required by the NYC Crane Contract. Id.
On January 27, 2021, Plaintiffs commenced this action in New York State Supreme Court alleging that Lexington must defend and indemnify Plaintiffs in the Weidtman Action as additional insureds under the Lexington Policies. Dkt. No. 1, Ex. 1 at 7-19. On March 12, 2021, Lexington removed the action to federal court. Dkt. No. 1. Hannover is a named defendant in this action, but has not appeared. Lex. Memo at 14. Plaintiffs alleged in their complaint that they were also owed additional insured coverage on a primary and non-contributory basis from Hannover, and Hannover had a duty to defend and indemnify them in the Weidtman Action. Dkt. No. 1, Ex. 1 at 19. On February 9, 2022, Plaintiffs filed a new suit against only Hannover in New York State Court (the “Hannover Action”), and Lexington alleges that as of March 14, 2023, Hannover had not appeared in that action either. Lex. Memo at 16.
On March 23, 2022, the court in the Weidtman Action granted summary judgment as to the defendants' liability (including Plaintiffs and Urban Precast LLC) under New York Labor Law §240(1). Pl. Reply, Ex. 4 at 2. On April 5, 2023, the court in the Weidtman Action subsequently denied summary judgment motions from Urban Precast LLC and Plaintiffs on the issue of contractual indemnification finding that there were “triable issues of fact.” Lex. Sur-reply, Ex. 1 at 3. Urban Precast LLC and Plaintiffs subsequently filed notice of appeals with respect to the underlying court rulings on their motions for summary judgment. Lex. Sur-reply at 2.
LEGAL STANDARD
To prevail on a motion for summary judgment, the movant must “show[ ] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The movant bears the burden of demonstrating the absence of a question of material fact. In making this determination, the Court must view all facts “in the light most favorable” to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378 (2007); see also Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir. 2008). To survive a summary judgment motion, the opposing party must establish a genuine issue of fact by “citing to particular parts of materials in the record.” Fed.R.Civ.P. 56(c)(1); see also Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). Only disputes over “facts that might affect the outcome of the suit under the governing law” will preclude a grant of summary judgment. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). In determining whether there are genuine issues of material fact, the Court is “required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012) (citing Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (1955)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at *556 (1955)).
The Declaratory Judgment Act states a court “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a) (emphasis added). Case law provides that “a district court is authorized, in its sound discretion, to stay or to dismiss an action seeking a declaratory judgment ...” Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). Motions to dismiss declaratory judgment actions are reviewed for abuse of discretion, rather than de novo. Id. at 290; see also Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942).
Regarding the instant action, the Court has diversity jurisdiction over the dispute under 28 U.S.C. § 1332, as the parties are citizens of different states and the amount in controversy exceeds $75,000. Plaintiffs and Defendant Lexington both assume that New York Law controls the dispute. Memo at 10; Lex. Memo at 16. In diversity jurisdiction cases, it is well settled that a federal court must look at the choice of law rules of the forum state. Curley v. AMR Corp., 153 F.3d 5, 12 (2d Cir. 1998). In New York, courts look to whether there is a conflict of laws and apply a “center of gravity” test. See Standard Gen. L.P. v. Travelers Indem. Co. of Connecticut, 261 F.Supp.3d 502, 506 (S.D.N.Y. 2017) (“For insurance contracts, the applicable law is typically that of the principal location of the insured risk. If the policy covers risks in multiple states, however, then the state of the insured's domicile ... is the ‘controlling factor' in determining the applicable law.”) (internal citations omitted).
Under New York law, it is well established that the party seeking coverage has the burden of establishing that coverage is owed. See, e.g., Jakobson Shipyard, Inc. v. Aetna Cas. & Sur. Co., 961 F.2d 387, 389 (2d Cir.1992). “The initial interpretation of a contract is a matter of law for the court to decide.” Morgan Stanley Grp. Inc. v. New Eng. Ins. Co., 225 F.3d 270, 275 (2d Cir. 2000). “When a dispute arises involving the terms of an insurance contract, New York insurance law provides that ‘an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.'” Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir. 2006). “It is well settled that where the language of an insurance contract is clear and unambiguous, interpretation of that contract and construction of its provisions are questions of law.” Sheehan v. State Farm Fire & Cas. Co., 658 N.Y.S.2d 61, 62 (2d Dept. 1997).
DISCUSSION
Plaintiffs seek a declaration that (i) Lexington must defend and indemnify Plaintiffs in the Weidtman Action as additional insureds under the Lexington CGL Policy, (ii) Lexington must indemnify Plaintiffs in the Weidtman Action as additional insureds under the Lexington Umbrella Policy, (iii) coverage under the Lexington CGL Policy is primary and non-contributory, (iv) coverage under the Lexington Umbrella Policy is primary and non-contributory, and (v) Lexington owes all amounts incurred by Plaintiffs in their defense in the Weidtman Action under the Lexington CGL Policy. Memo at 15. Lexington argues that Plaintiffs' Motion should be denied because “complete and enforceable relief cannot be afforded in the absence of a necessary party, the claim for indemnity coverage is premature, competing insurance policies would be co-primary, and [Plaintiffs] are not entitled to defense costs.” Lex. Memo. at 8. Alternatively, Lexington asks that the Court dismiss the action and abstain from deciding the case or stay any decision on Plaintiffs' Motion pending a decision in the Weidtman Action regarding contractual indemnity which may determine priority of coverage issues. Id. This Court will begin with Lexington's Cross-Motion to dismiss or stay the action, then turn to Plaintiffs' Motion for summary judgment.
A. Defendant Lexington's Cross-Motion to Dismiss or Stay the Action
Defendant Lexington argues that the Court should dismiss this action based on a theory of abstention; or, in the alternative, stay decision in this action pending resolution of the underlying Weidtman Action. Lex. Memo at 8.
1. Defendant Lexington's Request to Dismiss
This Court notes that Lexington's Cross-Motion to dismiss is not timely. Pl. Reply at 7. This Court set a deadline of October 11, 2022, for dispositive motions. Dkt. No. 32. Lexington requested extensions to respond to Plaintiffs' Motion, but never mentioned an intention to file a dispositive Cross-Motion to dismiss, nor asked for an extension of the dispositive motion deadline. See Dkt. Nos. 38 and 40. Lexington's Cross-Motion to dismiss could be denied on that basis, but this Court will nevertheless discuss the merits of the arguments presented.
a. Defendant Lexington's Position
Lexington argues that the Court should dismiss the action based on a theory of abstention. In support of abstention, Lexington argues (i) the Court has broad discretion to decline to hear declaratory judgment actions, (ii) abstention is favored in insurance coverage declaratory judgment actions that turn on questions of state law, and (iii) the Weidtman Action will moot priority of coverage issues in the instant action. Lex. Memo at 3. As Lexington states, the “unique and substantial discretion” of the Court to abstain from hearing claims for declaratory judgment is supported by case law. See Lex. Memo at 26; see e.g., Wilton v. Seven Falls Co., 515 U.S. 277 (1995).
In support of abstention being the correct action in this particular case, Lexington relies primarily on two cases. Lexington cites to TIG Ins. Co. v. Fairchild Corp., No. 07 CIV. 8250 (JGK), 2008 WL 2198087 at *3 (S.D.N.Y. May 27, 2008) for the proposition that “abstaining here avoids piecemeal and duplicative litigation and allows for all the parties' claims to be resolved in the [state court] [a]ction.”
Lexington further cites to Century Sur. Co. v. Metro. Transit Auth., 2021 WL 4538633 at *2 (2d Cir. Oct. 5, 2021) where the Second Circuit reversed and remanded a district court decision where the district court reviewed a “true excess policy,” but did not consider the legal effect of an indemnity agreement between parties. Lexington then relies on Century, to argue this Court should abstain because there are contractual issues being litigated in state court that will determine the priority of coverage among the Lexington Policies and the Hannover Policy. Lex. Memo at 29. Lexington asserts that Hannover is in the same position as Century and owes the primary obligation to Plaintiffs so abstention in this case would avoid “duplicative, piecemeal litigation, and potentially inconsistent results.” Lex. Memo at 29-31.
b. Plaintiffs' Position
Plaintiffs argue Lexington's request for abstention is inapplicable, if not improper, in the instant action because (i) this is the only action in which additional insured claims under the Lexington Policies will be litigated, (ii) Century is not an abstention case and is therefore inapplicable to the issue, and (iii) if Lexington wanted New York state court to decide the case then Lexington should not have removed to federal court. Pl. Reply at 18.
c. Analysis
This Court finds that (i) TIG Ins. Co. is distinguishable because the insurance claims were being litigated in state court in that action, (ii) Century does not apply with respect to abstention, and (iii) Defendant Lexington chose to remove so cannot ask the Court to abstain and defer to state court.
In TIG Ins. Co., unlike the instant case, all the parties in the suit were parties to the underlying action, and all of the claims and issues relevant to the suit were relevant to that action as well. TIG Ins. Co. v. Fairchild Corp., No. 07 CIV. 8250 (JGK), 2008 WL 2198087 at *3 (S.D.N.Y. May 27, 2008). Here, Defendant Hannover and Defendant Lexington are not parties to the underlying Weidtman Action, and this is the only suit where Plaintiffs' claim for additional insured coverage under the Lexington Policies is being litigated. Pl. Reply at 18. Therefore, while Lexington argues that the Court should abstain because the insurance coverage dispute can be adequately addressed in a pending state court action, the Lexington Policies are not at issue in the underlying Weidtman Action and cannot be resolved by that action.
With respect to Century, Plaintiffs are correct that it is not an abstention case. In Century at *5, the district court made a determination that Century Surety's insurance policy “was a true excess policy” and found that Century Surety was not obligated to provide insurance coverage for the underlying action. The Second Circuit reversed and remanded the case, finding that notwithstanding the “Other Insurance” provision in the Century Surety commercial excess liability insurance policy, an indemnity contract governed, and Century Surety was liable to pay. Id. Further, because New York law governed, the Second Circuit anticipated that New York's highest court “would not require a separate action to enforce parties' indemnity agreement” and that both a determination about the insurance policy and the underlying indemnity agreement should be determined in the same action when evaluating competing policies. Id. at 4. To the extent Century is applicable with respect to abstention, the logic only follows that the Court should consider abstaining from deciding indemnity coverage because, in reversing the district court ruling, the Second Circuit cited the indemnity agreements in the underlying contract as governing the resolution of the case and requiring reversal. Id. at 5. The case provides no support for the proposition that the Court should abstain from deciding whether a plaintiff is entitled to additional insured coverage under a particular insurer's insurance policy. At most, the Century case provides minimal support that the Court should abstain from deciding indemnity coverage.
Further, this Court does not believe that an assessment of Hannover's liability to Plaintiffs is necessary to resolve Plaintiffs' claims against Lexington. Century, supra, at 1, was a “dispute between two insurance companies seeking a declaratory judgment as to their rights and obligations regarding priority of coverage.” The instant case is in a very different posture. This case is a suit by a non-named insured seeking additional insured coverage from an insurer. There is no possibility of duplicative results because this is the only suit where Plaintiffs' claim for additional insured coverage against Lexington is being litigated. Pl. Reply at 18. There is no potential for inconsistent results because even if Lexington is found to owe coverage, and Hannover is found to owe coverage in the Hannover Action, the parties could bring a suit to determine priority of coverage like in Century.
Lexington is correct, however, that a ruling in this action could lead to additional litigation. For example, if Lexington is found to owe coverage to Plaintiffs under the Lexington Policies, then Lexington could bring suit against Hannover for contribution if Lexington believes contribution is owed. However, this Court does not believe the possibility of one party needing to litigate further is weighty enough to warrant denying insurance coverage to a potentially covered plaintiff. “Generally, if two policies potentially apply to a loss, an insured can elect which of its insurers should defend and indemnify by tendering its defense to one insured and not another.” Royal Ins. Co. of Am. d/b/a Royal & Sunalliance v. Com. Underwriters Ins. Co., No. 03 CIV. 8325 (NRB), 2004 WL 2609522 at *6 (S.D.N.Y. Nov. 17, 2004) (internal quotations omitted). While Plaintiffs filed suit against both Lexington and Hannover, they were not required to do so and the Court is well within its bounds to decide whether a particular insurer has a duty to defend and indemnify a plaintiff, even if a competing insurance policy may apply.
Finally, if Lexington preferred that this action be decided by state court because state law applies, then Lexington should not have removed. Plaintiffs cite to Albany Molecular Research, Inc. v. Schloemer, 2010 WL 5168890 at *8 (N.D.N.Y. Dec. 14, 2010), to argue that a “[d]efendant, after choosing to remove to federal court, cannot now reasonably assert that the federal court should abstain from exercising jurisdiction over the action.” This is not dispositive, but does weigh against Lexington's request for abstention in the instant case.
To the extent the District Court disagrees, this Court would recommend staying judgment rather than dismissing. “Wilton generally calls for staying, rather than dismissing, the declaratory judgment claim at issue, in order to preserve any of the plaintiff's claims that might not be resolved by the pending state proceeding.” TIG Ins. Co. v. Fairchild Corp., No. 07 CIV. 8250 (JGK), 2008 WL 2198087 at *5 (S.D.N.Y. May 27, 2008).
2. Defendant Lexington's Request to Stay
Turning to Lexington's argument that the Court should stay decision in this action, Lexington cites to Wilton v. Seven Falls Co., 515 U.S. 277 (1995) and Fireman's Fund Ins. Co. v. Chris-Craft Indus., Inc., 932 F.Supp. 618, 620-21 (S.D.N.Y. 1996) relying again on a theory of abstention.
Plaintiffs argue that the action should not be stayed because abstention is inapplicable. Pl. Reply at 18.
This Court does not find Wilton v. Seven Falls Co., 515 U.S. 277 (1995) or Fireman's Fund Ins. Co. v. Chris-Craft Indus., Inc., 932 F.Supp. 618 (S.D.N.Y. 1996) persuasive with respect to staying this action. Further, this Court reiterates that the underlying Weidtman Action will not resolve the present case provided Lexington argues that it does not owe primary and non-contributory additional insureds coverage to Plaintiffs. The insurance dispute is not at issue and will not be decided in the Weidtman Action. At most, as Lexington argues, the Weidtman Action will decide the contractual indemnity issues that will impact priority of coverage. Priority of coverage between Lexington and Hannover is not the issue before this Court. The issue before the Court in the instant case is whether Lexington owes coverage to Plaintiffs.
Wilton, supra, at 277, 289-290, stands for the proposition that a district court's decision to stay a declaratory judgment action during a parallel state court proceeding is discretionary and reviewed for abuse of discretion. As discussed previously, the Court has “unique and substantial discretion in deciding whether to declare the rights of litigants.” Id. at 286. Wilton holds that the Court can choose to rule on this dispute or to stay a decision, but Wilton does not provide strong support that the Court should stay its decision in the present action.
In Fireman's Fund Ins. Co., supra, at 619, the Court stayed an action about an insurance claim where all insurance companies at issue were parties to an action in California state court. Again, Lexington is not a party to the underlying Weidtman Action, nor the Hannover Action, so the issue of additional insured coverage under the Lexington Policies is not being litigated in state court. Further in Fireman's Fund Ins. Co., supra, at 620, the Court espoused six factors to consider related to abstention: “(1) the scope of the pending state proceeding and nature of defenses available there; (2) whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding; (3) whether necessary parties have been joined; . . . (4) whether such parties are amenable to process in that proceeding . . . (5) avoiding duplicative proceedings and (6) forum shopping.” (internal citations omitted).
Here, many of the Fireman's Fund Ins. Co. factors weigh against abstention. The scope of the pending state proceeding does not cover this insurance dispute, Plaintiffs' claim for relief under the Lexington Policies will not be adjudicated in the state court proceedings, Plaintiffs are not amenable to abstention pending the state court proceedings, there is no risk of duplicative proceedings because the Lexington Policies are not being adjudicated elsewhere, and this is not Plaintiffs forum shopping because Lexington chose to remove to federal court. Lexington argues that “Plaintiffs should not be rewarded for seeking to advance a partial and incomplete declaratory judgment action that seeks to resolve only a preliminary, and ultimately moot, insurance coverage issue after failing to properly join all of the parties involved in the coverage dispute.” Lex. Memo at 31. Plaintiffs argue that Hannover is not a necessary party and “if Lexington were to concede that it owes defense and indemnification to [P]laintiffs on a primary basis, then - but only then - this action would be moot.” Pl. Reply at 16. This Court agrees. The question before the Court is whether Plaintiffs are entitled to defense and indemnification from Lexington on a primary and non-contributory basis as additional insureds under the Lexington Policies, and Lexington disputes Plaintiffs' claims. The action and preliminary questions at issue are not moot. Therefore, because most of the factors for abstention laid out in Fireman's Fund Ins. Co., supra, at 620 weigh against abstention, this Court recommends that Lexington's Cross-Motion to dismiss or alternatively stay the action be DENIED.
B. Plaintiffs' Motion for Summary Judgment.
1. Additional Insureds under the Lexington Policies
First, Plaintiffs argue that as a matter of law, Plaintiffs are additional insureds under the Lexington Policies and Lexington must defend and indemnify Plaintiffs as a result. Under the Lexington CGL Policy, the “Additional Insured Required by Written Contract” endorsement #006 states, in part, that the definition of who is insured includes any person or organization the named insured (Urban Precast LLC) is “required to include as an additional insured under the policy by written contract or agreement . . .” See Lewis Decl. Ex. 10 at 11 (emphasis added). The plain language of the Urban Precast Contract Hold Harmless Agreement, states the CGL policy coverage must have terms and conditions for “Additional Insured coverage for Owner, Contractor, its director, officers, employees, subsidiaries and affiliates on a Primary & Non-Contributory basis.” Lewis Decl. Ex. 4 at 22. “When [contract] provisions are unambiguous and understandable, courts are to enforce them as written.” Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33 (2d Cir. 2006). Tremont Plaintiffs, as Owners, and Joy as Contractor, clearly fall within the Hold Harmless Agreement language, and both parties agree the Urban Precast Contract required Urban Precast LLC to obtain CGL insurance that covered Plaintiffs as additional insureds. Memo at 10; Lex. Memo at 9.Given this, Plaintiffs plainly fall within the “Additional Insured Required by Written Contract” endorsement #006 of the Lexington CGL Policy.
This Court notes Plaintiffs' Memo at 12-13 mentions an argument from Lexington that endorsement #009 of the Lexington CGL Policy forestalls the applicability of the endorsement #006. Lexington does not make this argument in its papers and this Court does not find the argument persuasive, so it is not analyzed here.
Therefore, this Court recommends a finding that Plaintiffs are additional insureds under the Lexington CGL Policy.
Next, Plaintiffs claim that they are also additional insureds under the Lexington Umbrella Policy based both on the “Insured” definition in the Lexington Umbrella Policy and the “Additional Insured Required by Written Contract” endorsement #007. Memo at 9-10.
Turning first to the definition of “Insured” under the Lexington Umbrella Policy, “Section V - Definitions” J(2)(e) includes, “[a]ny person or organization, other than the ‘Named Insured', included as an additional ‘Insured' under ‘scheduled underlying insurance', but not for broader coverage than would be afforded by such ‘scheduled underlying insurance.'” Mann Decl. Ex. T at 22 (emphasis added). Both parties agree that the Lexington CGL Policy is “scheduled underlying insurance” with respect to the Lexington Umbrella Policy. Lex. Memo at 22; Memo at 9. Plaintiffs argue that this qualifies them as additional insureds under the Lexington Umbrella Policy. Memo at 10. Lexington, however, argues that Plaintiffs are not additional insureds under the “Insured” definition in the Lexington Umbrella Policy because the Urban Precast Contract only required naming Plaintiffs as additional insureds under a CGL policy. Lex. Memo at 22. Relatedly, Lexington says that Plaintiffs do not qualify as additional insureds under endorsement #007 of the Lexington Umbrella Policy because Urban Precast LLC was not required to include Plaintiffs as additional insureds on that policy.
The crux of Lexington's challenge to both theories is that the Urban Precast Contract does not require the Lexington Umbrella Policy to include additional insureds coverage for Plaintiffs. Id. The “Additional Insureds Required by Written Contract” endorsements are identical in the Lexington Umbrella Policy and the Lexington CGL Policy. Memo at 10. With respect to the Lexington Umbrella Policy, the Urban Precast Contract Hold Harmless Agreement §3.2(e) plainly states, the umbrella/excess liability coverage should be for “all coverages outlined in the Commercial General Liability, Automobile Liability and Employers Liability insurance requirements.” Lewis Decl. Ex. 4 at 23 (emphasis added). As noted previously, both parties agree that that Urban Precast Contract required the CGL policy to include additional insureds coverage for Plaintiffs, Memo at 10; Lex. Memo at 9, and the Urban Precast Contract Hold Harmless Agreement §3.2(a) affirms this. Lewis Decl. Ex. 4 at 22. The Urban Precast Contract Hold Harmless Agreement §3.2(e) states that umbrella/excess liability coverage should be for “all coverages outlined in the Commercial General Liability. . . insurance requirements.” Lewis Decl. Ex. 4 at 23. Lexington essentially argues that this is not clear that the Lexington Umbrella Policy is to include Plaintiffs as additional insureds. This Court disagrees.
Lexington primarily relies on three cases. First, Tripani v. 10 Arial Way Assocs., 301 A.D.2d 644, 647 (2d Dept. 2003) which says, “[a] provision in a construction contract cannot be interpreted as requiring the procurement of additional insured coverage unless such a requirement is expressly and specifically stated.” Second, Empire Ins. Co. v. Ins. Corp. of N.Y., 40 A.D.3d 686, 688 (2d Dept. 2007), another case where the subcontract provisions at issue did not contain the words “additional insured.” Finally, Lexington relies on Vermont Teddy Bear Co., Inc. v. 583 Madison Realty Company, 1 N.Y.3d 470, 475 (2004) to argue that the Court should be “reluctant to interpret agreements as implicitly stating something which the parties have neglected to specifically include.”
All three of these cases are distinguishable. In both Tripani and Empire Ins. Co., the words “additional insured coverage” did not appear in the contract sections at issue. In contrast, the Urban Precast Contract explicitly states that the CGL policy insurance was to include additional insured coverage for Plaintiffs and the umbrella policy was to cover all the CGL policy requirements. See Lewis Decl. Ex. 4 at 23. Vermont Teddy Bear is similarly not persuasive because the reference to additional insureds coverage in the Urban Precast Contract is explicit rather than implicit, and plainly imputed to the Lexington Umbrella Policy. The Urban Precast Contract insurance requirements for CGL insurance in §3.2(a), plainly requires additional insured coverage for Plaintiffs. Lewis Decl. Ex. 4 at 22. The Urban Precast Contract Hold Harmless Agreement §3.2(e) plainly states the umbrella/excess policy is to cover all the CGL insurance requirements, and additional insured coverage is a clear CGL insurance requirement. Id. at 23. “The court is to give the words and phrases in a contract their plain meaning, construe the contract to give full meaning and effect to all its provisions, and avoid contract interpretations that render a clause superfluous or meaningless.” Certified Multi-Media Solutions, Ltd. v. Preferred Contractors Insurance Company Risk Retention Group, LLC, 674 Fed.Appx. 45 (2d Cir. 2017).
As Plaintiffs argue, if the requirements for the CGL policy are not incorporated for the purposes of the excess/umbrella policy, then the Urban Precast Contract Hold Harmless Agreement §3.2(e) would be meaningless. Pl. Reply at 14. A finding that Plaintiffs are additional insureds under the Lexington Umbrella Policy would not broaden what is required by contract with respect to the definition of “Insured.” Additionally, the Lexington Umbrella Policy endorsement #007 “Additional Insureds Required by Written Contract” is triggered because the Urban Precast Contract requires that the umbrella/excess policy cover all of the CGL insurance requirements, and additional insureds coverage for Plaintiffs is a plain CGL insurance requirement in the Urban Precast Contract.
Therefore, this Court recommends a finding that the Plaintiffs are additional insureds under the Lexington Umbrella Policy.
2. The Duty to Defend
Plaintiffs contend that as additional insureds under the Lexington CGL Policy, Lexington has a duty to defend them in the underlying Weidtman Action. Memo at 14. Lexington does not dispute the duty to defend under the Lexington CGL Policy. See generally Lex. Memo. Instead, Lexington argues that because Lexington offered to defend Plaintiffs under the Lexington CGL Policy, Plaintiffs' request is moot and should be denied. Id. at 15. Plaintiffs argue that the proper course is to grant that part of Plaintiffs' Motion as unopposed if Plaintiffs are entitled to a defense from Lexington. Pl. Reply at 18. Although the duty to defend under the Lexington CGL Policy is seemingly undisputed, the Court must still determine whether Plaintiffs have met their burden of showing that Lexington has a duty to defend under the Lexington CGL Policy as a matter of law. See Jackson v. Fed. Exp., 766 F.3d 189 (2d Cir. 2014).
In the underlying Weidtman Action, Plaintiffs were sued by Gregory Weidtman for negligence, alleged violations of New York Labor Law, and alleged violations of 12 NYCRR §23 of the Industrial Code of the State of New York. Lex. Memo at 10. The Lexington CGL Policy provides that additional insured coverage for bodily injury will apply with respect to liability arising out of Urban Precast LLC's work and products for the additional insureds. See Lewis Decl. Ex. 10 at 11.
In New York, “the duty of an insurer to defend its insured is ‘exceedingly broad' and far more expansive than the duty to indemnify its insured.” High Point Design, LLC v. LM Ins. Corp., 911 F.3d 89, 94-95 (2d Cir. 2018) (quoting Cont'l Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648, 593 N.Y.S.2d 966, 609 N.E.2d 506 (1993)); accord Regal Constr. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34, 37, 904 N.Y.S.2d 338, 930 N.E.2d 259 (2010). “If the allegations of the complaint are even potentially within the language of the insurance policy, there is a duty to defend.” High Point Design, LLC, 911 F.3d at 95 (quoting Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98 N.Y.2d 435, 443, 749 N.Y.S.2d 456, 779 N.E.2d 167 (2002)). “The phrases ‘ongoing operations,' ‘arising out of,' and ‘performed for' have been interpreted quite broadly under New York law.” 622 Third Ave. Co., L.L.C. v. Nat'l Fire Ins. Co. of Hartford, No. 21 CIV. 6050 (KPF), 2022 WL 17736796 at *8 (S.D.N.Y. Dec. 16, 2022) (emphasis added). New York Courts “have found that an ‘arising out of' . . . is satisfied where an insured's employee (or an insured's subcontractor's employee) is injured during the course of his work for an additional insured.” Id. (emphasis added).
Here, it is undisputed that Gregory Weidtman was an employee of NYC Crane, a subcontractor of Urban Precast LLC who is the named insured in this action. Lex. Sur-reply at 2. Gregory Weidtman claims he was injured at the Project where Tremont Plaintiffs were the owners and Joy was the general contractor and he sued Plaintiffs on that basis. See Motion. This allegation plainly meets the exceedingly broad standard of “arising under” for the purposes of the duty to defend.
Lexington argues that it will only have a duty to defend under the Lexington Umbrella Policy after “underlying and ‘other insurance' limits are exhausted.” Lex. Memo at 23. In support of this argument, Lexington invokes the Lexington Umbrella Policy which states: “[Lexington] will have the right and duty to defend any ‘suit' against the ‘Insured' that seeks damages for ‘bodily injury' . . . when the total applicable limits of ‘scheduled underlying insurance' and any applicable ‘other insurance' have been exhausted by payment of damages to which this policy applies. . .” Mann Decl. Ex. T at 9. Lexington notes that there is no evidence that the Hannover Policy or the Lexington CGL Policy have been exhausted so coverage under the Lexington Umbrella Policy is not yet triggered. Lex. Memo at 23-24. Notably, Plaintiffs claim for relief only asks for a determination of the duty to defend with respect to the Lexington CGL Policy. Memo at 15. To the extent that Lexington wishes to deny coverage based on the primacy of the Hannover Policy, this Court does not believe that is a coverage defense, but instead an argument for contribution from Hannover. Lexington cites to Certain Underwriters v. Illinois Nat. Ins. Co., 99 F.Supp.3d 400 (S.D.N.Y. 2015), where the Court held that a commercial liability policy and excess liability policy both provided the same level of insurance coverage so the insurance companies were required to ratably divide costs after the primary insurer paid out its policy. Further, the Court has stated, “[an] insurer has a duty to pay on [a] claim even if - pursuant to an ‘other insurance' clause - some other policy might be primary to it.” Tech. Ins. Co., Inc. v. Philadelphia Indem. Ins. Co., No. 21-CV-7387 (LJL), 2022 WL 17177852 at *19 (S.D.N.Y. Nov. 23, 2022) (footnote omitted). “The insurer cannot decline coverage on the basis that, though its policy is primary, it is excess to some other policy . . .” Id. While Tech Ins. Co., Inc. is distinguishable because it was analyzing the claims of an additional insurer against an insureds own insurer, id., the same logic applies here: an additional insurer cannot oppose coverage because another additional insurer may owe coverage first.
This Court recommends a finding that Lexington has a duty to defend Plaintiffs as additional insureds under the Lexington CGL Policy.
3. The Duty to Indemnify
Plaintiffs further seek a finding that as additional insureds under the Lexington Policies, Lexington must indemnify them in the underlying Weidtman Action. Lexington opposes this on two grounds: first by arguing Plaintiffs' request for indemnity coverage is premature because the actual basis of liability in the underlying action has not yet been determined, and second by arguing that there is a dispute of material fact as to whether the injury in the underlying action “arose out of” work covered by the applicable contracts. Lex. Memo at 21-22.
Regarding ripeness, Lexington argues that until Plaintiffs are found liable for coverage damages in the Weidtman Action, indemnity coverage is not triggered and is premature. Lex. Memo at 22. While acknowledging that there has been some liability determination made in the Weidtman Action, Lexington further argues that the court in the Weidtman Action has not decided contractual indemnity claims on the basis that there are “triable issues of fact as to which contracted work [p]laintiff's accident arose out of.” Lex. Sur-reply, Ex. A at 6.
Plaintiffs argue that they were found liable when the Court in the Weidtman Action granted summary judgment as to liability against the defendants (including Plaintiffs and Urban Precast LLC) under New York Labor Law §240(1). Pl. Reply, Ex. 4. Plaintiffs further argue that they do not need to wait until the underlying action is resolved to seek indemnity coverage. Pl. Reply at 6.
On balance, the Court finds that the question of indemnity coverage is ripe.
Lexington's second opposition is that there is a dispute of material fact. The relevant contracts cover liability arising out of Urban Precast LLC's work or product for the additional insureds. Lewis Decl. Ex. 10 at 11; Lewis Decl. Ex. 11 at 41. “An insurer's duty to indemnify is narrower and distinct from the duty to defend.” Town Plaza of Poughquag, LLC v. Hartford Ins. Co., 175 F.Supp.3d 93, 99 (S.D.N.Y. 2016). “[A] duty to indemnify cannot be triggered by the mere possibility of coverage; rather, it is triggered by an independent factual finding that the insured's liability is within the coverage provided by the policy.” Id. at 100.
Plaintiffs argue the New York Court of Appeals has applied the “arising out of” endorsement broadly citing Regal Const. Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34, 38 (2010) and Wausau Underwriters Inc. Co. v. Old Republic General Ins. Co., 122 F.Supp.3d 44 (S.D.N.Y. 2015). In Regal, supra, at 38, the Court found a duty to indemnify where the injured employee was an employee of Regal. Those facts are distinct from the present case where Gregory Weidtman was an employee of a sub-subcontractor. In Wausau, supra, at 49, the Court found a duty to indemnify where the underlying injury “arose out of” construction manager's ongoing operations for hotel project.
The question here is whether there is an absence of material fact that Mr. Weidtman's injuries arose out of Urban Precast LLC's work for the Plaintiffs. While Plaintiffs and Urban Precast LLC were both found liable for violations of New York Labor Law §240(1), Lexington notes the Court in the Weidtman Action has not decided contractual indemnity claims on the basis that there are “triable issues of fact as to which contracted work [p]laintiff's accident arose out of.” Lex. Sur-reply, Ex. A at 6. Plaintiffs argue that courts have determined the duty to indemnify as a matter of law when an underlying action is pending, but findings of facts in the underlying action are not required. Pl. Reply at 12. Plaintiffs are correct that they are not required to wait until the underlying case is resolved to seek indemnity coverage, but Lexington has plausibly pleaded that Plaintiffs allege insufficient connection between Urban Precast LLC and the accident.
To the extent that Plaintiffs argue that the “Section V - Definitions” where the Lexington Policies define “your work,” in part as “[w]ork or operations performed by you or on your behalf,” Memo at 5, is sufficient to impute the work of NYC Crane to Urban Precast LLC, this Court disagrees. From this Court's perspective, elsewhere in the same contract, the Lexington CGL Policy uses the term “ . . . by you or on your behalf by a contractor or subcontractor.” See e.g., Lewis Decl. Ex. 9 at 10 (emphasis added). This is plainly not the language used in the definition of “your work” so this Court does not believe that the definition unambiguously covers the work of subcontractors.
Therefore, this Court believes there are triable issues of fact as to whether indemnification is owed and recommends this portion of Plaintiffs' Motion be DENIED.
4. Primary and Non-Contributory Coverage
Plaintiffs argue that as a matter of law the Lexington CGL Policy is primary and non-contributory. Lexington counters that the Lexington CGL Policy is coprimary with the Hannover Policy, which prevents the “primary and noncontributory declaration.” Lex. Memo at 15. In support of this argument, Lexington cites only Certain Underwriters v. Illinois Natl. Ins. Co., 99 F.Supp.3d 400, 406 (S.D.N.Y. 2015). Again, in Certain Underwriters, the Court was considering competing insurance policies and expressly making a determination on priority of coverage between the policies. Id. at 402. The Court found that two policies provided the same level of coverage and must ratably divide the remaining coverage after a primary policy paid out its required share. Id. Conversely, in the present case, the only question at issue on summary judgment is whether Plaintiffs are as a matter of law entitled to coverage under the Lexington Policies. Further, in Certain, the Court noted that if multiple insurers “contracted to cover the same risk on the same level . . . none may argue that the other must bear the entire risk because the effect of a contrary holding would be to leave the insured with no coverage at all.” Id. (internal quotations and citations omitted). Lexington, therefore, cannot escape liability under the Lexington Policies by claiming that the Hannover Policy applies the same coverage level because under that argument, Lexington also owes a primary duty. This is further supported by Technology Ins. Co. v. Philadelphia Indemnity Ins. Co., 2022 WL 17177852, at *19 (S.D.N.Y November 23, 2022) cited by Plaintiffs which states in part that an insured can generally elect which of the insurers to pursue and an insurer has a duty to pay on the claim even if another policy might be primary to it. While not perfectly analogous, Technology Ins. Co. shows that evading coverage by invoking another insurance policy is disfavored by the Court and Lexington reserves the ability to bring suit against Hannover for any contribution they believe is owed.
Plaintiffs argue that the endorsements in the Lexington CGL Policy and Lexington Umbrella Policy require primary and non-contributory coverage for Plaintiffs. Memo at 14. Lexington argues that the below excerpt from the endorsements does not mean that the Lexington Policies are primary and noncontributory, but only means it is not excess, Lex. Memo at 18:
Any coverage provided by this endorsement to an additional insured shall 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 or written agreement specifically requires that this insurance apply on a primary and non-contributory basis. Lewis. Decl. Ex. 10 at 12; Lewis Decl. Ex. 11 at 42 (emphasis added).
This Court is not persuaded by Lexington's reading of this provision. The Urban Precast Contract Hold Harmless Agreement CGL policy requirements include that the additional insured coverage for Plaintiffs must be on a primary and noncontributory basis. Lewis Decl. Ex. 4 at 22. Further, with respect to the Lexington Umbrella Policy, as previously stated, the Urban Precast Hold Harmless Agreement requires umbrella/excess liability coverage for all coverages outlined in the Commercial General Liability insurance requirements. Id. at 23. This Court has already analyzed that the CGL policy requirements should be imputed into the umbrella/excess coverage. The Urban Precast Contract clearly requires the additional insured coverage to be on a primary and non-contributory basis, and the Lexington Policies endorsements contemplate that a written contract can require them to be primary and non-contributory. “[C]overage required for an additional insured is presumed to be primary unless unambiguously stated otherwise, and in construing the subcontract, the reasonable expectation and purpose of the ordinary business [person] when making an ordinary business contract will be considered.” Navigators Ins. Co. v. Merchants Mut. Ins. Co., 2017 WL 1032543 at *6 (N.Y. Sup. Ct. Mar. 17, 2017) (internal citations and quotations omitted).
This Court believes there is sufficient evidence that Plaintiffs are additional insureds under the Lexington Policies, the Lexington Policies clearly contemplate being primary and non-contributory if required by contract in their respective endorsements, and the Urban Precast Contract requires primary and noncontributory additional insured coverage.
Therefore, this Court recommends a finding that the Lexington Policies are primary and non-contributory with respect to Plaintiffs.
5. Defense Costs
Plaintiffs argue that they are entitled to defense costs for all amounts incurred on their behalf in the Weidtman Action. Motion at 2. Lexington argues that Plaintiffs do not have standing to claim defense costs because RLI paid defense costs on their behalf. Lex. Memo at 25. Plaintiffs supply case law where the Court required an insurer to reimburse an additional insured on behalf of its excess insurer for defense and indemnification costs. See e.g., Harco Constr., LLC v. First Mercury Ins. Co., 190 A.D.3d 831, 140 N.Y.S.3d 553 (2021). This Court is satisfied that Plaintiffs may recover defense costs as additional insureds under the Lexington Policies. This Court agrees with Lexington that pre-tender defense costs are not owed. See e.g., Bovis Lend Lease LMB, Inc. v. Royal Surplus Lines Ins. Co., 806 N.Y.S.2d 53, 61 (1st Dept. 2005)
6. Hannover as a Necessary Party
Lexington argues that Plaintiffs' Motion should be denied because Hannover is a necessary party pursuant to Federal Rule of Civil Procedure 19. Lex. Memo at 16-17. Plaintiffs dispute that Hannover is a required party because the claims between Plaintiffs and Lexington can be litigated without Hannover. Pl. Reply at 78. Rule 19 provides that a party should be joined if, “(1) in its absence the court cannot grant complete relief among those already parties, (2) the absent party claims an interest related to the action and is so situated that disposition of the action without that party may impair its ability to protect its interests, or (3) failing to join the absent party subjects parties already in the action to a substantial risk of double liability or otherwise inconsistent obligations.” Arkwright-Bos. Mfrs. Mut. Ins. Co. v. City of New York, 762 F.2d 205, 208 (2d Cir. 1985).
In support of arguing that Hannover is a required party, Lexington cited to Am. Home Assur. Co. v. Babcock & Wilcox Co., 2007 WL 4299847 at *1 (E.D.N.Y. Dec. 6, 2007), where the Court granted a motion to dismiss where an insurance company failed to add two necessary parties: an alleged co-insurer on the policy at issue and the entity to whom the insurance rights under the policy at issue had been assigned. That case is plainly distinct from the present case where Hannover is not a party to the Lexington Policies, nor does a determination of coverage under the Lexington Policies preclude a determination of coverage under the Hannover Policy. Lexington's argument that Hannover's absence prejudices Lexington because both coverages are primary and non-contributory is similarly unavailing. Lexington argues that Hannover's absence prevents the Court from rendering complete and enforceable relief, but case law is clear that “the term complete relief refers only ‘to relief as between the persons already parties, and not as between a party and the absent person whose joinder is sought.'” Arkwright-Bos. Mfrs. Mut. Ins. Co. v. City of New York, 762 F.2d 205, 209 (2d Cir. 1985) (internal citation omitted). Lexington and Plaintiffs are the parties at issue and a determination that Lexington owes coverage to Plaintiffs under the Lexington Policies does not require a determination about the Hannover Policy. The Court can make a full determination about Plaintiffs' coverage under the Lexington Policies without Hannover, therefore complete and enforceable relief can be afforded between Lexington and Plaintiffs under the Lexington Policies.
Further, Hannover's absence from this suit does not impair or impede its ability to protect its interests. In Vision en Analisis y Estrategia, S.A. v. Andersen, 662 Fed.Appx. 29, 32 (2d Cir. 2016), cited by Lexington, the Second Circuit upheld a finding that a third party's interests would be practically impeded where the resolution of plaintiffs' claims would require a determination of the third party's rights and obligations under certain contracts. Unlike in that case, a determination of Lexington's liability under the Lexington Policies does not require a determination about Hannover's rights or obligations under the Hannover Policy. As Plaintiffs argue, the claims against Hannover and Lexington are cumulative, rather than conditional. Pl. Reply. at 9. Hannover is not a required party under Federal Rule of Civil Procedure 19(a)(1)(B)(i) because, as a practical matter, a determination about the Lexington Policies does not impede or impair Hannover's ability to litigate whether coverage is owed under the Hannover Policy. Plaintiffs could be entitled to coverage under both the Lexington Policies and the Hannover Policy, under neither insurers' policy, or under just one insurer's policy.
Finally, Lexington argues that a determination without Hannover could invite inconsistent results or subject them to double litigation. Lex. Memo at 17. Lexington again cites, Certain Underwriters v. Illinois Natl. Ins. Co., 99 F.Supp.3d 400, 406 (S.D.N.Y. 2015). As discussed more fully above, Certain concerns issues not currently before the Court so the case is inapposite. Lexington is correct that a ruling in this case may require Lexington to pursue Hannover for contribution; however, cases like Certain show that this is routine practice and this Court does not believe it is a strong factor in favor of denying a plaintiff's meritorious claim for insurance coverage. For the reasons stated above, this Court does not believe Hannover is a necessary party to this litigation.
RECOMMENDATION
This Court recommends that the motions be resolved as follows:
• The Cross-Motion to dismiss or alternatively stay the action filed by Lexington, Dkt. No. 43, should be DENIED.
• The Motion for summary judgment filed by Plaintiffs, Dkt. No. 33 should be GRANTED in part.
o The Court should make a finding that Plaintiffs are additional insureds under the Lexington Policies and are entitled to primary and non-contributory coverage.
o The Court should make a finding the Lexington has a duty to defend Plaintiffs in the Weidtman Action under the Lexington CGL Policy, and post-tender defense costs are owed.
o The Court should make a finding that the duty to indemnify cannot be resolved as a matter of law because there is a dispute of material fact.
FILING OF OBJECTIONS TO THE REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections shall be filed with the Clerk of Court and on ECF. Any requests for an extension of time for filing objections must be directed to Judge Daniels. Failure to file objections within fourteen days will result in a waiver of objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Cephas v. Nash, 328 F.3d 98, 107 (2d Cir. 2003).
SO ORDERED.