Opinion
01 Civ. 2899 (RWS).
August 31, 2007
SAXE DOERNBERGER VITA, P.C., Attorneys for Plaintiff, Hamden, CT, By: EDWIN L. DOERNBERGER, ESQ., KEVIN P. DEAN, ESQ., Of Counsel.
BARRY, McTIERNAN MOORE, Attorneys for Defendants American, Manufacturers Mutual Insurance, Company and Lumberman's Mutual, Casualty Company, New York, NY, By: SUZANNE M. HALBARDIER, ESQ.,Of Counsel.
OPINION
Defendants American Manufacturers Mutual Insurance Company ("AMMIC") and Lumberman's Mutual Casualty Company ("LMCC") (collectively, the "Defendants") have moved under Local Civil Rule 6.3 for reconsideration of the denial of Defendants' motion for summary judgment. See Turner Constr. Co. v. Am. Mfrs. Mut. Ins. Co., 485 F. Supp. 2d 480 (S.D.N.Y. 2007) (the "May 2007 Opinion"). In addition, both parties have filed submissions related to the judgment and Plaintiff's claim for defense costs. For the reasons set forth below, the motion for reconsideration is denied, and judgment will be entered accordingly.
Prior Proceedings
Prior proceedings in this matter were outlined in the May 2007 Opinion. See id. at 482-83.
Plaintiff Turner Construction Company ("Turner" or "Plaintiff") and Defendants both filed motions for summary judgment. The motions were heard and marked fully submitted on September 20, 2006. The May 2007 Opinion granted Plaintiff's motion and denied Defendants' motion as to Count One of the Second Amended Complaint ("SAC"), finding that Turner's liability arose out of Trident's work, that the duty to defend Turner had therefore been triggered, and that Turner was entitled to damages as a result. See id. at 486-92. In addition, the May 2007 Opinion granted Defendants' motion and denied Plaintiff's motion as to the Second and Third Counts of the SAC, dismissing those counts. See id. at 492.
Turner submitted a proposed judgment on May 2, 2007, to which the Defendants responded and requested both a stay pending the New York Court of Appeal's decision in the appeal of BP Air Conditioning Corp. v. One Beacon Ins. Corp., 821 N.Y.S.2d 1 (N.Y. 2006), as well as a hearing on the issue of attorney's fees and costs. The Court issued an order on May 15, 2007, allowing for submissions to the Court on issues raised in connection with the reasonableness of Plaintiff's defense costs in the underlying actions. Defendants filed their submission on June 15, 2007, and Plaintiff responded on June 22, 2007.
The instant motion for reconsideration was filed by the Defendants on May 16, 2007, and considered fully submitted on June 6, 2007.
Defendants also filed a notice of appeal of the May 2007 Opinion on June 1, 2007.
Discussion 1. Standard of Review
Motions for reconsideration under Local Civil Rule 6.3 are evaluated under the same standard as motions to alter or amend judgments under Rule 59(e), Fed.R.Civ.P. See Word v. Croce, No. 01 Civ. 9614(LTS), 2004 WL 434038, at *2 (S.D.N.Y. Mar. 9, 2004); Williams v. New York City Dep't of Corr., 219 F.R.D. 78, 83 (S.D.N.Y. 2003); Griffin Indus., Inc. v. Petrojam, Ltd., 72 F. Supp. 2d 365, 368 (S.D.N.Y. 1999). To receive reconsideration, "`the moving party must demonstrate controlling law or factual matters put before the court on the underlying motion that the movant believes the court overlooked and that might reasonably be expected to alter the court's decision.'" Word, 2004 WL 434038, at *2 (quoting Parrish v. Sollecito, 253 F. Supp. 2d 713, 715 (S.D.N.Y. 2003)); see also Williams, 219 F.R.D. at 83. Moreover, "[r]econsideration of a court's previous order is an `extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources.'" Montanile v. Nat'l Broad. Co., 216 F. Supp. 2d 341, 342 (S.D.N.Y. 2002) (quoting In re Health Mgmt. Sys. Inc. Sec. Litig., 113 F. Supp. 2d 613, 614 (S.D.N.Y. 2000)).
"A notice of motion for reconsideration or re-argument of a court order determining a motion shall be served within ten (10) days after the entry of the court's determination of the original motion, or in the case of a court order resulting in a judgment, within ten (10) days after the entry of judgment. There shall be served with the notice of motion a memorandum setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked." Local Civ. R. 6.3.
2. The Motion for Reconsideration Is Denied
Defendants have failed to point to any controlling law or factual matter put before and overlooked by the Court on the underlying summary judgment motion that would alter the outcome of the Court's decision. Even assuming, arguendo, that Defendants had met their procedural burden and the Court were to reconsider the May 2007 Opinion, Defendants re-assertions that the additional insured obligation was not triggered and that Turner's liability did not arise from Trident's work would still be found unavailing.
Defendants have again asserted that the additional insured obligation was not triggered because there has yet to be a finding of fact that Turner's liability arose out of Trident's work for Turner. (Defs.' Mem. in Supp. 3-4.) Put another way, Defendants have asserted that a jury must find that there was "non-negligent work of Trident for Turner that resulted in Turner's liability." (Id. at 7-8.)
a. Trident's Work Was Effectively "For" Turner
First, although the Court did not directly address the issue of whether Trident's work was for Turner, it unquestionably was so. Defendants have asserted that this issue has not been resolved because the jury in the underlying trial was not asked "whether Trident was performing work for Turner." (Defs.' Reply 6.) Defendants also appear to be implying that because Trident and Turner did not have a direct contractual relationship, any work that Trident performed was not "for" Turner. However, Trident's contract with the Synagogue reads, in pertinent part: "The Work hereunder is to be performed and furnished under the general direction and to the satisfaction of the Architect, the Owner and Turner." (Jt. Ex. 18, Art. IX (emphasis added).) Turner is similarly mentioned throughout the contract.
Furthermore, the contract between Trident and the Synagogue also indicates, in pertinent part:
The Contractor hereby assumes entire responsibility and liability for any and all damage or injury of any kind or nature whatever . . . to all property caused by, resulting from, arising out of or occurring in connection with the execution of the Work, or in preparation for the Work, or any extension, modification, or amendment to the Work . . . should any claims for such damage or injury . . . be made or asserted, whether or not such claims are based upon Owner's or Turner's alleged active or passive negligence or participation in the wrong or upon any alleged breach of any statutory duty or obligation on the part of the Owner or Turner, the Contractor agrees to indemnify and save harmless the Owner and Turner . . . from and against any and all such claims and further from and against any and all loss, cost, expense, liability, damage, or injury, including legal fees and disbursements, that the Owner and Turner . . . may directly or indirectly sustain, suffer or incur as a result thereof and the Contractor agrees to and does hereby assume, on behalf of the Owner and Turner . . . the defense of any action at law or in equity which may be brought against the Owner and/or Turner . . . upon or by reasons of such claims and to pay on behalf of the Owner and/or Turner . . . upon demand, the amount of any judgment that may be entered against the Owner and/or Turner . . . in any such action.
(Jt. Ex. 18, Art. XXIII.) Under the language of the contract, Turner has a reasonable expectation that it will be an additional insured under the policies. To conclude that Turner was not an additional insured because Trident's work was not "for" Turner, would be to render the additional insured provision of the policies as it pertains to Turner meaningless.
The case of Brooklyn Hospital Center v. One Beacon Insurance, 799 N.Y.S.2d 158 (N.Y.Sup.Ct. 2004), is instructive here. Both the contractual structure and one of the insurance policies inBrooklyn Hospital Center were nearly identical to those implicated here. In that case, the contract between the contractor and the subcontractor required the subcontractor to obtain liability coverage naming both the contractor and the owner as additional insureds, even though there was no contract between the subcontractor and the owner. See id. at *1. Like the policy language at issue here, (see Jt. Ex. 18, AMMIC-7), the policy in Brooklyn Hospital Center extended coverage to "[a]ny person or organization to whom or to which [the subcontractor is] obligated by virtue of a written contract, agreement or permit to provide such insurance as afforded by this policy." Id. at *4. The Court held that the contract between the contractor and the subcontractor obligated the subcontractor to obtain coverage for the owner, "thereby triggering the additional insured provisions of the . . . policy." Id.
Based on the foregoing reasoning and analysis, there is no material issue of fact as to whether Trident's work was "for" Turner within the meaning of the additional insured provision of the policies.
b. This Court May Find that Turner's Liability Arose Out of Trident's Non-Negligent Work
Next, Defendants have contended that the indemnity obligation under the additional insured provision has not been triggered because there has been no factual finding that Turner's liability arose out of Trident's work for Turner. (Defs.' Mem. in Supp. 7-9; Defs.' Reply 4.) Defendants acknowledge that a fact finder has established that Turner is liable, yet they press that there must be a further factual finding "as to the cause or basis of that liability." (Defs.' Reply 4.) The proper inquiry, however, is whether Turner's liability "arose out of" Trident's work. See Turner Constr. Co. v. Kemper Ins. Co., 198 F. App'x 26, 30 (2d Cir. 2006).
Defendants have requested reconsideration, in part, because they believe that this is an issue solely for a jury. The Second Circuit agreed that the policy in question "provides for indemnification if Turner's liability arose out of Trident's work, not simply Trident's negligent work," but left it to this Court to determine whether Turner had "adduce[d] sufficient evidence to satisfy our more expansive construction of the contract's `arising out of' provision." Id. at 30-31. Furthermore, the New York Court of Appeals has indicated that while the "duty to indemnify requires a covered loss, . . . it should be apparent that a plenary trial of the issue is not always necessary." Servidone Constr. Corp. v. Sec. Ins. Co. of Hartford, 64 N.Y.2d 419, 425 (N.Y. 1985). Accordingly, it is not required that this issue be posed to a jury if there is no issue of material fact as to whether Turner's liability arose out of Trident's work.
Furthermore, it is possible for Turner's negligence to have arisen out of Trident's work. First, New York courts have found an additional insured obligation to indemnify to be triggered by the actions of the additional insured, rather than by the actions of the named insured. For example, in Consolidated Edison Company of New York, Inc. v. United States Fidelity and Guaranty Company, 697 N.Y.S.2d 620 (N.Y.App.Div. 1st Dep't 1999), plaintiff was an additional insured under the excavation contractor's insurance policy, the additional insured provision of which was very similar to the provision at issue here. An employee of the contractor claimed that he was injured because of the plaintiff's negligent placement of a barricade. The only issue in the case was whether plaintiff's liability "arose out of" the contractor's work for the plaintiff, thereby triggering the additional insured provision of the insurance policy. The defendant insurer unsuccessfully argued on appeal that the additional insured provision had not been triggered because the placement of the barricade had nothing to do with the contractor's work for the plaintiff. See id. at 621; see also Consol. Edison Co. of New York, Inc. v. Hartford Ins. Co., 610 N.Y.S.2d 219, 221 (N.Y.App.Div. 1st Dep't 1994) ("The fact that the cause of the injury may have been plaintiff's fault, or due to plaintiff's negligence, is immaterial." (citations omitted)).
According to the opinion, the additional insured endorsement limited coverage to "liability arising out of `our work' [i.e., the contractor's work] for the insured [i.e., the additional insured] by or for you." U.S. Fid. Guar. Co., 697 N.Y.S.2d at 621.
Additionally, New York Courts have refused to recognize any exclusion from additional insured coverage as a result of the loss or injury being caused by the negligence of the additional insured. See, e.g., Ins. Co. of N. Am. v. Liberty Mut. Ins. Co., Nos. 94 Civ. 637 (LLS), 94 Civ. 885 (LLS), 1994 WL 150818 (S.D.N.Y. Apr. 19, 1994) (rejecting defendants' contention that "summary judgment is premature because they are not responsible for providing coverage to the extent that [additional insured] is found negligent"); Tishman Constr. Corp. of N.Y. v. CNA Ins. Co., 652 N.Y.S.2d 742, 743 (N.Y.App.Div. 1st Dep't 1997) ("the [additional insured] clause was not to be read as an exclusion of coverage arising out of [the additional insured's] negligence");Hartford Ins. Co., 610 N.Y.S.2d at 221 ("If the parties intended to exclude coverage arising out of the negligence of [the additional insured], such language could have been easily added into the subject endorsement.").
Finally, Defendants' efforts to distinguish this case from those involving injured employees is unavailing. In support of this point, Defendants cite Greater New York Mutual Insurance Company v. Mutual Marine Office, Inc., 769 N.Y.S.2d 234, 238 (N.Y.App.Div. 1st Dep't 2003). That case, however, distinguished the owner/general contractor relationship from the lessor/lessee relationship, focusing on the lease allocation of responsibility for the repair and maintenance of demised premises within the latter relationship. The case did not distinguish between injuries to employees versus damages to property within the owner/general contractor relationship. See id. at 238-39.
Accordingly, Defendants' duty to indemnify Turner under the additional insured provision is not barred by the fact that the damages were caused by Turner's own actions or even that they were caused by Turner's own negligent actions.
c. There Is No Issue of Material Fact as to Whether Turner's Liability Arose Out of Trident's Work
As the Second Circuit Court of Appeals stated in its prior opinion:
The New York Court of Appeals has held that the phrase "arising out of" is ordinarily understood to mean originating from, incident to, or having connection with. Thus, the phrase requires only that there be some causal relationship between the injury and the risk for which coverage is provided.Turner Constr. Co., 198 F. App'x at 30 (internal citations and quotation marks omitted).
It was determined in the May 2007 Opinion that there was sufficient evidence adduced at trial to satisfy the Second Circuit's "more expansive construction of the contract's `arising out of' provision." Id. at 31. Specifically, it was indicated that:
Here, Trident was the HVAC contractor for the project. The fire was started by an employee of the roofing subcontractor, who was working on the roof that had been cut out for the installation of the air conditioning units installed by Trident. Furthermore, operation of the roof exhaust fans installed by Trident aided the spread of the fire. Also, Trident participated in disabling one of the fire alarm systems.Turner Constr. Co., 485 F. Supp. 2d at 489.
Defendants have contended that there "is no proof that Turner was found liable for Trident's work." (Defs.' Mem. in Supp. 8.) They have asserted further that "[a]ll of the `facts' recited by this Court . . . was [sic] either not work by Trident, or was [sic] a claim of negligence against Trident which was rejected by the jury," and that there "was a factual dispute at trial on which entity wired the fans, and who turned them on." (Id. at 8-9.)
As Defendants have repeatedly asserted, Turner's liability must "arise out of" Trident's work; Turner does not have to be found liable for Trident's work. In addition, just because Trident was found not to be negligent does not eliminate the possibility that Turner's liability arose out of Trident's non-negligent work. See Turner Constr. Co., 198 F. App'x at 30. Finally, a determination of which party was responsible for wiring and turning on the fans is not necessary to a determination that Turner's liability "arose of out" Trident's work.
The facts are as follows. Trident entered into a contract with the Synagogue regarding certain HVAC work. (Defs.' Rule 56.1 Stmt. ¶ 18; Pl.'s Rule 56.1 Stmt. ¶ 21.) The installation of the air conditioning units was part of Trident's work. (Pl.'s Rule 56.1 Stmt. ¶ 22; Defs.' Resp. to Pl.'s Rule 56.1 Stmt. ¶ 22.) Part of the roof was opened or removed so that the air handling units could be lowered into the building. (Pl.'s Rule 56.1 Stmt. ¶ 23; Defs.' Resp. to Pl.'s Rule 56.1 Stmt. ¶ 23.) An Aris worker was using the propane torch that started the fire while he and another worker were restoring the roof by nailing down base sheets, applying additional layers, and then using the propane torch on the top layer. (Defs.' Rule 56.1 Stmt. ¶ 13; Pl.'s Resp. to Defs.' Rule 56.1 Stmt. ¶ 13.) Turner was engaged as the owner's representative and agent at the Synagogue Phase III work site, and was thereby responsible for monitoring and administrating the building of the project. (Defs.' Rule 56.1 Stmt. ¶ 3; Pl.'s Resp. to Defs.' Rule 56.1 Stmt. ¶ 3.) Turner's negligence with regard to its Phase III work at the Synagogue was found to be part of the cause of the property damage. (Defs.' Rule 56.1 Stmt. ¶ 19; Pl.'s Resp. to Defs.' Rule 56.1 Stmt. ¶ 19.)
These facts alone are sufficient to show that Turner's liability "arose out of" Trident's HVAC work as part of the Phase III project at the Synagogue as that term "arose out of" has been broadly defined by both the New York Court of Appeals and the Second Circuit Court of Appeals. As in Consolidated Edison Company of New York, Inc. v. United States Fidelity and Guaranty Company, 697 N.Y.S.2d 620, where the plaintiff's negligent placement of a barricade was found to have arisen out of the excavation contractor's work, so Turner's negligence in monitoring and administrating the project "arose out of" Trident's work on the Phase III project.
3. Issues Related to Judgment
The motion for reconsideration being denied, several issues must be addressed with respect to entering judgment in this action.
a. Defendants' Liability for Turner's Defense Costs
Defendants have asserted that they are only liable for a percentage of Turner's defense costs and have raised issue with the amount of the fees owed. Each of these points will be taken in order.
i. Defendants May Not Be Liable for 100 Percent of Turner's Defense Costs
In response to Plaintiff's underlying summary judgment motion, Defendants asserted that they were only liable for one-fourth of Turner's defense costs. (Defs.' Mem. in Opp'n to Summ. J. 10.) Although the Court did not directly address this contention, it was acknowledged by the Court, which then indicated that "Turner is entitled to summary judgment granting the relief sought in relation to Count One of the SAC, including indemnification and the costs of its defense." Turner Constr. Co., 485 F. Supp. 2d at 491. Defendants' request for a hearing on the applicability of the other contractor's insurance to Plaintiff's defense costs was not granted. (See Defs.' Mem. in Opp'n to Summ. J. 10.)
It was not until their Reply Memorandum of Law on the instant motion that Defendants contended they were incapable of asserting contribution claims for Turner's defense costs against Turner's other insurers. This contention was based on the other insurers' settlements with Turner, which Defendants have asserted protect those insurers from any "cross-claims" for contribution pursuant to New York General Obligations Law ("N.Y. GOL") § 15-108. (Defs.' Reply 8.) Because the Court did not grant Defendants' earlier request for a hearing, the issue will now be addressed.
The Second Circuit has held that contribution rights among insurance companies insuring the same event cannot be impacted by any settlement among any of the insurers and the insured, but instead flow from equitable principles. See Maryland Cas. Co. v. W.R. Grace Co., 218 F.3d 204, 210-11 (2d Cir. 2000). The Second Circuit has also found that, in accordance with N.Y. GOL § 15-108, after a plaintiff has settled with a tortfeasor's insurer, any other tortfeasor will be entitled to an appropriate offset for that settlement. See Branch v. United States, 979 F.2d 948, 952 (2d Cir. 1992). Failure to implead other insurers does not bar any such offset. See Murphy v. Keller Indus., Inc., 201 F.R.D. 317, 320 (S.D.N.Y. 2001).
Therefore, based on principles of equity and N.Y. GOL § 15-108, Defendants should receive the benefit of an offset of any settlement of defense costs that Turner entered into with any of its primary insurers who had a duty similar to the Defendants to defend Turner in this action. See Consol. Edison Co. of N.Y. v. Fyn Paint Lacquer Co., Inc., No. CV 00-3764 DGT MDG, 2005 WL 139170, at *5 (E.D.N.Y. Jan. 24, 2005) (finding insurer not liable for full amount of defense costs where other insurers had already settled, thereby barring contribution because those defense obligations had been terminated). Pursuant to N.Y. GOL § 15-108, the liability of the non-settling defendant is reduced by the greatest of: (1) the amount stipulated in the release; (2) the amount of consideration paid for the release; or (3) the amount of the released tortfeasor's equitable share. See In re Joint E. S. Dists. Asebestos Litig., 798 F. Supp. 940, 952 (E.D.N.Y. 1992) (judgment reversed on other grounds).
In determining the released tortfeasor's equitable share, although they use the phrase "pro rata," Defendants have argued that the defense costs should be divided on an equal basis. (Defs.' Att'ys' Fees Mem. 3.) How the defense costs should be divided depends upon the "Other Insurance" provisions of the various policies. See Maryland Cas. Co., 218 F.3d at 212 ("the law of New York follows those provisions of the policies that may permit contribution by equal shares"); Avondale Indus., Inc. v. Travelers Indemnity Co., 774 F. Supp. 1416, 1436 (S.D.N.Y. 1991). For example, the AMMIC policy includes an "Other Insurance" "Method of Sharing" provision that provides for contribution by equal shares unless "any of the other insurance does not permit contribution by equal shares," in which case contribution would be by a ratio of the applicable limit of insurance. (Jt. Ex. 23, AMMIC-36, 4(c).)
ii. The Amount of the Fees Owed
Defendants have asserted that there are several defense cost items for which Plaintiff is not entitled to recover. Plaintiff has rebutted all of these assertions but one: a charge for "Skadden Arps" in the amount of $4,931.00, for which Turner is admittedly unable to provide support. (Pl.'s Att'ys' Fees Mem. 4 n. 6.) Therefore, the overall amount of Turner's defense fees will be reduced by $4,931.00.
b. Defendants' Indemnification of Turner
Plaintiff asserted in its underlying summary judgment motion that it was entitled to indemnity for the amount it paid to settle the underlying actions, as limited by the remaining limits of the Lumberman's Policy, going so far as to specify the amount of $9,750,000. (Pl.'s Mem. in Supp of Summ. J. 21-22.) In response, Defendants asserted that they had not participated in or consented to the reasonableness of the settlement. (Defs.' Mem. in Opp'n to Summ. J. 9.) This Court held that the Defendants were "obligated to reimburse Turner for any reasonable settlement amount paid in the underlying actions." Turner Constr. Co., 485 F. Supp. 2d at 490 (citing Burroughs Wellcome Co. v. Commercial Union Ins. Co., 713 F. Supp. 694, 698 (S.D.N.Y. 1989); Sucrest Corp. v. Fisher Governor Co., Inc., 371 N.Y.S.2d 927, 940 (N.Y.Sup.Ct. 1975)). The Court also indicated that under the circumstances, the settlement was reasonable. Id. (citing Sucrest Corp., 371 N.Y.S.2d at 940).
Only after Plaintiff submitted its proposed judgment to the Court did Defendants contend that there were issues regarding "set-offs" for contributions from the other insurers to the settlement amounts paid by Turner. Additionally, in their Reply Memorandum of Law on the instant motion, Defendants have contended that requiring them to pay 100 percent of Turner's liability would violate N.Y. GOL § 5-322.1 "and the clear intent of the additional insured endorsement." (Defs.' Reply 7.) Having failed to raise these contentions during consideration of the underlying summary judgment motions, it is not appropriate for Defendants to seek reconsideration by this Court on such grounds.
Conclusion
For the foregoing reasons, Defendants' motion for reconsideration under Local Civil Rule 6.3 is denied.
The parties will re-submit judgment on notice, pursuant to the principles set forth in this opinion and with all supporting documentation as to status as a primary insurer owing Plaintiff a duty to defend, any relevant settlements of such defense duties, applicable policies' "other insurance" provisions, and any other appropriate supporting documentation.
It is so ordered.