Selective Ins. Co. of Am. v Chu & Gassman
Consulting Engr's, P.C.
2012 NY Slip Op 31078(U)
April 19, 2012
Supreme Court, New York County
Docket Number: 112116/10
Judge: Richard F. Braun
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SUPREME COURT OF THE $TATE OF NEW YORK
The fallowing papers, numbered 1 to
Cross- Moti orS:
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SUPlWME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: IAS PART 23
X
SELECTIVE INSURANCE COMPANY OF AMERICA,
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Plaintiff,
Index No. 112116/10
Q!m B
â¬â¬ Q
-againstCHU & GASSMAN CONSULTING ENGINEERS, P.C.,
CONTINENTAL CASUALTY COMPANY, INC.,
DONNA MONTELLO, AS ADMINISTRATRIX OF THE
ESTATE OF GENNARO MONTELLO and DONNA
MONTELLO, INDIVIDUALLY, and DAVID MOSTYN
AND LISA MOSTYN,
RICHARD F. BRAUN, J.:
FILED
NEW YORK
COUNTY .CLERKâS OFFICE
This is a declaratory judgment action brought to determine the defense and
indemnification obligations of two liability insurers with respect to a personal injury action and a
wrongful death action arising from the collapse of an industrial conveyor belt. The parties have
moved for relief as follows:
(a) Defendant Continental C s a t Company, Inc. (âContinentalâ) moves for summary
auly
judgment (CPLR 3212) declaring that plaintiff Selective Insurance Company of America
(âSelectiveâ) must defend defendant insured Chu & Gassman Consulting Engineers, P.C.
(âChuâ) on a primary basis and reimburse Continental for certain defense costs.
(b)
Chu cross-moves for the same declaration, dismissal of plaintiffs amended
complaint, and attorneyâs fees in connection with the instant action.
(c) Selective cross-moves for summary judgment declaring that Selective is relieved from
any policy obligations under the insurance policy exclusions for âprofessional servicesâ and
âerrors and omissions.â
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Intl. S. Ins. Co., 71 AD3d 561, 562 [latDept 20101.) Moreover, â[tlo be relieved of its duty to
defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating
that the allegations of the complaint cast the pleadings wholly within that exclusion, that the
exclusion is subject to no other reasonable interpretation, and that there is no possible factual or
legal basis upon which the insurer may eventually be held obligated to indemnify the insured
under any policy provision (citation omitted).â (Frontier Insulation Conks. v Merchants Mut.
Ins. Co., 91 NY2d 169, 175 [1997].) If any claims asserted âarguably arise from covered
events,â the insurer must defend the entire action. (id.)
Where a professional services exclusion is invoked, the trier of fact must look âto the
nature of the conduct under scrutiny rather than to the title or position of those involved, as well
as to the underlying complaint, the contract under which [the insured] was to perform....9,
(Reliance Ins. Co. v National Union Fire Ins. Co. of Pittsburgh, Pa,, 262 AD2d 64, 65 [l* Dept
19991 [citation and internal quotation marks omitted] .) The exclusion does not apply where the
insured merely enforces the terms of its contract or safety rules without drawing upon
engineering or other professional knowledge. (id.)
The direct and third-party claims against Chu assert claims for ordinary negligence, and
contract, common law and statutory violations in connection with construction and demolition
that could conceivably fall outside the exclusion for professional, supervisory, inspection, or
engineering services (I$ Westpoint Intl., Inc. v American Intl. S, Ins. Co., 71 AD3d 561, 562
[âAlthough the underlying complaint contains some causes of action that are arguably subject to
the insurance policyâs âcontract liabilityâ exclusion, it alleges, in addition to a single cause of
action for breach of contract, several causes of action sounding in tort and alleging statutory
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violations.â]). The plaintiffs and other parties do not assert that all of Chuâs conduct involved
supervision and inspection.
In urging summary judgment under the exclusion, Selective has submitted a subcontract
and purchase orders claimed to be between Chu and an entity apparently alleged to be affiliated
with third-party defendants in the underlying actions. Selective argues that the documents show
that Chu was responsible for resident engineering, and electrical and mechanical inspection
support, and notes that the word âengineerâ appears in Chuâs corporate name and that Chu is
described as an architect in the declarations page of the policy. The court may not even consider
this âevidenceâ in determining the duty to defend. It is well-established that âa liability insurer
has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence,
even though the facts outside the four corners of those pleadings indicate that the claim may be
meritless or not covered (citation omitted).â (Fitzpatrick v American Honda Motor Co., 78
0
NY2d 6 1,63 [ 19911; accord Savik, Murray & Aurora Constr. Mgt. Co., LLC v ITT Hartford Ins.
Group, 86 AD3d 490,494 [lBt
Dept. 201 11.)
With respect to Selectiveâs invocation of the errors and omissions exclusion, there is no
need to examine the legal applicability of the clause. In neither of the two partial disclaimer
letters by Selective did it invoke that exclusion. Rather, Selective relied exclusively upon the
professional services exclusion, and did not raise the errors and omissions exclusion until
Selective made its instant cross-motion. Accordingly, any defense under the exclusion has been
waived (Estee Lauder Inc. v OneBeacon Ins. Group, LLC, 62 AD3d 3 3 , 35 [latDept 20091). In
any event, the same analysis applicable to the professional services exclusion would apply. The
pleadings allege negligence and statutory claims which might conceivably fall outside of the
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â(1) consulting; (2) evaluating; (3) advising; (4) instructing; (5) testing; (6) reporting; or
otherwise providing or failing to provide servicesâ provision of the errors and omissions
exclusion.
Chu and Continental are entitled to a declaration that the Selective policy, like
Continentalâs, provides primary coverage. Because both policies contain âother insuranceyâ
provisions, the clauses cancel each other out, and the insurers are required to provide primary
coverage on a pro rata basis (Great N. Ins. Co. v Mount Vernon Fire Ins. Co., 92 NY2d 682, 687
[1999]; Sport Rock Intl., Inc. v American Cas. Co. of Reading, Pa., 65 AD3d 12, 19 [lSt
Dept
20091). Furthermore, because Continentalâs policy provides for a $50,000 self-insured retention,
Selective is responsible for the first part of defense costs up to that amount before the two
insurers are required to share the costs (see New York State Thruway Auth. v KTA-Tutor Engâg
Sews., P.C., 78 AD3d 1566, 1568 [4âhDept 20101).
Finally, Chu is entitled to attorneyâs fees incurred in connection with this insurance
declaratory judgement action. An insured is entitled to such fees when it âhas been cast in a
defensive posture by the legal steps an insurer takes in an effort to free itself from its policy
obligations ... (citations omitted).â (Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21
[1979]; accord Reliance Ins. Co. v National Union Fire Ins. Co. of Pittsburgh, Pa., 262 AD2d at
66.) Selective placed Chu in that position by commencing this action.
Thus, by this courtâs separate decision and order, dated April 17, 201 1, the motion by
Continental and the cross motion by Chu were granted in their entirety. Selectiveâs cross motion
WBS
denied. The branch of Chuâs cross motion seeking dismissal of the amended complaint
cannot be granted, as it is not appropriate to dismiss a declaratory judgment cause of action on
the merits but, if the claim is meritless, a declaration should be made in the opposite direction
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(see 200
Genesee St. Corp. v City of Utica, 6 NY3d 761, 762 [2006]; Sirius Am. Ins. Co. v
Burlington Ins. Co., 81 AD3d 562, 563 [la Dept 201 1).
Dated: New York, New York
April 19,2012
FILED
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RICHARD F. BRAUN, J.S.C.
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