Penguin A.C. Corp. v Sterling Indus., Inc.
Annotate this CaseDecided on August 27, 2004
Supreme Court, New York County
PENGUIN AIR CONDITIONING CORP., Plaintiff,
against
STERLING INDUSTRIES, INC., and QBE INSURANCE CORP., Defendants.
118061/03
For Plaintiff
London Fischer
212-972-1000
For Defendants
Mendes & Mount
Helen E. Freedman, J.
Upon the foregoing papers, it is ordered that this motion by Penguin Air Conditioning Corp. ("Penguin") for summary judgment declaring that Sterling Industries, Inc. ("Sterling")is liable for its defense and to indemnify it or QBE Insurance Corp. ("QBE")must defend and indemnify it for claims arising out of the Kings County action Pardy v. 1-10 Industry Associates, LLC., et al. is granted to the extent that QBE is directed to assume Penguin's defense in the Pardy action and indemnify Penguin for any liability imposed in connection with work performed by Sterling. [*2]Cross-motions for summary judgment by Sterling and QBE are denied as follows:
Penguin was a contractor performing HVAC or air conditioning work in 600 of 241 37th Street, Brooklyn, New York and Sterling was its subcontractor. Sterling performed duct installation and related work at the premises. Robert Pardy allegedly was injured on February 27, 2003 because of falling duct work, and sued, inter alia, Penguin and Sterling.
Penguin's contract in the form of a Purchase Order with Sterling whereby Sterling agreed to perform HVAC and sheet metal work at the premises obligated Sterling to indemnify and hold Penguin harmless from all claims ...whether direct or consequential (including legal fees and other expenses of litigation) and to procure primary liability insurance for all work performed in accordance with the Purchase Order. Sterling provided Penguin with a Certificate of Insurance confirming the existence of primary insurance coverage with QBE effective January 30, 2003
and naming Penguin as an additional insured with the same rights. The claim against Sterling is based on Kinney v. G.W. Lisk Co., Inc., 76 NY2d 215 (1990) and applies only if this Court were to not find QBE liable.
QBE and Sterling oppose the summary judgment motion and cross-move for summary judgment
dismissing the complaint against them on the ground that Penguin failed to comply with the notice provisions of the policy. Penguin was notified by Sterling of the accident on March 5, 2003 and was again notified by Pardy's lawyer about the accident by a letter of representation dated April 28, 2003 but did not notify QBE directly until late June or July of 2003. QBE disclaimed based on late notice on July 17, 2003. QBE also cross-moves contending that the duct work performed by Penguin was not connected to Sterling's work at the premises and that Sterling's and Penguin's work were different.
The insurance policy provides that the insured is to provide notice of an occurrence "as soon as practicable," and within reasonable time in view of the facts. Penguin received notice of the accident by correspondence from Sterling dated March 5, 2003. The March 5th letter indicated that Sterling had installed the duct work two weeks earlier but that it appeared, based on an inspection by Sterling's foreman, that the duct work had tampered with and bolts had been removed. Penguin contends that based on that letter it had no reason to think it would be sued or reason to inform its insurer. It claims that until it received the April 28th letter Penguin did not see any reason to notify an insurer. At that point, Penguin informed CNA, its own insurer who undertook an investigation on behalf of Penguin. CNA did not complete its investigation until June 30, 2003 at which time Penguin became aware of the basis of the claim. Penguin then notified QBE by informing its broker. Although the papers do not so state, at oral argument it was made clear that QBE had been notified of the incident by Sterling in or about March 5, 2003. The disclaimer letter sent by QBE does indicate that it was put on notice by its insured (Sterling) of the incident on 5/5/03. Although it would have been better for Penguin to have notified QBE when it received the April 28, 2003 letter, in view of the fact that Sterling notified QBE in March or May of 2003, and that QBE will have the benefit of CNA's investigation, there was sufficient reason to delay notification and no prejudice will inure to QBE by having to undertake Penguin's [*3]defense. As stated by the Court of Appeals in Mighty Midgets, Inc. v. Centennial Ins. Co., 47 NY2d 12 (1979), the phrase "as soon as practicable" is an elastic phrase that cannot be decided in a vacuum but must be considered in light of all of the circumstances of the case. Here, Penguin has provided a sufficient excuse for its minimal delay. Moreover, in New York Telephone Co. v. Travelers Casualty and Surety Co. of America, 280 AD2d 268, 719 N.Y.S.2d 648 (1st Dept. 2001), the court held that notice by a main insured was sufficient to entitle the additional insured to a defense and indemnification where the interests of the insureds were not adverse.
With respect to Sterling's and QBE's claim that the additional insurance coverage did not cover Penguin, this Court is at a loss. Penguin subcontracted installation of the duct work to Sterling, Sterling admittedly installed the duct work, and Pardy's claim is for falling duct work. The allegation that somehow the duct work that injured Pardy was not covered by the QBE policy belies common sense. As long as QBE covers Sterling for Pardy's claim, it must also cover the claim against Penguin. To require further depositions to ascertain whether the claim against Penguin is for work performed by Sterling would be an exercise in overkill as there is no indication that Penguin did independent duct work. If it turns out that other duct work is involved in the accident, motions for summary judgment with respect to liability in the underlying action would be appropriate and would resolve the claims. In the meantime, the insurers duty to defend arises as long as the four corners of the complaint allege causes of action covered by the policy or "whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy." Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 749 N.Y.S.2d 456 (2002). As is well settled, the duty to defend is broader than the duty to indemnify. Fitzpatrick v. American Honda Motor Co., 78 NY2d 61 (1991).
Settle Order providing for a hearing, if needed.
Dated: August 27, 2004
Helen, E. Freedman, J.S.C.
Check one: X FINAL DISPOSITION NON-FINAL DISPOSITION
Check if appropriate: DO NOT POST
APPEARANCES
For Plaintiff
London Fischer
212-972-1000
For Defendants
Mendes & Mount
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