LaBoutique NY, Inc. v Utica Ins. Co.

[*1] LaBoutique NY, Inc. v Utica Ins. Co. 2008 NY Slip Op 50266(U) [18 Misc 3d 1132(A)] Decided on February 15, 2008 Supreme Court, Richmond County Minardo, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 15, 2008
Supreme Court, Richmond County

LaBoutique NY, Inc. and TRAVELERS INSURANCE COMPANY, Plaintiffs,

against

Utica Insurance Company and A.B.S. ATLANTIC, INC., Defendants.



102792/07

Philip G. Minardo, J.

Upon the foregoing papers, the motion (No. 2940) for summary judgment by defendant Utica Insurance Company is granted to the extent indicated and is otherwise denied; the cross motions for summary judgment (Nos. 2959 and 3689, respectively) by plaintiffs and defendant A.B.S. Atlantic, Inc. are denied in their entirety.

In this declaratory judgment action plaintiffs seek to compel the insurer of A.B.S. Atlantic, Inc. (hereinafter "A.B.S."), defendant Utica Insurance Company, to defend and indemnify plaintiff LaBoutique, NY, Inc. in the underlying personal injury action.[FN1]

To the extent relevant, Roman Uszynski commenced his action in New York County to recover damages for injuries he allegedly sustained due to a fall from a ladder at a construction site owned or leased by plaintiff LaBoutique NY, Inc. (hereinafter "LaBoutique") on February 5, 2003. LaBoutique had contracted with defendant A.B.S. to perform certain work at said premises. It is alleged that said contract obligated A.B.S. to procure liability insurance for the benefit of LaBoutique, and to name LaBoutique as an additional insured on its insurance policy.

At the time in question, LaBoutique had in effect general liability coverage through co-plaintiff Travelers Insurance Company (hereinafter "Travelers"), while A.B.S. was insured by defendant Utica First Insurance Company (s/h/a Utica Insurance Company; hereinafter "Utica"). The principal provisions of the Utica-A.B.S. policy (hereinafter the "A.B.S. policy") involved in this litigation are (1) an endorsement entitled "Exclusion of Injury to Employees, Contractors, and Employees of Contractors" (Form No. XCNTR [1.0]); (2) a disclosure notice (Form No. DNXCNTR [1/01]); (3) a contractual liability exclusion; and (4) a Blanket Additional Insured provision (Form No. BAI-1).

The action for a declaratory judgment arises out of the commencement by LaBoutique of a third-party action against A.B.S. for contribution and/or indemnification in the Uszynski action on or about March 22, 2005. It appears that on May 17, 2005, defendant Utica issued a disclaimer to its insured (A.B.S.) relative to the claims alleged in the third-party complaint, [*2]referencing the policy provisions cited above. LaBoutique subsequently obtained a judgment on the issue of liability against A.B.S. in the third-party action following its default in answering the third-party complaint.[FN2]

In this action, plaintiffs seek a declaration that LaBoutique (Travelers' insured) is covered as an additional insured under the A.B.S. policy for purposes of the Uszynski action, where it is named as a defendant. Utica then moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7), and has urged this Court to treat its pre-answer motion as one for summary judgment declaring that Utica is not obligated to defend or indemnify either A.B.S. or LaBoutique in the Uszynski action (CPLR 3211[c]; see CPLR 3001). In response, plaintiffs and A.B.S. have each cross-moved for summary judgment declaring that Utica is obligated to defend and indemnify it in the underlying action.

Since all of the parties have specifically requested summary judgment, and have made it clear that they are charting a summary judgment course of action, this Court will treat each motion as one for summary judgment under CPLR 3211(c) (see Shah v. Shah, 215 AD2d 287, 289-290 [1st Dept 1995]; cf. Sta-Brite Servs v. Sutton, 17 AD3d 570 [2nd Dept 2005]).

Utica's contention that plaintiffs lack standing to bring a direct action against it until they have obtained a judgment against A.B.S. is unavailing. Plaintiffs maintain that the default judgment which they obtained against A.B.S. in the third-party action obligates Utica to defend and hold them harmless in the underlying personal injury action. Be that as it may, the Appellate Division, Second Department has held that a plaintiff need not be in privy to an insurance contract in order to commence a declaratory judgment action to determine the rights and obligations of the respective parties, so long as the plaintiff stands to benefit from the policy (see Mortillaro v. Public Svc Mut Ins Co., 285 AD2d 586 [2nd Dept 2001]; Watson v. Aetna Cas & Sur Co., 246 AD2d 57 [2nd Dept 1998]; cf. Lang v. Hanover Ins Co, 309 AD2d 1123 [3rd Dept 2003], affd 3 NY3d 350 [2004]). Therefore, plaintiffs have standing to maintain this declaratory action.

Employee Exclusion

Utica's motion is premised, in part, on the ground that it is not obligated under the A.B.S. policy to defend or indemnify A.B.S. for damages occasioned by the bodily injury of an employee during the course of his/her employment. In support, Utica relies on the May 9, 2006 deposition testimony of Arletta Subocz Uszynski to the effect that Roman Uszynski was performing work "on behalf of" A.B.S. at the time of the accident (EBT, p 39), and points to two (2) separate policy provisions, i.e., an employee exclusion endorsement and a corresponding disclosure notice, each of which provides that: "insurance does not apply to bodily injury to any employee of any insured, to any contractor hired or retained by or for any insured or to any employee of such contractor, if such claim for bodily injury arises out of an in the course of his/her employment".[*3]

As a result, Utica maintains that the personal injury claims of Roman Uszynski are not covered under the A.B.S. policy. In this way, Utica has satisfied its prima facie burden of establishing that specific, clear and unambiguous language of exclusion shields it against the demands of plaintiffs and A.B.S. (see Makan Exports, Inc. v. U.S. Underwriters Ins Co., 43 AD3d 883, 885 [2nd Dept 2007]).

In opposition, both plaintiffs and A.B.S. have successfully raised a triable issue as to the employment status of Roman Uszynski at the time of the alleged incident (see Escobar v. Colonial Indem Ins Co, 22 AD3d 633 [2nd Dept 2005]) by citing to other portions of the deposition of Ms. Uszynski, wherein she testified that (1) Roman Uszynski was a fifty percent owner of A.B.S. (EBT, p 10); (2) the only employee of A.B.S. was "Paul Karbowski"(id. at 11); (3) Roman Uszynski did not file a worker's compensation claim (id. at 29); and (4) Roman Uszynski was paid on a commission basis (id. at 97). Clearly, if ultimately determined that Mr. Uszynski was not an employee, Utica's employee exclusion and disclosure notice would not apply. Accordingly, Utica's motion for summary judgment against plaintiffs and A.B.S. based upon the employee exclusion must be denied, as must the cross motion to compel coverage brought by A.B.S.

Timely Disclaimer

Plaintiffs also allege that Utica's disclaimer of coverage was untimely. It is well settled that an insurance carrier will be estopped from disclaiming coverage based on an exclusion in its policy where it fails to give written notice of disclaimer as soon as is reasonably possible (Insurance Law §3420[d]; see General Acc Ins Co v. Villani, 200 AD2d 711, 712 [2nd Dept 1994]; accord 474431 Assoc v. AXA Global Risks US Ins Co, 18 AD3d 604 [2nd Dept 2005]). The reasonableness of a carrier's delay in disclaiming is usually one of fact, and is judged from the time that it has sufficient facts before it to issue the disclaimer (see General Acc Ins Co v. Villani, 200 AD2d at 712). While a delay in disclaiming may be excused where, e.g., an investigation is warranted into the issues affecting its decision to disclaim, the burden is on the insurer to demonstrate that the delay was reasonably related to its completion of a thorough and diligent investigation (see Quincy Mut Fire Ins Co v. Uribe, 45 AD3d 661 [2nd Dept 2007]; Tully Constr Co. v. TIG Ins Co., 43 AD3d 1150 [2nd Dept 2007]).

Here, the affidavit by Jeff Mountz, a Utica claims representative, indicates that Utica's first notice of the underlying lawsuit occurred on April 18, 2005, when it received a copy of the third-party complaint. Thereafter, according to Mountz, an investigator was directed on April 25, 2005 to obtain information with regard to Roman Uszynski's status as an employee; the investigation was completed on May 16, 2005; and the written disclaimer was issued to A.B.S. on May 17, 2005. Therefore, Utica has met its burden in demonstrating that the 29-day delay in disclaiming coverage was not unreasonable for the purposes of Insurance Law §3420(d) (see Tully Constr Co. v. TIG Ins Co., 43 AD3d at 1153).

Blanket Additional Insured Endorsement and Contractual Liability Exclusion

In support of its motion for summary judgment against plaintiffs, Utica maintains that plaintiff LaBoutique was not covered under the A.B.S. policy since it was never named as an additional insured. In addition, Utica points to the "Blanket Additional Insured" endorsement in [*4]its A.B.S. policy, which provides that:

"insured also includes any person or organization whom you are required to name as an additional insured on this policy under a written contract or written agreement".

Here, Utica asserts that the blanket additional insured endorsement was not triggered because A.B.S. failed to produce any written contract requiring it to name LaBoutique as an additional insured.

It is well established that the party claiming to be an additional insured bears the burden of proving its status, and that a party not named or shown to be an insured or additional insured is not entitled to coverage (see Metropolitan Heat & Power Co. v. AIG Claims Serv., __AD3d__, 2008 NY Slip Op 91 [2nd Dept 2008]; Tribeca Broadway Assoc LLC v. Mount Vernon Fire Ins Co, 5 AD3d 198 [1st Dept 2004]). In this case, neither plaintiffs nor A.B.S. have produced any written agreement or contract either requiring the latter to name the former as an additional insured, or doing so directly. Accordingly, Utica has made a prima facie case that LaBoutique was not an additional insured under the A.B.S. policy, and plaintiffs have failed to raise a triable issue of fact on the issue. As such, Utica is entitled to summary judgment against the plaintiff dismissing the complaint. Plaintiffs' cross motion must therefore be denied.

Utica also contends that it is entitled to summary judgment against A.B.S. based on the "contractual liability exclusion" contained in the "Exclusions that Apply to all Liability Coverages" section of the A.B.S. policy (Movant's Exhibit A-1, page 7, Exclusion 3). That section provides that: "we do not pay for bodily injury, property damage, [or] personal injury... which is assumed under a contract or an agreement. This exclusion does not apply to (a) an incidental contract; or (b) liability for damages that an insured would have in the absence of the contract or agreement".

It is familiar law that if the language of a policy is doubtful, or its meaning uncertain, any ambiguity must be resolved in favor of the insured and against the insurer (see Westview Assoc v. Guaranty Natl. Ins. Co., 95 NY2d 334, 340 [2000]). Thus, for example, "when the exclusionary clause does not include the particular loss that the insurance company alleges, then the insured is entitled to be defended and possibly indemnified" (id. at 340). Here, the Court finds that Utica's contractual liability exclusion is inconsistent on its face with the terms of its Blanket Additional Insured endorsement, since the former purports to apply "to all Liability Coverages", and would therefore render the terms of the Blanket Additional Insured endorsement meaningless. Accordingly, the contractual liability exclusion cannot be applied to defeat any right to coverage which might have existed under the Blanket Additional Insured endorsement.

Default Judgment

Finally, that branch of plaintiffs' cross motion which is for a default judgment against Utica is denied. A defendant appears in an action by serving an answer or a notice of appearance or by making a motion which has the effect of extending the time to answer (see CPLR 320[a]; CPLR 3211[f]; New England Log Homes Inc. v. Moody, 194 AD2d 846 [3rd Dept 1993]).

Accordingly, it is

ORDERED, that defendant Utica Insurance Company's motion to dismiss the complaint and for summary judgment against the plaintiffs, pursuant to CPLR §3211(a)(1) and §3212, is [*5]granted; and it is further

ORDERED, that defendant Utica Insurance Company's motion for a declaration that it has no obligation to defend or indemnify plaintiff LaBoutique, NY, Inc. in the underlying personal injury action is granted; and it is further

ORDERED that plaintiffs' cross motion for summary judgment is denied; and it is further

ORDERED that the complaint is severed and dismissed; and it is further

ORDERED, that defendant Utica Insurance Company's motion for a declaration that it has no obligation to defend or indemnify co-defendant A.B.S. Atlantic , Inc. is denied; and it is further

ORDERED, that the cross motion for summary judgment by defendant A.B.S. Atlantic, Inc., is denied; and it is further

ORDERED that the cross claim by defendant A.B.S. Atlantic, Inc. shall stand as the complaint in a declaratory judgment action between itself and defendant Utica Insurance Company; and it is further

ORDERED that defendant Utica Insurance Company shall have thirty (30) days from the date of this decision and order within which to answer said complaint; and it is further

ORDERED that the caption be amended to read:

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF RICHMOND

 1;x

A.B.S. ATLANTIC INC.,

Plaintiff,

-against-

UTICA INSURANCE COMPANY,

Defendant.

 1;-x

and it is further

ORDERED, a preliminary conference shall be held April 11, 2008 at 9:30 A.M.

This shall constitute the order and decision of the court.

Dated: February 15, 2008

ENTER,

S/ Philip G. Minardo

J.S.C.

Clerk to notify all parties Footnotes

Footnote 1: That action, entitled Uszynski v. 47 Wooster St. Realty Corp., was commenced in the Supreme Court, New York County, under Index No. 100695/05, on or about January 11, 2005.

Footnote 2: This default judgment was granted by the Supreme Court, New York County on June 19, 2006 (Richter, J.).