Board of Mgrs. of the Schaefer Landing N. Condominium v Continental Cas. Co.
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Board of Mgrs. of the Schaefer Landing N. Condominium v Continental Cas. Co. 2011 NY Slip Op 33430(U) December 16, 2011 Sup Ct, NY County Docket Number: 104581/10 Judge: Jane S. Solomon Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. SCANNED ON I212712011 [* c/1] ItlWd A l N n 0 3 ]MOA M3N - N U O A M3N d 0 UWlS 3 H 1 4 0 l t I n O 3 3W3tldnS [* 2] SUPREME CC RT OF T E STATE OF NEW COUNTY OF NEW YORK: IAS PART 55 ORK _______-----________-------------------X THE BOARD OF MANAGERS OF THE SCHAEFER LANDING NORTH CONDOMINIUM and SCHAEFER LANDING NORTH CONDOMINIUM an Unincorporated Association, 104581/10 Index No. Plaintiff, J ) E I I p , 0 RDER, -)C$OJ PARTIAL JUDGMENT and -against- QECLARATLON CONTINENTAL CASUALTY CO., AGCS MARINE INSURANCE CO. f/k/a INTERSTATE INDEMNITY UNFILED JUDGMENT co. , STRATHMORE INSURANCE co. , A M E R I C ~ I S judgment has not been entered by the County Clerk GUARANTEE & LIABILITY INSURANCE c o . , and notlce of entry cannot be served based hereon. To PETER GRONTAS and VALENTINA SCHEMBRI,obtain entry, counsel or authorized representative m.~st appear in person at the Judgment Clerk's Desk (Room 1418). Defendants. Jane Solomon, J.: This is an insurance coverage action by plaintiffs The Board of Managers of the Schaefer Landing North Condominium (Board) and Schaefer Landing North Condominium (Condominium) deriving from an underlying action brought by the owners of a condominium unit, for defective design and construction of the building (Building) and the unit, and for failure to m a k e repairs. Plaintiffs move for a declaratory judgment, stating that: 1) certain policies issued by defendants Continental Casualty Co. (Continental), AGCS Insurance Co. Marine Insurance Co. (AGCS), Strathmore (Strathmore) and American Guarantee 1 & Liability [* 3] Insurance Co. (American Guarantee) were in effect within the time period encompassed in the complaint in the underlying action (Underlying Complaint); 2) that such defendants are required to indemnify the Board and the Condominium for any verdict, judgment or settlement in the underlying action; and 3) that defendants Continental, Strathmore and AGCS are obliged to defend the Board and the Condominium and to reimburse them for any costs incurred in defending the underlying action. Continental cross-moves, pursuant to CPLR 3212, for an order granting summary judgment dismissing the complaint and denying plaintiffs motion. AGCS cross-moves, pursuant to CPLR 3212, for an o r d e r granting summary judgment dismissing the complaint and f o r a declaration that it is not required to provide plaintiffs with a defense in the underlying action. Baakground The Condominium is located at 440 Kent Avenue in Brooklyn, New York. Defendants Peter Grontas and Valentina Schembri purchased unit 2 2 C (the Unit) in November of 2006. However, they allege that they soon began to experience significant water intrusion and leaks in their living room during periods of heavy rain. Complaint ¶ 64. 2 Underlying [* 4] In November 2009, they commenced an action (Underlying Action) against, among others, the Board, the Condominium, Kent North Associates LLC, which was the sponsor, and Kent Waterfront Associates LLC, which was the developer of the building. The Underlying Complaint alleges defectively designed and constructed, that the building was It also asserts that the Board failed to disclose to the underlying plaintiffs certain items that needed repair in order for the Unit to be f r e e from such defects. It further asserts that the Board failed to cure the water infiltration problems despite numerous letters and phone calls from the underlying plaintiffs. Underlying Complaint, ¶¶ 1, 01, 138, 142, 1 5 7 . The Underlying Complaint sets forth causes of action for breach of contract, negligence and breach of fiduciary duty against the Board, as well as a derivative claim against the Board on behalf of the Condominium. The Board and the Condominium commenced the instant action in April of 2010, against the defendant insurance companies which allegedly issued policies to the Condominium and the Board during the period f r o m 2001 to 2010. In a decision dated February 18, 2011, this court granted, in part, defendant American Guarantee 3 & Liability Insurance Co.'s [* 5] motion to dismiss the complaint, to the extent of dismissing plaintiffs' claim f o r indemnification under the excess insurance portion of the policy. The court denied the part of the motion which sought dismissal of the claim under the umbrella liability portion of the policy. The court found that the plaintiffs had adequately pleaded that the property damage at issue was the result of an "occurrence," as defined in the policy. Diaaussion Poliay Periods As a threshold matter, plaintiffs s e e k a declaratory judgment stating that the various policies issued by Continental, AGCS, Strathmore and American Guarantee were in effect within the time period encompassed in the Underlying Complaint. However, the moving papers do not address this issue or attempt to demonstrate that the policies were in effect during the relevant period of time. Therefore, this portion of the motion is denied. Indemnification Plaintiffs s e e k a declaration stating that Continental, AGCS, Strathmore and American Guarantee are required to indemnify the Board and the Condominium for a n y verdict, judgment or settlement 4 [* 6] in the underlying action. Plaintiffs argue that they are entitled to coverage because the allegations set forth in the Underlying Complaint, 1.e. the persistent water leaks, constituted an "occurrence" under the terms of the various policies. Strathmore, AGCS and American Guarantee argue that any such declaration would be premature, because a determination of an insurer's obligation to indemnify its insured should not be made in advance of the trial of the underlying action. that the motion Continental argues should be denied as to itself, because the Continental policy is not an "occurrence" policy. AGCS and Continental also cross-move f o r summary judgment dismissing the complaint on the ground that the allegations in the Underlying Complaint do not respective policies. fall within A party moving the terms of their for summary judgment is required to make a prima facie showing that it is entitled to judgment as a matter of law, by providing sufficient evidence to eliminate any material issues of fact from the case. Winegrad v New York Univ. Med. Ctr., 6 4 N Y 2 d 8 5 1 ( 1 9 8 5 ) ; Grab v K i n g s R e a l t y A S S O C . , 4 AD3d 394 (2d Dept 2004). The party opposing must then demonstrate the existence of a factual issue requiring a trial of the action. Zuckerman v C i t y of New Yor,k, 4 9 N Y 2 d 557, 5 6 2 (1980). As a threshold matter, plaintiffs' 5 motion is denied w i t h [* 7] respect to Continental, and Continental's cross-motion for summary judgment dismissing the complaint is granted on the ground t h a t the allegations in the Underlying Complaint do not fall within the terms of the Continental policy. Continental issued a claims-made Directors and Officers liability policy to the Condominium for the period of April 30, 2008 to April liability. 30, 2009, with a one million dollar limit of In an Endorsement titled "Not For Profit Community Associations," the Continental policy provides, in relevant part, that: The Insurer shall not be liable to pay any Loss in connection with any Claim: B. based upon, directly or indirectly arising out of, or in any way involving any: * * * (ii) Construction Defect; (iii) damage to tangible property; loss of use, or destruction or deterioration of, any tangible property; or failure to supervise, repair or maintain tangible property ... Here, the underlying action arises directly from property damage, resulting from alleged construction defects and failure to repair or maintain the building. Therefore, Continental has made a prima facie showing that there is no coverage u n d e r the policy. See S c h a r f v F e d e r a l I n s . Co., 261 AD2d 257, 257 (1st Dept 1999); 6 [* 8] Board o f Mgrs. of Y a r d a r m Condominium 11 v F e d e r a l I n s . Co., 2 4 7 AD2d 499, 500 (2d Dept 1998). Plaintiffs argue t h a t certain causes of action fall outside the scope of the exclusion, specifically, the claims for breach of fiduciary duty, aiding and abetting breach of fiduciary d u t y and violation of General Business Law 5s 349 a n d 3 5 0 . However, examination of the complaint reveals that even these claims a r i s e from the underlying plaintiff s assertion t h a t their damages were caused b y , among other things, defective construction of the building and the failure to repair such defects. The Continental policy clearly was written to exclude coverage for such damages. Therefore, Continental s cross motion for summary judgment dismissing the complaint is granted. As to the remaining defendants, the main issues are: 1) whether the allegations in the Underlying Complaint constituted an Occurrence as defined in the policies; and 2) whether coverage is barred by a n y exclusions. Strathmore, AGCS and American Guarantee each issued commercial general liability policies, covering the plaintiffs for various periods of time. accident, Each policy defined an occurrence as an including continuous or repeated substantially the same general harmful conditions. 7 exposure to [* 9] In the February 18, 2011 decision, this court noted that the Underlying Complaint specifically alleges that the property damage suffered by the underlying plaintiffs was the result of continuous and repeated exposure to the same harmful condition, i.e., the persistent water leaks in the apartment. Based on such allegations, the court found that plaintiffs had adequately pleaded that the property damage was the result of an occurrence, as defined by the policy. Plaintiffs now argue that this finding is law of the case and cannot be contested by any of the defendants. Defendants argue that the law of the case doctrine does not apply when a summary judgment motion follows a motion to dismiss. "The doctrine of the law of the case seeks to prevent relitigation of issues of law that have already been determined at an earlier stage of the proceeding. T h e doctrine applies only to l e g a l determinations that were necessarily resolved on the merits in a prior decision." B r o w n r i g g v N e w York C i t y Hous. A u t h . , A D 3 d 721, 722 (2d Dept 2 0 0 6 ) , 29 internal citation omitted. Here, this court's previous order was based on a motion to dismiss, which assumed the truth of the facts alleged in the complaint. It was not a determination of the ultimate merits of plaintiffs' claims for indemnification. 8 See 191 Chrystie LLC v [* 10] Ledoux, 82 AD3d 681 (1st Dept 2 0 1 1 ) ; R i d d i c k v City of New York, 4 AD3d 2 4 2 , 2 4 5 (1st Dept 2 0 0 4 ) . Thus, at this stage, the court has only determined that the allegations in the Underlying Complaint of persistent water l e a k s , if true, would constitute an occurrence as defined in the policies. Defendants are not, however, precluded from contesting whether the facts that are ultimately adduced at the trial of the underlying action constitute an occurrence under the policy. Defendants correctly assert that it is premature, at this point, for the court to declare ,whether or not plaintiffs a r e entitled to indemnification from any of the remaining defendant insurers. In C h u m v New York C i t y H o u s i n g Authority ( 5 5 AD3d 437 [ I a t Dept 2 0 0 8 1 ) , the Appellate Division, First Department, found that issues of fact as to liability in an underlying personal injury action rendered premature a determination of whether certain insurers had a duty to indemnify the insured. v X.L.O. See 79th Realty C o . Concrete Corp., 247 AD2d 256 (1st Dept 1998). Here, numerous factual disputes exist which preclude a determination as to whether, and to what extent, the defendant insurers are obligated to indemnify either the Board or the Condominium. Among other things, questions exist as to when the water leaks began and whether such leaks were caused by defective 9 [* 11] design or construction, defective repairs, a failure to repair the leaks or a combination of factors. The parties a l s o sharply dispute when plaintiffs first had notice of the leaks. Resolution of that issue will determine which policies were in effect during the relevant period of time and whether coverage was properly denied under a n y of the exclusions Set forth in the various policies. Therefore, plaintiffs' motion f o r a declaratory judgment on the issue of indemnification is denied, and AGCS's cross motion to dismiss this claim is denied. above. As to the remaining defendants, it is well settled that an insurer's duty to defend its insured is far broader than its duty to indemnify the insured. See F i e l d s t o n Prop. Owners Assn., Inc. 10 [* 12] v Hermitage I n s . C o . , Inc., 16 NY3d 257 Acceptance Corp. v N a t i o n w i d e I n s . C o . , (2011); General Motors 4 NY3d 451 (2005). The insurer must provide a defense whenever the allegations of the complaint suggest a reasonable possibility of coverage. New York S t a t e Energy Research (4th Dept 2011). & Stranz v Dev. A u t h . ( N Y S E R D A ) , 0 7 AD3d 1279 Thus, where the underlying complaint sets forth any facts or allegations which bring the claim potentially within the terms of the policy, the insurer is obligated to provide a defense. Id. Here, the allegations in the Underlying Complaint set forth facts which demonstrate a reasonable possibility of coverage for the instant plaintiffs under some or all of the policies. As described above and in this court's earlier decision, some of the damages allegedly incurred in the Underlying Action resulted from persistent water leaks in the Unit, which may constitute an occurrence under the policies Given possibility, the defendant at issue insurers here. have a duty to such a defend plaintiffs in the Underlying Action. Accordingly, it is ORDERED, A D J U D G E D and DECLARED that plaintiffs' motion f o r declaratory judgment is granted to the extent that defendants AGCS Marine Insurance Co. and Strathmore Insurance Co. are obligated to 11 [* 13] 12 [* 14] ORDERED that the remainder of the action shall continue, to include a determination of the amount of damages plaintiffs are entitled to recover as reimbursement f o r c o s t s and reasonable attorneys fees incurred in defending the Underlying Action. DATED: December 16, 2011 ENTER: 13
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