S. Constr., Inc. v Everest Natl. Ins. Co.

[*1] S. Constr., Inc. v Everest Natl. Ins. Co. 2012 NY Slip Op 51109(U) Decided on June 15, 2012 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 15, 2012
Supreme Court, Richmond County

S. Construction, Inc., and ARI STEINMAN, Plaintiff(s),

against

Everest National Insurance Company, IRA S. ILOWITE, IRA S. ILOWITE AGENCY, GLN WORLDWIDE, LTD., INTER-RECO, INC., JOHN DOE, (Name being ficticious and unknown) and XYZ CORP. (Name being fictitious and unknown), Defendant(s).



150294/10

Philip G. Minardo, J.

Upon the foregoing papers, the motion (No. 094- 001) of defendant GLN WORLDWIDE LTD to dismiss the complaint is denied; the cross motion (No. 411- 002) of defendants EVEREST NATIONAL INSURANCE COMPANY and INTER-RECO, INC. for summary judgment is denied without prejudice to renewal upon the completion of discovery.

Plaintiffs S. CONSTRUCTION, INC. and ARI STEINMAN (hereinafter "plaintiffs") commenced this action seeking a declaration compelling defendant EVEREST NATIONAL INSURANCE COMPANY (hereinafter EVEREST) to defend and indemnify them and/or any additional insureds, as well as pay any judgment or settlement involving these entities or individuals, in connection with the lawsuit identified in plaintiffs' amended complaint, pursuant to the terms of an alleged "EVEREST" insurance policy. Plaintiffs also seek damages against various defendants for their individual negligence in procuring, selling and/or purchasing insufficient and/or inappropriate insurance coverage for plaintiffs with regard to its construction activities at 176-180 Fulton Street, in Brooklyn, New York.

It appears from the papers submitted to the Court, that on or about July 31, 2007, Brian Ilowite of defendant IRA S. ILOWITE AGENCY (hereinafter, collectively, "ILOWITE") forwarded to Greg Portnoy, President of defendant GLN WORLDWIDE LTD. (hereinafter "GLN"), a commercial general liability insurance application and supplemental application on behalf of plaintiff S. CONSTRUCTION INC. for the purpose of requesting quotes for insurance coverage at a premium not to exceed $35,000.00 from EVEREST and non-party Ace Insurance Company (hereinafter "Ace") for the work being performed at 176-180 Fulton Street. GLN, a self-described "excess line broker", in turn, forwarded the request for quotes to both EVEREST and Ace, which resulted in a binder being issued by INTER-RECO on behalf of EVEREST on August 22, 2007 and the subsequent issuance of an EVEREST policy to plaintiff.

The lawsuit underlying this declaratory judgment action is a property damage action in which it has been alleged that Mazeh Construction Corp. (hereinafter "Mazeh"), a general contractor, had hired plaintiff to perform certain excavation work for Fulton Housing, LLC (hereinafter "Fulton Housing") at 176-180 Fulton Street, and that, as a result of plaintiff's purported negligence in doing so, the adjacent property was damaged. At this point, the owners of the adjacent property commenced a property damage action against Mazeh and Fulton Housing, which, in turn, commenced a third-party action against plaintiff herein seeking, inter alia, indemnification for any claims, losses, expenses and costs arising from plaintiff's work at the subject location. However, when plaintiff notified EVEREST of the foregoing claims, EVEREST denied coverage based on the fact that (1) excavation work was not a "covered" activity under the policy issued to plaintiff; (2) plaintiff failed to timely notify EVEREST of the [*2]subject occurrence; and (3) Mazeh and Fulton Housing were never named as "additional insureds" under the subject policy. In the present action, plaintiffs seeks, inter alia, a declaration of coverage against EVEREST with regard to the claims made by the adjacent home owners against Mazeh and Fulton Housing. In the event such relief is denied, plaintiff seeks an order of indemnification against the remaining defendants based, e.g., on their negligent failure to procure proper insurance.

In support of its application to dismiss all causes of action asserted against it, GLN maintains that the documentary evidence flatly contradicts the factual claims made by plaintiffs. According to GLN, it had no contractual relationship with plaintiff, none of its employees interacted directly with plaintiff, nor did anyone at GLN ever offer advice or make any recommendation to plaintiff.Instead, it is alleged that ILOWITE, as the plaintiff's insurance agent, merely utilized GLN's services as an excess line broker for the placement of coverage for its client. According to GLN, it simply acted within the instructions and parameters provided to it by ILOWITE in order to determine which insurance policies were available to plaintiff at the specified price, and then to procure the policy selected by plaintiff pursuant to ILOWITE's direction.

In addition, GLN contends that in New York, an insured is conclusively presumed to have read and assented to the terms of an insurance policy, and that plaintiff cannot now claim that the policy failed to contain other or different coverage.

In their cross motion, defendants EVEREST and INTER-RECO seek summary judgment dismissing the complaint against them pursuant to CPLR 3212. According to INTER-RECO, it was neither plaintiff's broker or agent with the respect to the subject policy, nor did it place any coverage on behalf of plaintiff. According to the affidavit of Patrick Conklin, INTER-RECO's Executive Vice President (dated January 31, 2012), it merely honored a request from "insurance intermediaries" to provide a quote for the renewal of an EVEREST general liability insurance policy. According to Conklin, INTER-RECO is an "independent insurance producer" authorized by EVEREST to bind and issue policies, as well as to collect and audit premiums on EVEREST's behalf. In addition, Conklin asserts in his affidavit that an EVEREST policy requires a separate endorsement to cover any additional insureds, and that there was no such endorsement in the policy before the Court. He further claims that neither entity was ever apprised of any request to cover additional insureds in this case. With regard to the matter of "risk classifications", the affiant further states that the subject policy contains a risk classification endorsement which limits coverage to those risks listed in the policy, and that these endorsements are based upon information provided in the application for insurance submitted by or on behalf of the insured. Here, plaintiff is said to have applied for insurance coverage in only four risk classifications, i.e., (1) carpentry; (2) masonry; (3) Contractor-Executive Supervisors; and (4) Executive Superintendents, but not for "excavation". As a result, there is no coverage for excavation operations under plaintiff's policy. In addition, it is claimed that by expressly providing in an endorsement that the policy is limited in effect to the designated risk classifications, EVEREST has satisfied its obligation to inform its insureds that no other classification of risks will be covered. According to the cross-movants, there is no evidence that plaintiff ever requested additional coverage for, e.g., excavation risks, and the supplemental application completed by or on behalf of plaintiff is alleged to deny plaintiff's participation in any excavation work. Hence, [*3]no coverage was provided and no premium was charged or collected with regard to such coverage.

In further support of their summary judgment motion, both INTER-RECO and EVEREST maintain that any purported error in obtaining the proper coverage would not fall upon either but, rather, on the broker, ILOWITE, or on plaintiff itself for failing to request the proper coverage. The classification endorsement in the policy is unambiguous and expressly limits coverage to the four specified risks recited therein. It is urged that no other interpretation or implication of coverage is sustainable, nor should the court add, subtract or distort the meaning of the terms used by the parties under the guise of interpreting an unambiguous contract; coverage cannot be created where none was bargained or paid for.

Finally, the cross-moving defendants maintain that the certificates of insurance allegedly reflecting the policy's coverage of excavation risks were improperly issued to plaintiff and the purported additional insureds by ILOWITE, which acted without the knowledge, consent or authority of EVEREST. In any event, it is claimed that a mere certificate of insurance confers no coverage or rights, and can neither alter the terms of or create other or different coverage than that specified in the policy itself. Accordingly, they argue that neither INTER-RECO nor EVEREST is bound by the terms of these certificates.

In opposition to summary judgment and in support of its claims of negligence or malpractice against INTER-RECO, plaintiff alleges that EVEREST has a reputation for disclaiming coverage, and that INTER-RECO either knew or should have known of this fact. Therefore, it is claimed to be negligence or a departure from regular and prudent insurance practice to have chosen EVEREST over Ace as plaintiff's insurer. It is further claimed that this departure or negligence would be the proximate cause of plaintiff's damages should EVEREST's disclaimer be sustained.

In further opposition to the cross motion, plaintiffs contend that the affidavit by INTER-RECO's Executive Vice President is insufficient insofar as EVEREST is concerned, as he is an officer of an independent insurance agency (INTER-RECO), and therefore cannot attest that the copy of the policy attached to defendants' cross-moving papers is a true and accurate copy. Neither have any facts been alleged which would support an assumption that he has direct knowledge of any of the procedures followed by EVEREST. Moreover, while the affiant claims that INTER-RECO has the authority to issue policies on behalf of EVEREST, he never made any such representation previously in this case.

In addition, it is claimed that the affidavit of Michael Adams, EVEREST's Claims Manager, in which he never identifies the subject policy, precludes him from properly authenticating same.[FN1] It is also claimed that Adams' affidavit improperly relies upon the findings of an investigation conducted by UTC, the risk management company handling the subject claim for EVEREST. As recounted in Adams' affidavit, these findings are mere hearsay, and therefore, insufficient to support summary judgment. Plaintiffs also claim that the cross motion is premature given that ILOWITE has yet to answer their amended complaint, and that documents presumably in its possession would clearly be material and relevant in evaluating both the merit [*4]of the action and the proffered defenses. Accordingly, EVEREST and INTER-RECO are not entitled to judgment as a matter of law at this time.

In response, INTER-RECO argues that plaintiff has failed to provide any substantive proof of their claim of excavation coverage or EVEREST's reputation for issuing disclaimers, and were obviously willing to renew with that insurer. INTER-RECO also argues that it cannot be held liable for malpractice as a producer of insurance products, as it is only responsible for making those products available to insurance agencies. In addition, since it had no direct contract or communication with same, INTER-RECO claims that it lacks privity with plaintiff, which bars any possible claim of justifiable reliance on, e.g., its purported statements.

In opposition to GLN's motion to dismiss, plaintiffs contend that the documentary evidence submitted by GLN is legally insufficient to support its claim under CPLR 3211(a)(1).[FN2] In addition, plaintiffs contend that the absence of any proof regarding GLN's alleged quote request to or from Ace renders its claim that the latter's quote was too high for submission to plaintiff both conclusory and unsupported by the evidence. Moreover, it is claimed to be "substantially obvious" that GLN favors the placement of insurance with EVEREST even when its policies do not provide the necessary coverage. As a result of the foregoing, plaintiff claims that it was forced to renew its policy with EVEREST.

Insofar as the purported lack of privity is concerned, plaintiff contends that as a "particular prospective buyer", defendants' efforts were undertaken for the singular purpose of inducing plaintiff to act. Hence, the absence of privity is claimed to be unavailable as a defense to this action.

Finally, plaintiff argues that GLN's dismissal motion is also premature, since no discovery has taken place and ILOWITE had yet to serve an amended answer by the time these motions were filed. In the alternative, plaintiffs seek leave to re-plead as against GLN.

Generally, on a motion to dismiss pursuant to CPLR 3211(a), the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true, and provide plaintiff with the benefit of every possible favorable inference (see Halliwell v. Gordon, 61 AD3d 932, 933). The test to be applied in such circumstances is whether the complaint gives sufficient notice of the transactions, occurrences, or series of transactions or occurrences intended to be proved, and whether the requisite elements of any cause of action known to our law can be discerned (see Moore v. Johnson, 147 AD2d 621).

Here, while GLN has not produced sufficient documentary evidence to warrant a dismissal under CPLR 3211(a)(1), it is the opinion of this Court that the amended complaint fails to allege sufficient facts to provide this defendant with adequate notice of the transactions or occurrences intended to be proved against it, i.e., facts supportive of the material elements of the causes of action against it, for, e.g., breach of contract and negligence. In particular, the amended complaint is barren of any factual allegations establishing the breach of any duty owed to plaintiff as opposed to codefendant ILOWITE, or knowledge of plaintiff's specific need for an excavation endorsement and/or coverage for additional insureds. Neither are there factual [*5]allegations that GLN engaged in any activities upon which plaintiff could have placed detrimental reliance. To the contrary, the better part of plaintiff's opposition is based on speculation and surmise. Nevertheless, in view of the fact that this action is still in its earliest stages and ILOWITE's answer to the amended complaint is not before the Court, GLN will suffer no prejudice if leave to replead is granted against it (see CPLR 3211[e]; Janssen v. Incorporated Vil. of Rockville Ctr., 59 AD3d 15).

As for the cross motion, it is well settled that a motion for summary judgment requires the movant to make a prima facie showing of its entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. Failure to make such showing requires the denial of the motion, regardless of the sufficiency of the opposing papers (see Alvarez v. Prospect Hosp., 68 NY2d 320, 324). However, where a movant has made a prima facie showing of entitlement to judgment, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which would require a trial (id.; see Prudential Home Mtge Co v. Cermele, 226 AD2d 357). Nevertheless, CPLR 3212(f) also provides that "[s]hould it appear from affidavits submitted in opposition to the motion that facts essential to justify opposition may exist but cannot [now] be stated, the court may deny the motion or ... make such other order as would be just".

At bar, it is the opinion of this Court that the pre-discovery motion for summary judgment made on behalf of defendants EVEREST and INTER-RECO is premature (see e.g. Miller v. Adamski, 54 AD3d 1011). In the absence of discovery, this Court would be loathe to dismiss the complaint without allowing plaintiff the benefit of conducting discovery with regard to, inter alia, the inter-relationship between EVEREST and INTER-RECO, as the latter's claims appear to suggest the presence of an agency-type relationship between itself and the insurer, which has purportedly authorized INTER-RECO it to bind coverage and collect premiums on its behalf. If this or some like relationship can be shown to exist, EVERST, which was clearly in privity with plaintiff as its insurer under the subject general commercial liability policy, could well be subjected to liability for any negligence on the part of INTER-RECO which, e.g. deprived plaintiff of the desired coverage, under principles of respondeat superior. At present, knowledge of the relationship between these defendants and/or the nature of any communication between them regarding the subject policy remains unavailable to plaintiff. The lack of an adequate opportunity on the part of an opponent of summary judgment to conduct discovery into relevant issues of which may be ignorant constitutes a sufficient basis upon which to deny summary relief (see CPLR 3211[d]; 3212[f]; County of Nassau v. Velasquez, 44 AD3d 987, 989; Verchini v. Silverite Constr Co., 289 AD3d 434).

Accordingly, it is

ORDERED that the motion to dismiss the complaint as against defendant GLN WORLDWIDE LTD. is granted; and it is further

ORDERED that the complaint as to this defendant is severed and dismissed, without prejudice to renewal following the service, if any, of a second amended complaint as hereinafter provided; and it is further

ORDERED that plaintiffs are granted leave to replead their causes of action against defendant GLN WORLDWIDE LTD within 30 days of the service upon them of a copy of this [*6]Decision and Order with notice of entry; and it is further

ORDERED that the cross motion for summary judgment of defendants EVEREST NATIONAL INSURANCE COMPANY and INTER-RECO, INC., is denied with leave to renew upon the completion of discovery.

E N T E R,

/s/ Philip G. Minardo

J.S.C.

Dated:June 15, 2012 Footnotes

Footnote 1: Relative to this claim and that affecting the Conklin affidavit, it is worthy of note that plaintiff has not submitted any proof of an EVEREST policy containing other or different terms.

Footnote 2: A dismissal under CPLR 3211(a)(1) can only be granted where the documentary evidence conclusively establishes a defense to the claims asserted by the movant as a matter of law (see Goldman v. Metropolitan Life Ins Co., 5 NY3d 561, 571).