M. Ali Construction Inc. v. United Specialty Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

M. ALI CONSTRUCTION, INC.,

Plaintiff, MEMORANDUM & ORDER

19-CV-4514 (NGG) (CLP)

-against-

UNITED SPECIALTY INSURANCE COMPANY

and MEADOWBROOK, INC. a/k/a

MEADOWBROOK INSURANCE AGENCY

SERVICES,

Defendants.

NICHOLAS G. GARAUFIS, United States District Judge.

Plaintiff M. Ali Construction, Inc. (“M. Ali”) brings this action

against Defendants United Specialty Insurance Company

(“United”) and Meadowbrook, Inc., a/k/a Meadowbrook Insur-

ance Agency Services (“Meadowbrook”), seeking a declaratory

judgment that United is obligated to defend and indemnify Plain-

tiff in relation to a claim made by Fitz I. Duncan (“Duncan”), an

employee of Plaintiff, against the Metropolitan Transit Authority

(“MTA”). (Compl. (Dkt. 1-2 at ECF 3-8) ¶¶ 1, 6.) Defendants

move pursuant to Federal Rule of Civil Procedure 12(b)(6) to

dismiss the complaint with prejudice based on Plaintiff’s failure

to state a claim upon which relief can be granted. (See Mem. in

Supp. of Mot. to Dismiss (“Mem.”) (Dkt. 9-1) at 1.) For the rea-

sons stated below, the motion is GRANTED.

BACKGROUND

A. Facts

The following factual summary is drawn from the facts alleged

in the complaint, which the court generally accepts as true. See

N.Y. Pet Welfare Ass’n v. City of New York, 850 F.3d 79, 86 (2d Cir.

2017).1

Plaintiff was a subcontractor on the 36-03 Flood Mitigation Pro-

ject for the Triborough Bridge and Tunnel Authority, a division

of the MTA. (Compl. ¶ 6.) As required by Plaintiff’s contract with

the project’s general contractor, Judlau Contracting, Inc. (“Jud-

lau”), Plaintiff obtained a General Liability Coverage bearing pol-

icy number USA4197816 (the “Policy”) from United. (Id. ¶ 7; see

also Policy (Dkt. 11-3).)

On September 14, 2018, Duncan was injured in an accident that

he alleges occurred while he was performing his job duties.

(Compl. ¶ 9.) On November 28, 2018, Duncan’s counsel served a

notice of claim on the MTA. (Id. ¶ 10.) On December 7, 2018, the

MTA tendered the claim to Judlau’s insurer, Travelers Indemnity

Company (“Travelers”). (Id. ¶ 11.) Travelers then tendered the

claim to United. (Id. ¶ 12.)

Meadowbrook, which handles claims on behalf of United, denied

Duncan’s claim based on the endorsement form CGL 1702 11/00

(the “Action Over Exclusion”), which amends the Employer’s Li-

ability Inclusion contained in the Policy. (Id. ¶¶ 13, 19; see also

Letter Denying Claim (Dkt. 11-7).) The Employer’s Liability Ex-

clusion provides as follows:

This insurance does not apply to:

e. Employer’s Liability

“Bodily Injury” to:

(1) An "employee" of the named insured arising out of

and in the course of:

(a) Employment by the named insured; or

1 When quoting cases, unless otherwise noted, all citations and quotation

marks are omitted and all alterations are adopted.

(b) Performing duties related to the conduct of the

named insured's business; or

(2) The spouse, child, parent, brother or sister of that

"employee" as a consequence of Paragraph (I)

above.

This exclusion applies whether the named insured may be

liable as an employer or in any other capacity and to any

obligation to share damages because of the injury.

This exclusion does not apply to liability assumed by the in-

sured under an “insured contract.”

(Id. ¶ 15; see also Policy at ECF 4.)

An “insured contract” is defined as:

That part of any other contract or agreement pertaining to

your business (including an indemnification of a municipal-

ity) under which you assume tort liability of another party to

pay for “bodily injury” or “property damage” to a third per-

son or organization. Tort liability means liability that would

be imposed by law in the absence of any contract agreement.

(Compl. ¶ 17; see also Policy at ECF 16.)

The Action Over Exclusion, however, replaces the Employer’s Li-

ability Exclusion:

It is agreed that the following change is made to Coverage A.

2. Exclusions: Exclusion e. Employer's Liability is deleted in

its entirety and replaced with the following:

e. Employer's Liability "Bodily injury" to:

(1) An "employee" of the named insured arising out of

and in the course of:

(a) Employment by the named insured; or

(b) Performing duties related to the conduct of the

named insured's business; or

(2) The spouse, child, parent, brother or sister of that

"employee" as a consequence of Paragraph (I)

above.

This exclusion applies:

(1) Whether the named insured may be liable as an em-

ployer or in any other capacity; and

(2) To any obligation to share damages with or repay

someone else who must pay damages because of the

injury.

(Policy at ECF 52 (emphasis added).)

B. Procedural History

Plaintiff filed its original complaint in the Kings County Supreme

Court on July 8, 2019. Defendants removed the case to this court

on August 6, 2019. (See Not. of Removal (Dkt. 1-1).) Currently

pending before the court is Defendants’ motion to dismiss for fail-

ure to state a claim. (See Mem.; Pl. Mem. in Opp. to Mot. to Dis-

miss (“Opp.”) (Dkt. 11); Reply (Dkt. 10).)

LEGAL STANDARD

The purpose of a motion to dismiss for failure to state a claim

under Rule 12(b)(6) is to test the legal sufficiency of a plaintiff’s

claims for relief. Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir.

2007) (per curiam). A complaint will survive a motion to dismiss

if it contains “sufficient factual matter, accepted as true, to ‘state

a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007)). “Threadbare recitals of the elements

of a cause of action, supported by mere conclusory statements,

do not suffice.” Id.

In evaluating a motion to dismiss, a court may consider docu-

ments central to a plaintiff’s claim, documents sufficiently re-

ferred to so as to be deemed “integral” to the complaint, and

documents over which a court may take judicial notice. See King

v. City of New York, No. 12-cv-2344 (NGG), 2014 WL 4954621,

at *7-8 (E.D.N.Y. Sept. 30, 2014) (citing Global Network Comms.,

Inc. v. City of New York, 458 F.3d 150, 156 (2d Cir. 2006)); see

also Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.

2002) (holding that courts may consider an extrinsic document

when the complaint “relies heavily upon its terms and effect”).

The purpose of this rule is to “prevent[] plaintiffs from generat-

ing complaints invulnerable to Rule 12(b)(6) simply by clever

drafting.” King, 2014 WL 4954621, at *8 (quoting Global Net-

work, 458 F.3d at 157).

DISCUSSION

Plaintiff contends that the Action Over Exclusion only applies to

claims against Plaintiff itself as the named insured and, as such,

does not bar coverage for claims against the MTA or Judlau as

additional insureds,2 even where, as here, the claimant is Plain-

tiff’s employee. As discussed below, however, Plaintiff’s position

is contrary to the plain language of the Action Over Exclusion,

which unambiguously bars coverage for any claim by an em-

ployee of the named insured for injuries sustained in the course

of her employment. As such, Plaintiff’s claim fails as a matter of

law and the court accordingly grants Defendants’ motion to dis-

miss with prejudice.

A. The Action Over Exclusion

The Action Over Exclusion endorsement, by its language, bars

coverage to all insureds and purported additional insureds for

any injuries to an employee of the named insured. This bar ap-

plies regardless of the capacity in which the named insured might

2 Assuming that either or both qualifies as an additional insured, an issue

that the court need not resolve.

be liable, including to any obligation to share damages with an-

other party that might be liable for the same injury. (See Policy

at ECF 52.) Duncan was injured within the scope of his employ-

ment by Plaintiff, who is the named insured in the Policy. There-

fore, the Action Over Exclusion applies and bars coverage.

The scope of action over exclusion endorsements containing sim-

ilar or identical language has been litigated multiple times in this

circuit and, in every instance, the conclusion has been the same:

the exclusion bars coverage for any claim made by an employee

of the named insured for an injury sustained during the course

of her employment. See Endurance Am. Specialty Ins. Co. v. Cen-

tury Sur. Co., 630 F. App’x 6, 8 (2d Cir. 2015) (summary order)

(identical action over exclusion endorsement barred coverage

where claimant was employee of named insured); see also Old

Republic Gen. Ins. Corp. v. Cent. Sur. Co., No. 17-cv-3415 (PGG),

2018 WL 4356729 (S.D.N.Y. Sept. 12, 2018), aff’d, 778 F. App’x

57, 58 (2d Cir. 2019) (summary order); Cent. Sur. Co. v. Atweek,

Inc., No. 16-cv-335 (ENV), 2019 WL 1994172, at *5 (E.D.N.Y.

May 6, 2019); Cent. Sur. Co. v. Vas and Sons Corp., 17-cv-5392

(DLI) (RLM), 2018 WL 6164724, at *4 (E.D.N.Y. Aug. 31, 2018),

report and recommendation adopted, 2018 WL 4804656

(E.D.N.Y. Sept. 30, 2018).

Judge Gershon of this district analyzed an almost identical set of

facts in United Specialty Ins. Co. v. All State 12 Gen. Contracting

Corp., No. 18-cv-2863 (NG), 2019 WL 2912759 (E.D.N.Y. July 8,

2019). There, United sought a declaratory judgment that it had

no duty to defend and indemnify defendant All State in two un-

derlying actions arising from an incident in which an employee

of All State’s subcontractor was injured at the site of a construc-

tion/demolition project. Id. at *1. Judge Gershon held that

United had no duty to defend or indemnify All State because the

Action Over Exclusion precluded coverage to additional insureds

for claims by an employee of the named insured. Id. at *2.

In the face of these uniform precedents, Plaintiff, relying on

Emp’rs Ins. Co. of Wausau v. Harleysville Preferred Ins. Co., 726 F.

App’x 56 (2d Cir. 2018) (summary order), argues that the Action

Over Exclusion only applies to claims that impose employer lia-

bility against the named insured. As such, Plaintiff contends, it

does not apply here, since Duncan asserted his claim against the

MTA, which is not his employer. (Opp. at 13.) “This logic would

apply if,” as was the case with the policy at issue in Harleysville,

“the Action Over Exclusion clause used the language ‘the insured’

rather than ‘the named insured.’” Endurance, 630 F. App’x at 8.

However, “the language ‘the named insured’ evinces that the Ac-

tion Over Exclusion clause specifically exclude[s] coverage for

bodily injury to employees of the named insured.” Id. Because

Duncan is Plaintiff’s employee, coverage is barred.

Plaintiff also suggests in its complaint and, in passing and with-

out citation to case law in its opposition papers, that the Action

Over Exclusion maintains the “insured contract” exception to the

Employer’s Liability Exclusion, despite the fact that the Action

Over Exclusion, by its terms, “delete[s][the Employer’s Liability

Exclusion] in its entirety and replace[s] it.” (Policy at ECF 52.)

To the extent that Plaintiff intends to make this argument, it is

summarily rejected. See Atl. Cas. Ins. Co. v. Cheyenne Country,

515 F. App’x 398, 403-04 (6th Cir. 2013) (summary order) (“The

words ‘deleted in its entirety and replaced’ do not require a law

degree to understand.”).

B. Ambiguity

Plaintiff also argues, in the alternative, that the Employer’s Lia-

bility Exclusion3 is ambiguous. (Opp. at 16.) Plaintiff cites as sup-

port Hastings Dev., LLC v. Evanston Ins. Co., in which the Second

Circuit held that a similar exclusion was ambiguous. 701 F. App’x

3 Presumably as modified by the Action Over Exclusion, although Plaintiff’s

opposition papers are ambiguous on this point.

40, 43-44 (2d Cir. 2017). In Hastings, however, the ambiguity

arose out of the fact that there were five named insureds and

claimant was employed by a different named insured from the

named insured that was seeking coverage. Id.

Plaintiff contends that this precedent applies because the Policy

is ambiguous as to the definitions of and distinctions between the

“named insured” and an “additional insured,” such that the MTA

or Judlau may qualify as named insureds. Plaintiff is wrong. As

an initial matter, the court notes that the Second Circuit, albeit

in a non-binding summary order, examined identical language

and held it to be unambiguous. See Endurance, 630 F. App’x at 7.

While that precedent is not binding on this court, it is highly per-

suasive. And, in any case, having examined the Policy, the court

reaches the same conclusion.

Under New York law, a contract is ambiguous if it is “susceptible

to more than one reasonable interpretation.” Evans v. Famous

Music Corp., 1 N.Y.3d 452, 458 (2004). The Policy, however,

clearly delineates the distinction between the named insured and

additional insureds. Specifically, the named insured is defined as

the party so named in the policy declaration and, with strict time

limitations, certain organizations that the party named in the

declaration establishes or acquires during the coverage period.

(Policy at ECF 3, 12.) Meanwhile, an “insured” or “additional in-

sured” (terms which the Policy uses interchangeably) is defined

as, inter alia, “any person or organization for whom you4 are per-

forming operations when you and such person or organization

have agreed in a contract … that such person or organization be

added as an additional insured.” (Policy at ECF 41.) Plaintiff is

the only party named in the declaration (see Decl. (Dkt. 10-1 at

ECF 3)); moreover, as there are no allegations that Plaintiff either

4 As used in the Policy, “the word[] ‘you’ … refer[s] to the Named Insured

shown in the Declarations.” (Policy at ECF 3.)

formed or acquired Judlau or the MTA, neither qualifies as a

named insured under the Policy.5

CONCLUSION

For the reasons stated above, Defendants’ (Dkt. 9) Motion to Dis-

miss is GRANTED. Further, because any amendment of the com-

plaint would be futile, the dismissal is with prejudice. See

generally Ruffolo v. Oppenheimer & Co., 987 F.2d 129 (2d Cir.

1993). The Clerk of Court is respectfully DIRECTED to enter

judgment in favor of Defendants and close this case.

SO ORDERED.

Dated: Brooklyn, New York

June 17, 2020

_/s/ Nicholas G. Garaufis_

NICHOLAS G. GARAUFIS

United States District Judge

5 The court also notes that the Court of Appeals has interpreted the precise

language defining additional insureds in the Policy to require direct con-

tractual privity between the named and putative additional insured. See

Gilbane Bldg. Co./TDX Constr. Corp. v. St. Paul Fire & Mar. Ins. Co., 31

N.Y..3d 131, 134 (2018). Insofar as the subcontract at issue in this case is

between Judlau and Plaintiff (Subcontract (Dkt. 11-2) at 1), it is not clear

that MTA qualifies as an additional insured either.