City of New York v. Fleet General Insurance Group, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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THE CITY OF NEW YORK,

Plaintiff,

-against- MEMORANDUM AND ORDER

19-CV-6629 (RPK) (ST)

FLEET GENERAL INSURANCE GROUP,

INC.,

Defendant.

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RACHEL P. KOVNER, United States District Judge:

This lawsuit presents the question whether an insurer has a duty to defend the City of New

York (“the City”) in a state-court lawsuit over millions of dollars in property damage that allegedly

occurred when a section of Northern Boulevard in Queens collapsed during a construction project.

Consistent with a City requirement, the general contractor on the Northern Boulevard construction

project—the Perini Group, Inc. (“Perini”)—obtained an insurance policy that covers the City as

an additional insured “only with respect to liability for . . . ‘property damage’ . . . caused, in whole

or in part, by [Perini’s] acts or omissions.” Consolidated Edison Company of New York, Inc.

(“Con Edison”) has filed a complaint in state court seeking to recover millions of dollars for

property damage that Con Edison allegedly suffered due to the collapse. The lawsuit names the

City and Perini as defendants, among others.

The City has now filed this federal lawsuit arguing that Perini’s insurer, Fleet General

Insurance Group, Inc. (“Fleet”), has a duty to defend the City in the Con Edison case. Under New

York law, an insurer has a duty to defend a litigant if a complaint raises “a reasonable possibility”

that the lawsuit will result in an award of damages against the litigant that is covered by the

insurer’s policy. Maryland Cas. Co. v. Cont’l Cas. Co., 332 F.3d 145, 160 (2d Cir. 2003).

I conclude that the insurer does have a duty to defend the City in Con Edison’s lawsuit.

Like other courts that have examined similar policy language, I conclude that endorsement

insuring the City for property damage “caused, in whole or in part, by” Perini’s acts or omissions

requires the insurer to cover the City for property damage proximately caused by Perini. And,

fairly read, Con Edison’s lawsuit does allege that the City is liable for such damage.

Even if the policy were narrower, the insurer would have a duty to defend the City in the

Con Edison case. Both parties agree that, at minimum, the insurance policy here would protect

the City against joint and several liability with Perini for Con Edison’s damages. And the

complaint raises at least a reasonable possibility that Perini and the City will be held jointly and

severally liable. Accordingly, the City’s motion for summary judgment is granted, and Fleet’s

motion for summary judgment is denied.

BACKGROUND

The following background comes from the parties’ joint statement of undisputed facts and

attached exhibits. See Local Rule 56.1; Joint Statement of Undisputed Facts (Dkt. #20).

A. Factual Background

1. The Construction Project

In July 2014, the Fleet Financial Group, Inc. (“Fleet Financial”), a nonparty, allegedly

sought to build “a multi-story, mixed-use building, featuring apartments, a hotel, retail [space,]

and office space” on a “pie-shaped wedge of land . . . bordered by Northern Boulevard” in Queens.

See Compl. ¶ 3, Consol. Edison Co. of New York, Inc. v. E. Emerald Grp. LLC, No. 715229/2019

(N.Y. Sup. Ct. filed Sept. 5, 2019) (Dkt. #20-1) (“Con Edison Compl.”). Fleet Financial enlisted

Perini as a general contractor and the Racanelli Construction Group, Inc. (“Racanelli”), as a

“contractor or subcontractor” to do the work. See id. ¶¶ 12-13, 32-33.

The following year, under Fleet Financial and Perini’s “guidance, direction, and

supervision,” Racanelli allegedly “began excavation work.” Id. ¶ 38. Racanelli soon started to

receive “violations, penalties, and stop work orders” from the New York City Department of

Buildings. Id. ¶ 40. For example, Racanelli allegedly received a violation in November 2015 “for

failure to maintain building walls.” Id. ¶ 43. This violation noted “at the time of the inspection”

that “the sidewalk and curb” adjacent to the site had “shift[ed].” Ibid. Perini also received a permit

to work on the Northern Boulevard site, see Joint Statement ¶ 7, and also received violations from

the New York City Department of Buildings, see Con Edison Compl. ¶¶ 45-61. For example,

Perini allegedly received a violation “for failure to provide protection at sides of an excavation.”

Id. ¶ 45. Perini also allegedly received a violation for “failure to monitor adjoining structures for

movement.” Id. ¶ 46.

By December 2018, a Con Edison employee had noticed “a street depression at Northern

Boulevard at the location of the” construction site. Id. ¶ 55. Con Edison allegedly notified New

York City’s Department of Environmental Protection and Department of Transportation. Id. ¶ 56.

Soon after, the New York City Department of Buildings allegedly received another complaint that

the excavation “was causing cracks on the sidewalk and the street.” Id. ¶ 59. In response, the

Department of Buildings issued two more violations to Perini: “one for the failure to provide

construction documents and another for the failure to protect public property.” Ibid. The same

day, the Department of Buildings issued an order “directing that all work on the [p]roject be

stopped.” Id. ¶ 60.

Con Edison alleges that around this time, one of New York City’s “underground water

mains or fire hydrant service lines at or near the [p]roject . . . leaked.” Id. ¶ 137. The water

allegedly “wash[ed] away the soil supporting the road and sidewalk adjacent to the [p]roject.”

Ibid. It also allegedly washed away soil supporting “the retaining wall on the [p]roject” and nearby

“gas and electric facilities.” Ibid.

Con Edison further alleges that in January 2019, the excavation work at the Northern

Boulevard site “caus[ed] a 75 by 6 feet section of Northern Boulevard and a 75 by 5 feet section

of sidewalk adjacent to the [site] to collapse” when the “excavation wall suffered a catastrophic

failure.” Id. ¶ 62. The collapse allegedly damaged “gas and electric facilities” adjacent to the site

and caused “the loss of natural gas from Con Edison’s gas transmission main.” Id. ¶ 65. Con

Edison allegedly “deployed an emergency response and performed necessary and reasonable

repairs to its gas and electric facilities.” Id. ¶ 66.

2. The Con Edison Action

In September 2019, Con Edison filed a property-damage action in the Supreme Court of

the State of New York, Queens County. See id at 33. The defendants are Perini, Racanelli, Fleet

Financial, the Eastern Emerald Group LLC, the Grand Eastern Mirage Group, LLC, and the City

of New York. Id. ¶¶ 8-14. The complaint divides the defendants into two groups: (i) the

“Construction Defendants”—all non-City defendants—and (ii) the City of New York. Id. ¶ 1.

The Con Edison complaint asserts six causes of action against the Construction

Defendants: (1) strict liability under N.Y.C. Admin. Code § 28-701.2C33, Con Edison Compl.

¶¶ 68-74; (2) strict liability under the common law, id. ¶¶ 75-81; (3) negligence per se, id. ¶¶ 82-97;

(4) failure to comply with N.Y. Comp. Codes R. & Regs. tit. 16, § 753, Con Edison Compl.

¶¶ 98-109; (5) negligence under the common law, id. ¶¶ 110-120; and (6) nuisance, id. ¶¶ 121-135.

On the third, fourth, and fifth causes of action, Con Edison alleges that the non-City defendants’

“actions and omissions [were] the proximate cause” of their injuries. Id. ¶¶ 91, 108, 115.

On each of these six causes of action, Con Edison seeks a judgment against the non-City

defendants of “at least $4.8 million.” Id. at 31-32. It also alleges that these non-City defendants

are liable “jointly and severally.” Id. ¶¶ 74, 81, 97, 109, 120, 135.

The Con Edison complaint then asserts a seventh cause of action of common-law

negligence against the City. Id. ¶¶ 136-153. This cause of action can be read to assert several

theories of liability. First, the complaint alleges that the City negligently “inspect[ed] and

monitor[ed] [the] construction, excavation, and development work being done throughout the

City.” Id. ¶ 140. Specifically, the City “fail[ed] to properly inspect, monitor, and/or stop the

construction work being done on the [p]roject, including, but not limited to, work in violation of

NYC’s stop work orders, and allow[ed] that work to cause damage to Con Edison’s gas and electric

facilities.” Id. ¶ 142. Second, the complaint alleges that the City negligently “operate[d] and

maintain[ed] the water and sewer systems.” Id. ¶ 139. Specifically, the City negligently

“allow[ed] one of its underground water mains or fire hydrant service lines at or near the [p]roject

to wash away the soil supporting the road, sidewalk, retaining wall and the gas and electric

facilities.” Id. ¶ 141. And it “fail[ed] to repair its underground facilities that it knew, or should

have known, were failing and/or leaking.” Id. ¶ 143. Third, the complaint alleges that the City

negligently “fail[ed] to take proper and necessary actions to investigate, remediate, and repair the

street depression reported by Con Edison on December 16, 2018.” Id. ¶ 144. “This investigation,

remediation, and repair would have revealed either the leak[s] . . . or the deficient construction

work,” which “would have prevented the street depression from turning into the street collapse.”

Ibid.

The seventh cause of action alleges that the City’s “actions and omissions were the direct

and proximate cause of the damage” to Con Edison. Id. ¶ 146. It does not allege that the City is

jointly or severally liable with the other defendants, but it does allege in passing that the City is

“directly or vicariously liable” for Con Edison’s injuries. Id. ¶ 148. On the seventh cause of

action, Con Edison again seeks a judgment of “at least $4.8 million.” Id. at 32.

Con Edison’s complaint explains that the monetary judgment it is seeking on each count—

one to seven—is for “the costs and expenses incurred by Con Edison in responding to the

emergency collapse of Northern Boulevard, the cost of repair or replacement of the gas and electric

facilities damaged by the collapse, and the consequent loss of Con Edison’s gas caused by the

collapse.” Id. ¶¶ 74, 81, 97, 109, 120, 135, 148.

In sum: “Con Edison seeks compensatory damages for property damage . . . , caused by: (a)

[non-City] actions in connection with excavation . . . , and (b) the City[‘s] . . . actions in connection

with NYC’s: (i) inspection and monitoring of this excavation . . . (ii) installation, maintenance,

operation, and repair of NYC’s streets, sidewalks, curbs, water, sewer, and fire hydrant services,

and (iii) failure to warn of hazards . . . after having notice of the problem.” Id. ¶ 1.

3. The Insurance Policy and Demand

Fleet had issued a commercial general liability insurance policy to Perini covering the

period of the Northern Boulevard collapse. See Joint Statement ¶ 8. Under the policy, Fleet agreed

to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily

injury’ or ‘property damage’ to which this insurance applies.” Commercial General Liability

Policy at 1 (Dkt. #20-3). Fleet also acknowledged that it had “the right and duty to defend the

insured against any ‘suit’ seeking those damages.” Ibid.

An endorsement included the City as “an additional insured on [Perini’s] general liability

policy.” Commercial General Liability Policy, Endorsement #23 (Dkt. #20-3); Project Specific

General Liability Insurance Summary at 1 (Dkt. #20-4). The endorsement specified that the

additional insured would be covered “only with respect to liability for ‘bodily injury’, ‘property

damage’ or ‘personal and advertising injury’ caused, in whole or in part, by [Perini’s] acts or

omissions or the acts of omissions of those acting on [Perini’s] behalf in the performance of

[Perini’s] ongoing operations or in connection with property owned by [Perini].” Commercial

Liability Policy, Endorsement #23; cf. Rules of the City of New York, tit. 1, § 101-08 (requiring

certain holders of permits for construction work to “provide that the [C]ity . . . is an [a]dditional

[i]nsured with coverage at least as broad as set forth in the most recent edition of ISO Form[] . . .

CG 2026”); NYC, Insurance Requirements and Sample Documents, ISO Form CG 2026 (requiring

coverage of additional insured under the circumstances set out in Fleet’s endorsement).

When the City received the Con Edison action, the City sent a copy of the summons and

complaint to Fleet alongside a “demand[] [for] defense coverage as soon as possible.” September

16, 2019 Cwiecek Letter (Dkt. #20-5). Fleet “den[ied] any obligation to defend . . . the City.”

Joint Statement ¶ 11; see October 14, 2019 Bisgaier Letter (Dkt. #20-6). Since then, the City has

defended itself. See Joint Statement ¶ 12.

B. Procedural History

In November 2019, the City filed this action against Fleet in the Eastern District of New

York. See Compl. at 10 (Dkt. #1). The first cause of action alleges that Fleet’s failure to defend

the City in the Con Edison action breached Fleet’s duty to defend under Perini’s insurance policy.

Id. ¶¶ 30-32. The second cause of action alleges that Fleet is liable for the City’s defense costs in

the Con Edison action. Id. ¶¶ 34-38. The complaint requests a declaration that Fleet is obligated

to defend the City in the Con Edison action and an order directing Fleet to pay the attorneys’ fees

and expenses incurred by the City defending that action. See Compl. at 10.

Both parties have moved for summary judgment. See Pl.’s Notice of Mot. (Dkt. #16);

Def.’s Notice of Mot. (Dkt. #18). The City renews its request for “a declaration that defendant

Fleet . . . is required to defend the City” in the Con Edison action and an order “to reimburse the

City for its attorneys’ fees and costs expended in defending that action.” Pl.’s Notice of Mot. at 1.

Fleet requests an order “dismissing the complaint . . . with prejudice.” Def.’s Notice of Mot. at 1.

STANDARD OF REVIEW

Summary judgment is appropriate when “there is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “An issue of

fact is genuine if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” Frost v. New York City Police Dep’t, 980 F.3d 231, 242 (2d Cir. 2020) (quoting

SCR Joint Venture L.P. v. Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009)). “A fact is material if

it might affect the outcome of the suit under the governing law.” Ibid. In assessing the record, I

view “the evidence in the light most favorable to the nonmoving party and draw all reasonable

inferences in that party’s favor.” Tracy v. Freshwater, 623 F.3d 90, 95 (2d Cir. 2010).

“The same standard applies where, as here, the parties filed cross-motions for summary

judgment.” Morales v. Quintel Ent., Inc., 249 F.3d 115, 121 (2d Cir. 2001). “[E]ach party’s

motion must be examined on its own merits, and in each case all reasonable inferences must be

drawn against the party whose motion is under consideration.” Ibid.

DISCUSSION

I. Legal Framework

The parties agree that New York law governs whether Fleet had a duty to defend the City

in the Con Edison action. See Pl.’s Mem. of L. in Support of Mot. for Summ. J. at 11 (Dkt. #17)

(“City Memo”); Def.’s Mem. of L. in Support of Mot. for Summ. J. at 7 (Dkt. #19) (“Fleet Memo”).

In New York, “the standard for determining whether an additional named insured is entitled to a

defense is the same standard that is used to determine if a named insured is entitled to a defense.”

BP Air Conditioning Corp. v. One Beacon Ins. Grp., 871 N.E.2d 1128, 1132 (N.Y. 2007). “An

insurer must defend whenever the four corners of the complaint suggest—or the insurer has actual

knowledge of facts establishing—a reasonable possibility of coverage.” Maryland Cas. Co. v.

Cont’l Cas. Co., 332 F.3d 145, 160 (2d Cir. 2003) (quoting Cont’l Cas. Co. v. Rapid-Am. Corp.,

609 N.E.2d 506, 509 (N.Y. 1993)).

This duty is “exceedingly broad.” Euchner-USA, Inc. v. Hartford Cas. Ins. Co., 754 F.3d

136, 140 (2d Cir. 2014) (quoting Auto. Ins. Co. of Hartford v. Cook, 850 N.E.2d 1152, 1155 (N.Y.

2006)). An insurer may refuse only if “there is no possible factual or legal basis” for eventual

indemnity “under any provision of the insurance policy.” High Point Design, LLC v. LM Ins.

Corp., 911 F.3d 89, 95 (2d Cir. 2018) (quoting Servidone Constr. Corp v. Sec. Ins. Co. of Hartford,

477 N.E.2d 441, 444 (N.Y. 1985)). “If any of the claims against the insured arguably arise from

covered events, the insurer is required to defend the entire action.” Ibid. (quoting Frontier

Insulation Contractors, Inc. v. Merchs. Mut. Ins. Co., 690 N.E.2d 866, 869 (N.Y. 1997)).

The duty to defend is “ordinarily ascertained by comparing the allegations of the complaint

with the wording of the insurance contract.” Int’l Bus. Machines Corp. v. Liberty Mut. Ins. Co.,

363 F.3d 137, 144 (2d Cir. 2004) (citing Ruder & Finn Inc. v. Seaboard Sur. Co., 422 N.E.2d 518,

521 (N.Y. 1981)). In interpreting an insurance agreement, a court applies “principles of contract

interpretation.” Burlington Ins. Co. v. NYC Transit Auth., 79 N.E.3d 477, 481 (N.Y. 2017). Any

“unambiguous provisions of an insurance contract must be given their plain and ordinary

meaning.” Vigilant Ins. Co. v. Bear Stearns Cos., Inc., 884 N.E.2d 1044, 1047 (N.Y. 2008).

Beyond this, “a contract must be construed in a manner which gives effect to each and every part.”

Nomura Home Equity Loan, Inc., Series 2006-FM2, by HSBC Bank USA, Nat’l Ass’n v. Nomura

Credit & Cap., Inc., 92 N.E.3d 743, 747 (N.Y. 2017). “[A]mbiguities in insurance contracts are

construed in favor of the insured.” Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 615

(2d Cir. 2001) (citing Handelsman v. Sea Ins. Co., 647 N.E.2d 1258, 1260 (N.Y. 1994)).

Moreover, in assessing the duty to defend, the allegations in the underlying complaint must

be “liberally construed.” Euchner-USA, 754 F.3d at 141 (quoting Auto. Ins. Co. of Hartford, 850

N.E.2d at 1155). Ultimately, “[a]ny doubt as to whether the allegations state a claim within the

coverage of the policy must be resolved in favor of the insured and against the carrier.” Ibid.

(quoting Brook Shopping Ctr. v. Liberty Mut. Ins. Co., 80 A.D. 2d 292, 294 (N.Y. App. Div.

1981)).

II. Analysis

Applying these principles, Fleet has a duty to defend the City in the Con Edison action,

because there is at least a reasonable possibility that Fleet will be required to indemnify the City

in that case. Fleet’s policy is best read to indemnify the City from all claims for property damage

proximately caused by Perini’s acts or omissions. That includes the City’s liability for property

damage caused in part by its own actions, so long as that damage was also proximately caused by

Perini’s acts or omissions. There is at least a reasonable probability here that the Con Edison

complaint will lead to liability within the scope of that coverage.

Even if Fleet’s policy were narrower, Fleet would still have a duty to defend. Fleet

acknowledges its duty to defend if the City and Perini could be held jointly and severally liable.

And there is a reasonable possibility of such liability in the Con Edison case.

A. Fleet must defend the City in the Con Edison case because Con Edison seeks

to hold the City liable for property damage proximately caused by Perini.

Fleet must defend the City because Con Edison’s complaint seeks to hold the City liable

for damage proximately caused by Perini’s acts or omissions. Fleet can be understood to argue

that its endorsement only covers an additional insured’s vicarious liability, meaning liability for

the named insured’s torts, see Dan B. Dobbs, The Law of Torts § 425 (2d. ed), and never covers

an additional insured’s direct liability, meaning liability from an additional insured’s own conduct,

see Restatement (Third) of Agency § 7.03 cmt. b (2006). See Fleet Memo at 7. But text, precedent,

and history all establish that the endorsement covers an additional insured’s direct liability for

damage proximately caused by the named insured’s acts or omissions.

1. Fleet’s policy covers the City’s liability for property damage

proximately caused by Perini’s acts or omissions.

Applying principles of contract interpretation to Fleet’s endorsement, see Burlington Ins.

Co., 79 N.E.3d at 481, the endorsement covers the City as an additional insured for any claims of

property damage proximately caused by actions of Perini. The endorsement states that an

additional insured is covered “with respect to liability for . . . ‘property damage’ . . . caused, in

whole or in part, by [Perini’s] acts or omissions.” Commercial General Liability Policy,

Endorsement #23. The phrase “caused, in whole or in part” in this context “describes proximate

causation.” Burlington Ins. Co., 79 N.E.3d at 481. “‘[P]roximate cause,’” in turn, “refers to a

‘legal cause’ to which the Court has assigned liability.” Id. at 482 (citation omitted).

The phrase “caused, in whole or in part, by [Perini’s] acts or omissions” most naturally

modifies “property damage.” A limiting phrase ordinarily modifies “[t]he last antecedent”—that

is, “only the noun or phrase that it immediately follows.” Barnhart v. Thomas, 540 U.S. 20, 26

(2003). This “rule of grammar” applies to contract disputes. GPIF-I Equity Co., Ltd. v. HDG

Mansur Inv. Servs., Inc., 2013 WL 3989041, at *8 (S.D.N.Y. Aug. 1, 2013); see, e.g., Lloyd v. J.P.

Morgan Chase & Co., 791 F.3d 265, 271 (2d Cir. 2015). Indeed, “the New York Court of Appeals

has specifically relied on the principles underlying the rule of the last antecedent in resolving an

insurance contract dispute.” GPIF-I Equity Co., 2013 WL 3989041 at *8 (citing Maurice Goldman

& Sons, Inc. v. Hanover, Ins. Co., 607 N.E.2d 792 (N.Y. 1992)). Taking these words together,

Fleet’s endorsement encompasses liability for property damage with only one limitation: acts or

omissions of Perini must have been a proximate cause of the damage. That includes the City’s

direct liability for damages proximately caused by Perini’s acts or omissions.

The surrounding language bolsters this understanding, because it specifies that an

additional insured is covered “with respect to liability for . . . ‘property damage’ . . . caused, in

whole or in part,” by Perini, Commercial General Liability Policy, Endorsement #23 (emphasis

added). It thus expressly acknowledges that the endorsement applies when parties other than the

named insured—like an additional insured—are also tortfeasors. See First Mercury Ins. Co. v.

Shawmut Woodworking & Supply, Inc., 660 F. App’x 30, 34 (2d Cir. 2016) (summary order)

(reasoning that the “in whole or in part” language “clearly contemplates that the additional insureds

might also be tortfeasors”); Pro Con, Inc. v. Interstate Fire & Cas. Co., 794 F. Supp. 2d 242, 256-

57 (D. Me. 2011) (“Defendant, by including the language ‘in whole or in part’ in its [policy],

specifically intended coverage for additional insureds to extend to occurrences attributable in part

to acts or omissions by both the named insured and the additional insured.”). At minimum, that is

a reasonable reading of the endorsement, and such ambiguity in an insurance contract is resolved

in the insured’s favor. Euchner-USA, 754 F.3d at 141.

The New York Court of Appeals’ decision in Burlington Insurance Co. confirms that

Fleet’s policy covers the City for property damage proximately caused, in whole or in part, by

Perini’s acts or omissions. The Court of Appeals construed a policy with the same relevant

language—covering an additional insured “only with respect to liability for ‘bodily injury’,

‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by . . . [the

named insured’s] acts or omissions.” 79 N.E.3d. at 479. It squarely held that “where an insurance

policy is restricted to liability for any bodily injury ‘caused, in whole or in part,’ by the ‘acts or

omissions’ of the named insured, the coverage applies to injury proximately caused by the named

insured.” Id. at 478; see also, e.g., id. at 481 (“[B]y its terms, the policy endorsement is limited to

those injuries proximately caused by [the named insured.”).

The endorsement’s history reinforces the same understanding. The language of this

endorsement comes from a form issued by a trade group known as the Insurance Services Office

(“ISO”). See City Memo at 5; Rules of the City of New York, tit. 1, § 101-08 (requiring

prospective permit holders to make the City “an [a]dditional [i]nsured with coverage at least as

broad as set forth in the most recent edition” of relevant forms promulgated by the ISO). Before

2004, the ISO’s form for coverage of an additional insured applied to injuries “arising out of” the

named insured’s actions. Burlington Ins. Co., 79 N.E.3d at 485. Under that regime, courts

regularly concluded that the endorsement covered an additional insured’s direct liability for harms

proximately caused by the conduct of the named insured—not simply an additional insured’s

vicarious liability for the additional insured’s actions. See, e.g., Charter Oak Fire Ins. Co. v.

Trustees of Columbia Univ. in City of New York, 198 A.D.2d 134, 135 (N.Y. App. Div. 1993). But

some courts further ruled that the endorsement covered an additional insured’s direct liability for

“damage arising from the additional insured’s sole negligence.” Burlington Ins. Co., 79 N.E.3d at

485; see, e.g., Ins. Co. of N. Am. v. Liberty Mut. Ins. Co., No. 94-CV-637, 1994 WL 150818, at *2

(S.D.N.Y. Apr. 19, 1994). They concluded that a named insured need not be a proximate cause of

the damage, so long as the named insured’s acts or omissions were a “but for” cause. Burlington

Ins. Co., 79 N.E.3d at 485. In apparent response, the ISO amended its forms in 2004 “to replace

the language ‘arising out of’ with ‘caused, in whole or in part.’” Ibid. This amendment simply

“preclu[ded] . . . coverage for an additional insured’s sole negligence” by replacing but-for

causation with “proximate causation.” Ibid.; see First Mercury Ins. Co. v. Shawmut Woodworking

& Supply, Inc., 48 F. Supp. 3d 158, 174 (D. Conn. 2014) (explaining that “[t]he amendment was

intended to require proximate causation by the insured rather than simply but-for causation”).

Accordingly, as many courts in New York have already concluded, this language requires

an insurer to defend an additional insured when the complaint alleges that actions of the named

insured were a proximate cause of the damages being sought. Those courts assess the insurer’s

duty to defend based solely on whether the underlying complaint alleges that the additional insured

is liable for an injury that was proximately caused by the named insured. See First Mercury Ins.

Co. v. Preferred Contractors Ins. Co., 136 N.Y.S.3d 728, 728 (N.Y. App. Div. 2021) (“At this

stage, the pleadings are sufficient to allege . . . that [the insurer’s] named insured proximately

caused the underlying accident, and thus that under the policy language, there is a reasonable

possibility of coverage that could trigger at least a duty to defend.”); Citizens Ins. Co. of Am. v.

Am. Ins. Co., 130 N.Y.S.3d 289, 290 (N.Y. App. Div. 2020) (“Since the underlying personal injury

complaint here contains allegations that all defendants, including [the additional insured], are

liable for bodily injuries, and that all defendants, including [the named insured], were a proximate

cause of those injuries, [the insurer’s] duty to defend is triggered.”); see also Vargas v. City of New

York, 158 A.D.3d 523, 525 (N.Y. App. Div. 2018); see also Starr Indem. & Liab. Co. v. Excelsior

Ins. Co., No. 19-CV-3747, --- F. Supp. 3d ----, 2021 WL 326209, at *8 (S.D.N.Y. Feb. 1, 2021).

2. Fleet’s narrower construction lacks merit.

Fleet offers a narrower construction of its endorsement, contending that it only applies

when the additional insured could “be liable for the negligent acts of” the named insured. Def.’s

Opp’n to Def.’s Cross-Mot. for Summ. J. at 1 (Dkt. #25) (“Fleet Opp’n); see id. at 6 (“Because the

Con Edison complaint does not assert that the City is . . . liable for Perini’s conduct, Fleet has no

duty to defend the City.”); Fleet Memo at 9 (“[T]he City is not being sued for the negligence of

Perini.”). So construed, the City would only be indemnified if it were vicariously liable for Perini’s

negligence or were jointly and severally liable with Perini. See Def.’s Reply in Supp. of Cross-

Mot. for Summ. J. at 3 (Dkt. #30) (“Fleet Reply”).

Fleet’s construction does not persuade. While Fleet acknowledges that the touchstone of

an insurance dispute is the language of the contract, see, e.g., Fleet Memo at 7, Fleet does not

attempt to ground its interpretation in the policy’s text. Instead, Fleet appears to rest on the New

York Court of Appeals’ opinion in Burlington, suggesting that the decision established that Fleet’s

policy covers the City only if “the City is vicariously liable for Perini’s conduct” or if “Perini and

the City are jointly and severally liable for Con Edison’s damages.” Fleet Reply at 3. But

Burlington did not adopt those limits. To the contrary, Burlington repeatedly explained that it was

adopting a proximate-causation test. See pp. 12-13, supra; 79 N.E.3d at 478 (“[C]overage applies

to injury proximately caused by the named insured.”); id. at 483 (“‘[C]aused in whole or in part,’

as used in the endorsement, requires the insured to be the proximate cause of the injury giving rise

to liability.”); ibid. (“Giving the words chosen by the parties their plain and ordinary meaning, the

endorsement describes proximate cause.”).

The portions of the opinion on which Fleet relies does not adopt a contrary rule. Fleet

seizes on a sentence where the Court of Appeals explained that the endorsement was designed to

“provide coverage for an additional insured’s vicarious or contributory negligence, and to prevent

coverage for the additional insured’s sole negligence.” 79 N.E.3d at 485; see, e.g., Fleet Opp’n

at 3. But the Court of Appeals’ statement regarding “sole negligence” does not help Fleet; it simply

confirms that acts or omissions of a named insured must be a proximate cause of the injury for the

endorsement to apply. Further, the Court of Appeals’ reference to “an additional insured’s . . .

contributory negligence” strongly suggests that the Court of Appeals understood the endorsement

would reach cases in which an injury results from the negligence of both a named insured and an

additional insured. While “contributory negligence” is commonly used to refer to the “negligence

of the plaintiff . . . [as] one of the causes of her harm,” Dan B. Dobbs, The Law of Torts § 219

(2d ed.) (emphasis added), the Court of Appeals’ reference to “an additional insured’s . . .

contributory negligence” suggests the parallel concept of negligence on the part of an additional

insured as a contributing cause. Accordingly, this section of Burlington simply reinforces that

Fleet’s endorsement applies when acts of both the additional insured and the named insured were

proximate causes of an injury. To the extent uncertainty remains about how Burlington is best

understood, Fleet has a duty to defend the City on the possibility that “the cases governing the

insurance policy [will] be read to impose coverage.” Hugo Boss Fashions, 252 F.3d at 620.

My conclusion that Fleet’s endorsement is not limited to an additional insured’s vicarious

or joint and several liability is also consistent with the conclusions of courts across the country.

See, e.g., Scottsdale Ins. Co. v. United Rentals (N. Am.), Inc., 977 F.3d 69, 73 (1st Cir. 2020)

(“[The insurer] has a duty to indemnify [the additional insured] . . . for both direct and vicarious

liability.”); FirstEnergy Generation, LLC v. Valley Forge Ins. Co., No. 19-CV-2413, 2020 WL

5544359, at *5 (N.D. Ohio Sept. 16, 2020) (“[T]he Court construes the policy . . . to cover any of

[the additional insured’s] potential liability in the underlying suits caused in whole or in part by

[the named insured], even if that liability is not vicarious liability resulting from [the named

insured]’s actions.”); Moore v. Home Depot USA, Inc., 352 F. Supp. 3d 640, 648 (M.D. La 2018)

(“Nothing in the text of the blanket additional-insured endorsement limits coverage to [the

additional insured]’s vicarious liability for [the named insured’s] fault.”); First Mercury, 48 F.

Supp. 3d at 174 (“[C]overage . . . is not limited to . . . vicarious liability . . . but instead refers more

broadly to liability that is caused, at least in part, by [the named insured], but excludes situations

involving only the independent acts of negligence of the additional insureds.”). Fleet’s

endorsement reaches the City’s direct liability for property damage when that damage was

proximately caused, at least in part, by acts or omissions of Perini.

3. The Con Edison complaint alleges that the City is liable for property

damage that was proximately caused by Perini.

The Con Edison complaint alleges claims within the scope of Fleet’s endorsement. Con

Edison seeks “compensatory damages for property damage” from the City. See Con Edison

Compl. at 1. Specifically, it seeks about $4.8 million, representing the amount of money spent to

repair damaged gas and electric facilities and restore those power systems. See id. at 32. And

while the complaint alleges that the City was a proximate cause of that damage, it also identifies

Perini as another proximate cause of that same harm. The introduction to the complaint states that

the property damage was also “caused by . . . [non-City] actions in connection with excavation.”

Id. ¶ 1. And the third, fourth, and fifth causes of action expressly allege that the non-City

defendants’ “actions and omissions [were] the proximate cause” of the $4.8 million in property

damage. Id. ¶¶ 91, 108, 115. These are not mere conclusory allegations; the complaint describes

how Perini and others “engaged in a pattern and practice of violating the New York City Building

Code, accumulating a plethora of violations, monetary penalties, and stop work orders,” which led

to “shifting ground and/or damage to neighboring structures.” Id. ¶¶ 39-40. Because the complaint

alleges the Perini’s actions—as well as the City’s—were proximate causes of the property damage

for which Con Edison seeks to recover, Fleet owes the City a duty to defend. See High Point

Design, LLC, 911 F.3d at 95 (noting that an insured has a duty to defend a lawsuit when “any of

the claims against the insured arguably arise from covered events”); cf. Vargas, 158 A.D.3d at 525

(concluding that complaint adequately alleged proximate causation by named insured when it

“allege[d] that all defendants were negligent and failed to provide a safe job site,” so it was

“possible that plaintiff’s injury was caused by [the named insured]”).

Fleet’s contrary arguments lack merit. First, Fleet argues that the complaint does not allege

that Perini was a proximate cause of the property damage for which Con Edison seeks damages

from the City because the seventh cause of action states that “NYC’s actions and omissions were

the direct and proximate cause of the damage to Con Edison’s gas and electric facilities and the

loss of Con Edison’s gas.” Con Edison Compl. ¶ 147; see Fleet Memo at 5. But since “there may

be more than one proximate cause of an injury,” “the proximate cause” can mean “a proximate

cause.” Argentina v. Emery World Wide Delivery Corp., 715 N.E.2d 495, 498 n.2 (N.Y. 1999);

see Burlington Ins. Co., 79 N.E.3d at 482 (“[T]here may be more than one proximate cause”).

That reading is best here, where the complaint alleges that both Perini and the City were “the

proximate cause” of Con Edison’s injuries, Con Edison Compl. ¶¶ 91, 108, 115, 147, and describes

these injuries in identical terms, id. ¶¶ 1, 97, 109, 120, 153.

Second, Fleet argues that there is no reasonable possibility that the City will be held liable

for property damage proximately caused by Perini because “Con Edison has advanced [the] two

theories of causation on an ‘either/or’ basis: the accident was either caused by Perini and the other

Construction Defendants’ negligence, or it was caused by the City’s separate and independent

negligence.” Fleet Opp’n at 5. But the complaint’s allegations are not mutually exclusive. A

factfinder accepting the allegations in the complaint could determine that negligence of both the

Construction Defendants and the City combined to cause the damage to Con Edison’s property.

To the extent that the allegations are “ambiguous” on the point, Fleet is obligated to defend the

City due to the possibility that the complaint alleges that both were a proximate cause. U.S. Fid.

& Guar. Co. v. Executive Ins. Co., 893 F.2d 517, 519 (2d Cir. 1990). Because the Con Edison

complaint seeks to hold the City liable for property damage proximately caused by Perini, Fleet is

obligated to defend the City in the Con Edison action.

B. Even under a narrower construction of Fleet’s policy, Fleet has a duty to

defend the City because Con Edison’s allegations qualify for joint and several

liability.

Even if Fleet’s policy had the narrower scope that Fleet suggests, Fleet would have a duty

to defend the City in the Con Edison action. Fleet concedes that its endorsement at least covers

the City’s joint and several liability with Perini, see Fleet’s Reply at 3, presumably because joint

and several liability would make the City “responsible . . . for the shares [of damage] attributable”

to Perini, see David D. Siegel, N.Y. Prac. § 168A (6th ed.); Dan B. Dobbs, Law of Torts § 488

(2d ed.) (“When two or more tortfeasors are jointly and severally liable, each defendant is subject

to liability for all of the plaintiff’s damages.”).

The “reasonable possibility” of eventual joint and several liability independently obligates

Fleet to defend the City in the Con Edison action. Maryland Cas. Co., 332 F.3d at 160. While the

Con Edison complaint does not explicitly state that it seeks to hold the City and Perini jointly and

severally liable, the complaint raises a reasonable possibility of such liability. Under New York

law, “[w]hen two or more tort-feasors act concurrently or in concert to produce a single injury,

they may be held jointly and severally liable.” Ravo by Ravo v. Rogatnick, 514 N.E.2d 1104, 1106

(N.Y. 1987); see Elizabeth Williams, 103 N.Y. Jur. 2d Torts § 33 (2d ed.) (same). As previously

explained, the complaint alleges that both the City and Perini took actions concurrently that

ultimately produced Con Edison’s property damage. Those allegations are enough to create the

reasonable possibility that the City and Perini might be held jointly liable.

The fact that the Con Edison complaint does not explicitly raise the City’s joint and several

liability does not change the outcome. The duty to defend applies in “poorly or incompletely

pleaded cases as well as those artfully drafted,” U.S. Fid. & Guar. Co, 893 F.2d at 519 (quoting

Ruder & Finn, Inc. v. Seaboard Sur. Co., 422 N.E.2d 518, 521 (N.Y. 1981)), and an insurer cannot

“construct a formal fortress of [a] third party’s pleadings” by requiring magic words,

see Fitzpatrick v. Am. Honda Co., 575 N.E.2d 90, 93-94 (N.Y. 1991). What matters is the

possibility of coverage, and the reasonable possibility remains that the City and Perini would be

held jointly liable were they found to be joint tortfeasors. See David D. Siegel, N.Y. Prac. § 168A

(6th ed.) (“The general rule in New York tort law is still that of joint and several liability.”);

N.Y. C.P.L.R. § 3017 (“[T]he court may grant any type of relief within its jurisdiction appropriate

to the proof whether or not demanded, imposed on such terms as may be just.”).

C. Because Fleet has a duty to defend the City, Fleet also has a duty to pay

attorneys’ fees and litigation expenses that the City reasonably incurred.

“Where an insurer breaches the duty to defend, it must pay damages in the form of

attorneys’ fees and litigation expenses reasonably incurred by the insured in defending the

underlying action.” United Parcel Serv. v. Lexington Ins. Grp., 983 F. Supp. 2d 258, 267-68

(S.D.N.Y. 2013). Fleet has a duty to defend the City in the Con Edison action. Accordingly, Fleet

also has a duty to compensate the City for the fees and expenses reasonably incurred defending

that action. See Lowy v. Travelers Prop. & Cas. Co., 2000 WL 526702, at *2 n.1 (S.D.N.Y. May,

2, 2000); Port Auth. of New York & New Jersey v. Brickman Grp. Ltd., LLC, 181 A.D.3d 1, 19-20

(N.Y. App. Div. 2019).

CONCLUSION

The City’s motion for summary judgment is granted, and Fleet’s motion for summary

judgment is denied. A conference is scheduled for May 19, 2021 to discuss further proceedings

in this case, including proceedings concerning the amount of the City’s litigation expenses.

SO ORDERED.

/s/ Rachel Kovner

RACHEL P. KOVNER

United States District Judge

Dated: May 12, 2021

Brooklyn, New York