Travelers Indemnity Company of America v. Accredited Surety & Casualty Company, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

TRAVELERS INDEMNITY

COMPANY OF AMERICA,

MEMORANDUM AND ORDER

Plaintiff, Case No. 21-CV-7189 (FB) (JRC)

-against-

ACCREDITED SURETY &

CASUALTY COMPANY, INC.

Defendant.

Appearances: For the Defendant:

For the Plaintiff: EDWARD S. BENSON

LISA SZCZEPANSKI Nicoletti Spinner Ryan Gulino Pinter LLP

Attorneys for Travelers Indemnity 555 Fifth Avenue, 8th Fl.

Company of America New York, NY 10017

485 Lexington Ave., 6th Fl.

New York, NY 10017

BLOCK, Senior District Judge:

In this diversity jurisdiction action pertaining to an insurance coverage

dispute, Plaintiff Travelers Indemnity Company of America (“Travelers”) and

Defendant Accredited Surety & Casualty Company, Inc. (“ASCC”) both move for

summary judgment. For the foregoing reasons, Travelers’ motion is granted, and

ASCC’s motion is denied.

I. BACKGROUND

The following facts are taken from the pleadings, the parties’ Rule 56.1

statements, and the supporting documentation. The facts are undisputed unless

otherwise noted. A moving party is entitled to summary judgment when it shows

“that 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). When both parties move

for summary judgment, the Court examines each party’s motion on its own merits

and draws all reasonable inferences against the party whose motion is under

consideration. See Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 822

F.3d 620, 631 n.12 (2d Cir. 2016) (internal quotation marks and citation omitted).

This case springs from an underlying New York state court personal injury

case, Gerard Quinn v. The City of New York, et al (“Underlying Action”), in which

claimant Gerald Quinn (“Quinn”) brought claims for negligence and violations of

the New York Labor Law against Topline Drywall, Inc. (“Topline”), New York

City Housing Authority (“NYCHA”), and LIC 73 Owner, LLC (“LIC 73”) for

injuries Quinn suffered from falling from a ladder at a NYCHA Project (the

“Project”) in Long Island City in August 2019.

Travelers, the insurer for contractor Archstone Builders, LLC (“Archstone”),

seeks an Order declaring that: (a) the insurer for subcontractor Topline, ASCC,

owes a duty to defend NYCHA and LIC 73 in connection with the Underlying

Action; (b) ASCC’s coverage obligations to NYCHA and LIC 73 in connection

with the Underlying Action are primary; and (c) Travelers’ coverage obligations

are excess to those of ASCC with respect to the Underlying Action; and granting

an award in Travelers’ favor against ASCC for all sums Travelers has paid in

defending NYCHA and LIC 73 in the Underlying Action.

A. The Purchase Order

According to Travelers, on June 13, 2018, Archstone entered a Purchase

Order (the “Purchase Order”) with Topline, wherein Topline agreed to provide

work for rough carpentry and drywall work for Archstone at the Project site. The

Purchase Order states:

Subcontractor will submit project specific insurance documents . . .

specifically naming ASB, Owner, their officers, directors, agents and

employees, Building Owner, Landlord, Managing Agent, Lender and

all applicable additional indemnitees . . . as an additional insured

afforded on a primary and non-contributory basis[.]

ASCC disputes whether there is an admissible, signed version of the

Purchase Order.

B. The Insurance Policies

ASCC issued a commercial general liability policy to Topline (the “ASCC

Policy”) for the policy period of December 14, 2018, to December 14, 2019, that

includes a duty to defend the insured against any suit seeking bodily injury

damages. The Policy also contains endorsements that provide coverage for

additional insureds with respect to, in relevant part, liability for bodily injury

“caused, in whole or in part, by” Topline’s “acts or omissions . . . in the

performance of [its] ongoing operations for the additional insured(s).”

Travelers issued a commercial general liability policy (the “Travelers

Policy”) to Archstone for the policy period of December 31, 2018, to December

31, 2019. The Travelers Policy provides that coverage under the policy is excess

over any other coverage available where a party is added as an additional insured.

C. The Underlying Action and This Action

After Quinn, an employee of Archstone, fell from a ladder owned by

Topline, he commenced the Underlying Action against Topline, NYCHA, and LIC

73. Travelers tendered and retendered the defense and indemnification of all

applicable indemnitees to ASCC, but ASCC denied the tender and retender. In the

Underlying Action, Travelers has tolled more than $55,000 in costs as of

September 2023.

II. DISCUSSION

The duty to defend insureds is “derived from the allegations of the complaint

and the terms of the policy.” Technicon Elecs. Corp. v. Am. Home Assur. Co., 74

N.Y.2d 66, 73 (1989). To determine whether ASCC has a duty to defend the

additional insureds of LIC 73 and NYCHA, the Court begins by “compar[ing] the

allegations of the complaint with the operative insurance policy.” Int’l Bus.

Machs. Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 148 (2d Cir. 2004). Because

an insurer’s duty to defend is “exceedingly broad” — broader than the duty to

indemnity — the duty is “invoked whenever the allegations in a complaint against

the insured fall within the scope of the risks undertaken by the insurer, regardless

of how false or groundless those allegations might be.” High Point Design, LLC v.

LM Ins. Corp., 911 F.3d 89, 94–95 (2d Cir. 2018) (cleaned up).1 A duty to defend

thus exists unless “it can be concluded as a matter of law that there is no possible

factual or legal basis on which the insurer will be obligated to indemnify the

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

(quoting Frontier Ins. Co. v. State, 87 N.Y.2d 864, 867 (1995)). This standard

“applies equally to additional insureds and named insureds.” Worth Const. Co. v.

Admiral Ins. Co., 10 N.Y.3d 411, 415 (2008) (cleaned up).

A. Existence of Valid Purchase Order

Before turning to the complaint in the Underlying Action and the ASCC

Policy, the Court must first resolve whether a valid Purchase Order exists

establishing LIC 73 and NYCHA as additional insureds. ASCC contends that

there is no admissible written contract because Travelers has only produced

1 While unnecessary to do here, even if the complaint’s explicit language does not

trigger the duty, the Court must also look “beyond the four corners of the

complaint to determine whether there is any potentially covered occurrence.”

Westport Ins. Corp. v. Napoli, Kaiser & Bern, 746 F. Supp. 2d 502, 506 (S.D.N.Y.

2010) (citing Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61, 65–66 (1991)).

unsigned and partially signed versions of the Purchase Order. This argument is

without merit.

Travelers has produced a version of the Purchase Order on Archstone

letterhead, dated as of June 13, 2018, and signed by Niall McDonagh on behalf of

Topline. An offer made by Archstone and accepted by Topline via signature

establishes mutual assent by the parties to be bound by the Purchase Agreement.

See Gonzalez v. Gotham Org. Inc., No. 16-CV-607 (FB) (ST), 2023 WL 6214544,

at *7 (E.D.N.Y. Sept. 25, 2023) (“[T]he suggestion that the rental agreement would

not be enforceable because it was unsigned by TJM – the party seeking to enforce

the agreement – is without legal merit.”); see also In re Portjeff Dev. Corp., 128

B.R. 38, 44 (Bankr. E.D.N.Y. 1991) (the offer became binding on both parties

when party received the offer and signed, executed, and returned the agreement)

(citing Camrex Contractors v. Reliance Marine Applicators, 579 F. Supp. 1420

(E.D.N.Y. 1984)). Accordingly, LIC 73 and NYCHA qualify as additional

insureds under the Purchase Agreement.

ASCC next quibbles that the Purchase Order has not been properly

authenticated, thereby making it “unknown” whether Archstone and Topline

entered into the agreement. The Court is thoroughly unconvinced by this

argument. As an initial matter, if ASCC has any reason to believe that the

Purchase Order proffered by Travelers is fraudulent, it would be better for ASCC

to say so rather than proceeding behind evidentiary niceties. Nonetheless, turning

to the heart of the matter, the Court is satisfied as to the Purchase Order’s

authenticity. Under Federal Rule of Evidence 901(a), parties must provide

“evidence sufficient to support a finding that the matter in question is what its

proponent claims,” a bar that the Second Circuit has described as “not particularly

high.” United States v. Vayner, 769 F.3d 125, 130 (2d Cir. 2014). This standard is

satisfied “if sufficient proof has been introduced so that a reasonable juror could

find in favor of authenticity or identification” and can be proved circumstantially

or directly. United States v. Ruggiero, 928 F.2d 1289, 1303 (2d Cir. 1991). Here,

there is sufficient evidence as to the document’s authenticity. Todd Anderson of

Travelers attests to having received the Purchase Order from Archstone, both

Archstone and Topline clearly performed as if there were a valid contract, and

ASCC does not offer any evidence to the contrary. Accordingly, the Court finds

that the Purchase Order is valid and binding.

B. The Duty to Defend

The Court turns next to the Underlying Action’s complaint. Quinn alleged,

inter alia, that the defendants, including Topline, were negligent in “permitting a

ladder that Plaintiff was on to exist and remain in a broken, bent, defective, loose,

dangerous, improperly secured and/or unsecured, improperly fastened and/or

unfastened, improperly positioned and aligned condition,” “operating, cleaning,

controlling, regulating, supervising, inspecting, repairing, managing, erecting,

constructing, designing, maintaining and overseeing said premises and more

particularly the aforesaid ladder;” and “failing to foresee the existence of a hazard

from the condition of said ladder[.]”

Quinn’s allegations are sufficient to trigger ASCC’s duty to defend. “[A]

liability insurer has a duty to defend its insured in a pending lawsuit if the

pleadings allege a covered occurrence, even though facts outside the four corners

of those pleadings indicate that the claim may be meritless or not covered.” Int’l

Bus. Machines Corp, 303 F.3d at 427 (quoting Fitzpatrick, 78 N.Y.2d at 63).

Because “the allegations of the complaint are even potentially within the language

of the insurance policy, there is a duty to defend.” High Point Design, LLC, 911

F.3d at 95 (quoting Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98

N.Y.2d 435, 443 (2002)). Here, because Quinn clearly alleges negligence by

Topline, his complaint induces ASCC’s duty to defend.

ASCC argues that Topline cannot be held liable under Quinn’s complaint,

citing several cases in its reply brief that purportedly establish that Topline was not

negligent. But as this Court explained recently, the merits of Quinn’s complaint —

i.e., whether Topline is ultimately held liable for negligence — are “irrelevant; if

the allegations suggest coverage, ‘the insurer must come forward to defend its

insured no matter how groundless, false or baseless the suit may be.’” Certain

Underwriters at Lloyd's, London v. Travelers Cas. Ins. Co. of Am., 664 F. Supp. 3d

288, 293 (E.D.N.Y. 2023) (quoting Town of Massena v. Healthcare Underwriters

Mut. Ins. Co., 98 N.Y.2d 435, 444 (2002)). In fact, “an insurer may be required to

defend under the contract even though it may not be required to pay once the

litigation has run its course.” Auto. Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131,

137 (2006). In this case, a “complaint subject to defeat because of debatable

theories must nevertheless be defended by the insured.” Int’l Paper Co. v. Cont’l

Cas. Co., 35 N.Y.2d 322, 326 (1974).

ASCC urges the Court to consider extrinsic evidence to vitiate its duty to

defend. While the “precise delineations of the use of extrinsic evidence to permit

an insurer to disclaim its duty to defend are ‘unclear’ under New York law,” ASCC

is correct that courts in the Second Circuit will sometimes consider undisputed

evidence of facts to conclusively establish that the insurer faces no possible

liability. Philadelphia Indem. Ins. Co. v. Streb, Inc., 487 F. Supp. 3d 174, 186

(S.D.N.Y. 2020) (quoting Int’l Bus. Machines Corp., 363 F.3d at 148 n.4).

However, the Court cannot conclude, based on the facts presented, that there is “no

possible factual or legal basis on which it might eventually be obligated to

indemnify its insured under any policy provision.” Burt Rigid Box, Inc. v.

Travelers Prop. Cas. Corp., 302 F.3d 83, 97 (2d Cir. 2002) (quoting Allstate Ins.

Co. v. Zuk, 78 N.Y.2d 41, 45 (1991)). Rather, based on Quinn’s allegations, it is

reasonably possible that Topline was negligent in the performance of its

operations. To the extent there is any ambiguity, the Court must “liberally

construe” the allegations and resolve any doubt as to whether the allegations state a

claim within the coverage of the ASCC policy “in favor of the insured and against

the carrier,” Charter Oak Fire Ins. Co. v. Zurich Am. Ins. Co., 462 F. Supp. 3d 317,

323-24 (S.D.N.Y. 2020).

The cases ASCC cites to avoid its duty are to no avail. In Worth, the New

York Court of Appeals granted the defendant summary judgment because the

plaintiff/general contractor conceded that the negligence claim against the

subcontractor in the underlying action lacked factual merit and should be

dismissed. See Worth, 10 N.Y.3d at 414-15. Here, by contrast, the “complaint

alleges a clear connection between the claimant’s injury and the risk for which the

additional insured endorsements in the policy were intended.” Wausau

Underwriters Ins. Co. v. Old Republic Gen. Ins. Co., 122 F. Supp. 3d 44, 51

(S.D.N.Y. 2015) (cleaned up).

ASCC raises much ado about the causation standard. The ASCC Policy

limits coverage for liability for bodily injury “caused, in whole or in part” by

Topline’s acts or omissions in the performance of its ongoing operations, language

that the New York Court of Appeals has read to limit coverage to injuries

proximately caused by Topline. See Burlington Ins. Co. v. NYC Transit Auth., 29

N.Y.3d 313, 321 (2017) (the phrase “caused, in whole or in part” requires

proximate causation). Thus, the ASCC Policy requires ASCC to defend Topline’s

additional insureds if the complaint in the Underlying Action suggests a reasonable

possibility that Topline proximately caused Quinn’s injuries. Quinn’s complaint

does so, by alleging that Topline was negligent. See id. at 323 (negligence suffices

to establish liability under the “caused, in whole or in part, by” language).

Accordingly, ASCC has a duty to defend the additional insureds.

Finally, the Court finds that ASCC’s coverage obligations to NYCHA and

LIC 73 in connection with the Underlying Action are primary and Travelers’

coverage obligations are excess to those of ASCC with respect to the Underlying

Action, which ASCC apparently does not dispute. The Court determines the

priority or allocation of coverage by comparing the respective policies’ “other

insurance” clauses. See Emp’rs Ins. Co. of Wausau v. Harleysville Preferred Ins.

Co., 726 F. App’x 56, 64 (2d Cir. 2018). Here, the ASCC Policy provides that its

coverage is primary absent inapplicable exceptions, while the Travelers Policy

provides that its coverage is excess of any other insurance available to the

additional insured. Travelers is thus entitled to recoup the defense costs it has

incurred in the Underlying Action. See Arch Specialty Ins. Co. v. Farm Fam. Cas.

Ins. Co., 238 F. Supp. 3d 604, 615 (S.D.N.Y. 2017).

CONCLUSION

For the foregoing reasons, Travelers’ motion for summary judgment is

GRANTED, and ASCC’s motion is DENIED. Within ten days, Travelers shall

submit an appropriate declaratory judgment for this Court’s signature.

SO ORDERED.

_/S/ Frederic Block__________

FREDERIC BLOCK

Senior United States District Judge

Brooklyn, New York

March 13, 2024