The Travelers Indemnity Company v. State National Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

THE TRAVELERS INDEMNITY COMPANY,

Plaintiff,

MEMORANDUM AND ORDER

23-cv-00496 (LDH) (TAM)

-against-

STATE NATIONAL INSURANCE COMPANY,

Defendant.

LASHANN DEARCY HALL, United States District Judge:

Travelers Indemnity Company (“Plaintiff”) brings this action against State National

Insurance Company (“Defendant”) seeking a declaratory judgment that it has no obligation, as

Defendant does, to provide additional insured coverage in an underlying personal injury action.

Defendant brings a counterclaim for a declaratory judgment as to Plaintiff’s obligation regarding

the same. Before the Court are the parties’ cross-motions for summary judgment, each brought

pursuant to Federal Rule of Civil Procedure 56, regarding each party’s duty to defend the

defendants in the underlying action.

I. BACKGROUND1

Barr & Barr, Inc. (“Barr & Barr”) is a general contractor, which was hired for the Jetro

Holdings LLC (“Jetro”) Corporate Office Relocation Project (the “Project”) at JMDH Real

Estate Offices (“JMDH”), in Queens, New York at some time before April 2018. (Rule 56.1

1 The foregoing facts are undisputed unless otherwise noted. Further, facts that were not contradicted by citations to

admissible evidence are deemed admitted. See Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003) (“If

the opposing party . . . fails to controvert a fact so set forth in the moving party’s Rule 56.1 Statement, that fact will

be deemed admitted.”).

Statement of Material Facts (“56.1”), ECF No. 23, ¶ 5.) Construction Resources Corporation

(“CRC”) is a union pay master, which provides union payroll services. (Id. ¶¶ 32–33.) In April

2018, Barr & Barr entered into a subcontract with CRC to provide payroll services for union

employees on the Project (“Barr-CRC Subcontract”). (Id. ¶ 31.) Specifically, CRC agreed to

carry payroll and workman’s compensation insurance for Barr & Barr’s Superintendent, Peter

Santorufo, and labor foreman, Joey Castelli. (Id. ¶ 32.) Both Santorufo and Castelli worked for

Barr & Barr for years before the CRC subcontract was active – Santorufo for 20 years and

Castelli for “quite a long time.” (Id. ¶¶ 33, 38.) Although CRC appeared as the payor on

Santorufo’s and Castelli’s pay stubs while the subcontract was active, Santorufo and Castelli

continued to report to Barr & Barr directly, and their duties did not change. (Id. ¶¶ 36, 37, 39.)

For example, Santorufo and Castelli supervised and controlled Barr & Barr employees who

worked at the Project. (Id. ¶ 41.)

In August 2018, Capitol Fire Sprinkler (“Capitol”), a fire protection company, entered

into a subcontract agreement with Barr & Barr to provide fire protection services for the Project

(“Barr-Capitol Subcontract”). (Id. ¶ 26.) At some point before November 6, 2018, Plaintiff

issued an insurance policy to Capitol for the policy period November 6, 2018 to November 6,

2019 (the “Travelers Capitol Policy”). (Id. ¶ 53.) The Travelers Capitol Policy contained a

Blank Additional Insured endorsement that provided additional insured coverage “if and only to

the extent that, the injury . . . is caused by acts or omissions of [Capitol].” (Id. ¶ 54.) Plaintiff

also issued a commercial excess policy to Capitol for the policy period November 6, 2018 to

November 6, 2019, which provided additional insured coverage if the Barr-Capitol Subcontract

required “that the insurance provided by this policy . . . apply on a primary basis or a primary

and noncontributory basis.” (Id. ¶ 56.) Under the Barr-Capitol Subcontract, Capitol agreed to

provide additional insured coverage for Barr & Barr and property owner JMDH, on a primary

and non-contributory basis, under its commercial general liability and umbrella liability policies.

(Id. ¶ 27.) Capitol also agreed to accept responsibility for defects in other work, of which it

would notify Barr & Barr in writing, if Capitol proceeded with its own work prior to the remedy

of those defects. (Id. ¶ 28.)

At some point before November 3, 2018, Defendant issued an insurance policy to CRC

for the policy period November 3, 2018, to November 3, 2019 (the “SNIC CRC Policy”). (Id. ¶¶

2, 50.) The SNIC Policy’s Blanket Additional Insured provision provided additional insured

coverage “only with respect to operations performed by or on behalf of [CRC].” (Id. ¶ 51.) And

at some point prior to April 1, 2019, Plaintiff issued a general liability insurance policy to Barr &

Barr for the policy period April 1, 2019 to April 1, 2020 (the “Travelers Barr Policy”). (Id. ¶ 1.)

Between October 11, 2019, and October 24, 2019, Max Stewart, a Capitol employee who

worked at the Project, notified Barr & Barr Superintendent Santorufo about unsecured Masonite

board. (Id. ¶ 19.) Barr & Barr was responsible for ensuring that Masonite was properly secured.

(Id. ¶ 42.) CRC did not supervise or direct Santorufo’s work or provide him with any tools or

materials. (Id. ¶¶ 44–45.) CRC also had no foreman at the Project, and no one from CRC went

to the Project to inspect the work. (Id. ¶ 46.) On October 25, 2019, Stewart was injured when he

tripped over the raised edge of a Masonite board. (Id. ¶¶ 6, 15–16.) On October 26, 2020,

Stewart filed an action against JMDH, Jetro, and Barr & Barr in New York State court

(“Underlying Action”) 2. (Id. ¶ 6.) On or about November 13, 2020, Plaintiff accepted a tender

by JMDH and Jetro to defend them in the Underlying Action under the Travelers Barr Policy.

(Id. ¶ 20.)

2 Max Stewart v. JMDH Real Estate Offices, LLC, Jetro Holdings LLC and Barr & Barr, Inc., Index No.

159073/2020 (N.Y. Supr. Ct., N.Y. Cty.).

On July 9, 2021, Barr & Barr, Jetro, and JMDH (the “Barr parties”) filed a Third-Party

Complaint alleging that Capitol and CRC owed contractual and common law indemnification,

contribution, and apportionment with respect to the claims at issue in the Underlying Action.

(Id. ¶ 7.) Specifically, the Barr parties alleged that Capitol’s and CRC’s negligence,

carelessness, and recklessness caused or contributed to Stewart’s injuries. (Id. ¶¶ 23, 25.)

Between November 7, 2019, and July 20, 2021, Plaintiff sent a series of letters to CRC

seeking CRC’s agreement to provide additional insured coverage for the Barr parties. (Id. ¶ 8.)

In a March 10, 2022 letter, Defendant responded that the Barr parties would only qualify as

additional insureds under the SNIC-CRC policy if there is “a determination that liability for Mr.

Stewart [sic] injuries resulted from operations performed by or on behalf of CRC.” (Id. ¶ 9.)

Defendant acknowledged that some of the allegations in the Underlying Action, if proven, could

fall within the scope of coverage provided under the policy. (Id.)

Plaintiff seeks a declaration that Defendant owes additional insured coverage for the Barr

parties under the SNIC CRC Policy. (Id. ¶ 49.) Defendant has filed a counterclaim against

Plaintiff, seeking a declaration that Plaintiff owes additional insured coverage for the Barr parties

under the Travelers Capitol Policy. (Id. ¶ 52.)

II. STANDARD OF REVIEW

Summary judgment must be granted 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). A genuine

dispute of material fact exists “if the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The movants bear the initial burden of demonstrating the absence of a genuine issue of material

fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Feingold v. New York, 366 F.3d 138,

148 (2d Cir. 2004). Where the non-movant bears the burden of proof at trial, the movants’ initial

burden at summary judgment can be met by pointing to a lack of evidence supporting the non-

movant’s claim. Celotex Corp., 477 U.S. at 325. Once the movants meet their initial burden, the

non-movant may defeat summary judgment only by adducing evidence of specific facts that raise

a genuine issue for trial. See Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 250; Davis v. New

York, 316 F.3d 93, 100 (2d Cir. 2002). The Court is to believe the evidence of the non-movant

and draw all justifiable inferences in her favor, Anderson, 477 U.S. at 255, but the non-movant

must still do more than merely assert conclusions that are unsupported by arguments or facts,

Bellsouth Telecomms., Inc. v. W.R. Grace & Co., 77 F.3d 603, 615 (2d Cir. 1996). That is, the

non-movant cannot survive summary judgment by relying on the same conclusory allegations set

forth in her complaint. See Murphy v. Lajaunie, No. 13-CV-6503, 2016 WL 1192689, at *2

(S.D.N.Y. Mar. 22, 2016) (citing Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998)).

III. DISCUSSION

A. Duty to Defend

The motions before the Court concern each party’s duty to defend the Barr parties in the

Underlying Action pursuant to an additional insured endorsement. Because the parties apply the

substantive law of the forum state, New York, to the issues, “their consent concludes the choice

of law inquiry.” Texaco A/S (Denmark) v. Com. Ins. Co. of Newark, NJ, 160 F.3d 124, 128 (2d

Cir. 1998) (quoting Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997)).

New York law subjects insurance agreements to the ordinary “principles of contract

interpretation,” “giv[ing] full force and effect” to all contractual provisions and construing

unambiguous provisions in line with “their plain and ordinary meaning.” Burlington Ins. Co. v.

NYC Transit Authority, 29 N.Y.3d 313, 321, 323 (N.Y. 2017) (internal quotation marks omitted);

White v. Cont’l Cas. Co., 9 N.Y.3d 264, 267 (N.Y. 2007). The interpretation of unambiguous

insurance agreement provisions is a matter of law for the court. Burlington Ins., 29 N.Y.3d at

321.

“In New York, an insurer’s duty to defend is ‘exceedingly broad’ and distinct from the

duty to indemnify.” Euchner-USA, Inc. v. Hartford Cas. Ins. Co., 754 F.3d 136, 140 (2d Cir.

2014) (quoting Auto. Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131, 137 (N.Y. 2006)). Generally,

an insurer may refuse to defend “only if it could be concluded as a matter of law that there is no

possible factual or legal basis on which [the insurer] might eventually be held to be obligated to

indemnify [the insured] under any provision of the insurance policy.” CGS Indus., Inc. v.

Charter Oak Fire Ins. Co., 720 F.3d 71, 82 (2d Cir. 2013) (alterations in original) (quoting

Servidone Constr. Corp. v. Sec. Ins. Co. of Hartford, 64 N.Y.2d 419, 424 (N.Y. 1985)). In other

words, an insurer must defend an insured if a “reasonable possibility” of recovery under the

policy exists pursuant to either (a) the allegations in the underlying action or (b) the insurer’s

actual knowledge of the facts. Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61, 65–66 (N.Y.

1991). “This standard applies equally to additional insureds and named insureds.” Regal Const.

Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34, 37 (N.Y. 2010) (citation

omitted).

An underlying complaint is “the significant and usual touchstone for determining” an

insurer’s duty to defend, although its allegations are not controlling. Axis, 2021 WL 3912562, at

*4 (citation omitted). “If, liberally construed, the claim is within the embrace of the policy, the

insurer must come forward to defend its insured no matter how groundless, false or baseless the

suit may be.” Id. (citing Schwamb v. Fireman’s Ins. Co. of Newark, NJ, 41 N.Y.2d 947, 949

(N.Y. 1977) (“So long as the claims, even though predicated on debatable or even untenable

theory, may rationally be said to fall within policy coverage, whatever may later prove to be the

limits of the insurer’s responsibility to pay, there is no doubt that it is obligated to defend.”). As

relevant here, this standard also extends to a third-party complaint brought in the underlying

action by the plaintiff in the coverage action. Axis, 2021 WL 3912562, at *4 (citing All State

Interior Demolition Inc. v. Scottsdale Ins. Co., 168 A.D.3d 612, 613 (N.Y. App. Div., 1st Dep’t

2019). “Any 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.” Euchner-USA, Inc. v. Hartford

Cas. Ins. Co., 754 F.3d 136, 141 (2d Cir. 2014). The Court addresses in turn each party’s duty to

defend the Barr parties in the Underlying Action.

1. Defendant’s Duty to Defend

Plaintiff argues that the Blanket Additional Insured endorsement of the policy Defendant

issued to CRC, which includes operations performed “by or on behalf of” CRC, triggers

Defendant’s duty to defend the Barr parties in the Underlying Action. (Pl.’s Mem. in Supp. of

Mot. for Summ. J. (“Pl.’s Mem.”) at 9–13, ECF No. 28.) The Court agrees. “Courts applying

New York law interpret . . . [additional insured] endorsement[s] to trigger coverage where the

named insured’s operations are alleged to have proximately caused the bodily injury for which

coverage is sought.” Axis, 2021 WL 3912562, at *5 (citing Burlington, 29 N.Y.3d at 324–25)

(2017)). Thus, if there exists a “reasonable possibility” that the proximate cause of Stewart’s

injury was CRC, Defendant is obligated to defend [the Barr parties].” See Charter Oak Fire Ins.

Co. v. Zurich Am. Ins. Co., 462 F. Supp. 3d 317, 324 n.4 (S.D.N.Y. 2020) (“[i]f there is no

reasonable possibility that the proximate cause of Claimant’s injury was [the named insured] . . .

[the named insured’s insurer] would not be obligated to defend [the purported additional

insured].”)

Here, there is no dispute that the Barr parties’ third-party complaint in the Underlying

Action alleges that CRC’s operations proximately caused the injury for which Stewart seeks

relief. Indeed, the third-party complaint alleges that CRC “constructed, owned, operated,

maintained, directed and/or controlled the objects, materials, work, and/or instrumentalities

allegedly involved in the . . . alleged accident.” (Third-Party Compl. ¶¶ 20-21, ECF No. 23-6.)

The third-party complaint further states that CRC’s “negligence, carelessness, [and] recklessness

. . . caused . . . or contributed to the injuries alleged” in the Underlying Action. (Id. ¶ 57.) The

“allegations in the [third-party] complaint fall within the risk covered by the [SNIC-CRC]

policy.” See Axis, 2021 WL 3912562, at *5 (citing Ruder & Finn Inc. v. Seaboard Sur. Co., 52

N.Y.2d 663, 669 (N.Y. 1981)). Accordingly, Defendant’s duty to defend is triggered.

In opposition, Defendant attempts to make much ado of the way the parties in the instant

action characterized CRC’s role in the Project. Specifically, Defendant argues that because the

parties in this action do not dispute that CRC conducted no operations and performed no work at

the Project (56.1 ¶¶ 44, 46), the actions that gave rise to Stewart’s injuries could not possibly

have been performed “by or on behalf of CRC.” (Def.’s Mem. in Supp. of Mot. for Summ. J.

(“Def.’s Mem. at 13, ECF No. 29.) Defendant’s argument is unavailing. Indeed, Defendant

clearly fails to appreciate that it is the allegations in the Underlying Action that form “the

touchstone for determining” its duty to defend. Axis, 2021 WL 3912562, at *4 (citation omitted).

This is so no matter how “groundless, false or baseless” those allegations may be. Id. (citing

Schwamb, 41 N.Y.2d at 949). And here, the allegations set forth in the Barr parties’ third-party

complaint squarely place CRC within the ambit of liability for Stewart’s injuries.

Next, Defendant insists that its insured, CRC, cannot be liable for the work of Barr &

Barr’s superintendent and foreman because the superintendent and foreman were “special

employees” of Barr & Barr. (Def.’s Mem. at 15.) Defendant directs the Court to cases in which

New York courts found that where there is a special employer, who “controlled and directed”

work, and there is also a “general employer” who is not directly involved in the work, the special

employer is liable for any negligence of the special employees. (Id.) Defendant urges the Court

to view it as a general employer, which “as just a payroll operation . . . that drew its employees

from the union and would then process the payroll,” is not liable for the negligence of Barr &

Barr’s purported special employees. (See id. (citing O’Connell Electric Company v.

Murnane/Kennedy, 252 A.D.2d 851 (3d Dept. 1998).) The Court declines to do so.

The special employment analysis that Defendant undertakes is inapposite here. Tellingly,

not a single case that Defendant cites to support this argument reflects a court’s assessment of

whether an additional insured provision triggers an insurer’s duty to defend. (Id. (citing

Thompson v. Grumman Aerospace Corp., 78 N.Y.2d 553 (1991) (setting forth factors a court

should consider in determining whether a special employment status existed in worker’s

compensation action); O’Connell, 252 A.D.2d 851 (determining whether special employment

status existed where parties disputed whether general contractor or construction workers were

liable for property damage at worksite); Maldonado v. Canac Int’l, Inc., 685 N.Y.S.2d 715, 716

(N.Y. App. Div. 1999) (considering whether a plaintiff who received his pay from a temporary

employment agency was a special employee of the corporation to which he was assigned)). As

Plaintiff aptly argues, whether Barr & Barr was the superintendent’s and foreman’s “special

employer” at the Project has no bearing on whether allegations presented in the Underlying

Action point to CRC as a cause of Stewart’s injuries. (Pl.’s Reply Mot. for Summ. J (“Pl.’s

Reply”) at 2, ECF No. 30). It follows, therefore, that whether there exists a special employment

relationship between Barr & Barr and the superintendent and foreman is of no import in

assessing Defendant’s obligation under the SNIC-CRC policy. See Lafarge Bldg. Materials, Inc.

v. J. Hall Ltd., 3 A.D.3d 651, 652 (3d Dept. 2004) (“a factual issue as to whether an employee of

the insured has become a special employee of the additional insured does not preclude coverage

under the endorsement”); Fed. Ins. Co. v. Ryder Truck Rental, Inc., 82 N.Y.2d 909, 912 (1994)

(holding that the finding that a truck driver was a special employee of a trucking services

company had no impact on whether the trucking services company’s primary coverage policy

was triggered). Simply put, Defendant fails to reject its duty to defend the Barr parties in the

Underlying Action.

2. Plaintiff’s Duty to Defend

Defendant argues that Plaintiff has a duty to defend the Barr parties in the Underlying

Action under the terms of the general liability policy it issued to Capitol, which provides

additional insured coverage “if and only to the extent that the injury . . . is caused by acts or

omissions of [Capitol].” (Def.’s Mem. at 21–23.) The Court agrees. Here, too, the Barr parties’

third-party complaint presents a “reasonable possibility” that the proximate cause of Stewart’s

injury was Capitol, such that Plaintiff is obligated to defend” the Barr parties. See Charter Oak,

462 F. Supp. 3d at 324 n.4 (S.D.N.Y. 2020). There is no dispute that in the Underlying Action

alleges that CRC performed work at the Project “constructed, owned, operated, maintained,

directed and/or controlled the objects, materials, work, and/or instrumentalities allegedly

involved in the . . . alleged accident.” (Third-Party Compl. ¶¶ 16-17.) The third-party complaint

further states that CRC’s “negligence, carelessness, [and] recklessness . . . caused . . . or

contributed to the injuries alleged” in the Underlying Action. (Id. ¶ 37.) Plaintiff therefore faces

a reasonable possibility that its named insured, Capitol, faces liability for creating the condition

that caused Stewart’s injuries.

In opposition, Plaintiff only argues that the identical assertions asserted against CRC and

Capitol render the third-party complaint an unreliable basis from which to impose any duty to

defend upon Plaintiff. (Pl.’s Reply Mot. for Summ. J. at 5, ECF No. 30.) Plaintiff directs the

Court to New York Marine & General Insurance Company v. The Travelers Property Casualty

Company of America, where the court declined to impose a duty to defend, noting that it must

consider “facts that are pleaded in the Underlying Third-Party Complaint, not the conclusory

assertions . . . to determine if they suggest a reasonable possibility of coverage.” 632 F.Supp.3d

303, 308 (S.D.N.Y. 2022) (citation and internal quotation marks omitted.) That case is easily

distinguishable. There, the court found that a “mention[] . . . only in passing” that a

subcontractor had performed work at a project was insufficient to sustain a reasonable possibility

of proximate cause liability for injuries alleged. Id. The New York Marine court specifically

noted that the underlying complaint failed to allege that the subcontractor was responsible for the

conditions that led to the plaintiff’s injury. Id. New York Marine is not instructive, or even

persuasive, here, where the third-party complaint indisputably alleges that Capitol contributed to

the conditions that caused Stewart’s injuries. And Plaintiff cites no authority to support its

argument that similarity between allegations against subcontractors undermines the reasonable

possibility of liability. Accordingly, Plaintiff fails to reject its duty to defend the Barr defendants

in the Underlying Action.

IV. CONCLUSION

For the foregoing reasons, Plaintiff’s motion for summary judgment is GRANTED in part and

DENIED in part. Defendant’s motion for summary judgment is GRANTED. The Court

declares that each party has a duty to defend the Barr parties in the Underlying Action.3

SO ORDERED.

Dated: March 31, 2025 /s/ LDH

Brooklyn, New York LASHANN DEARCY HALL

United States District Judge

3 Because both parties are directed to defend the Barr parties, the Other Insurance provisions cancel each other out,

resulting in an evenly split defense. See Sport Rock Int’l v. American Cas. Co. of Reading, 65 A.D.3d 12, 19 (1st

Dept. 2009). As Defendant points out, both provisions provide that only if primary and noncontributory insurance is

required, then each policy is excess to all other insurance, except for insurance on which the additional insureds are

the named insureds. (Def.’s Mem. at 24.) Where, as here, “each policy contains an excess ‘other insurance’ clause,

so that giving each policy’s clause effect would leave the insured without primary insurance, the clauses are deemed

to cancel each other out, and the insurers are required to cover the loss on a pro rata basis.” See Sport Rock Int’l, 65

A.D.3d at 19 (1st Dept. 2009).