Tuesday, November 22, 2011

Crane Lessor Obtains $11 Million in Coverage for 2008 Crane Accident

New York Crane & Equipment v. Zurich American Insurance Co., Index No: 603218/09 (J. Feinman, 11/11/11).
In a recent decision by Judge Paul G. Feinman, New York Supreme Court, this writer recently obtained a declaratory judgment that the owner of a tower crane that collapsed in 2008, was entitled to $11 million of insurance coverage from the insurance carrier of the crane lessee/operator with respect to the various wrongful death, personal injury and property damage claims.

Zurich American Insurance Co. (“Zurich”), the carrier for the crane lessee Sorbara Construction (“Sorbara”), disclaimed coverage on the grounds that the additional insured coverage for NY Crane only existed to the extent that the accident occurred as a result of Sorbara’s work for NY Crane. Zurich argued that Sorbara was operating the crane for the general contractor, not NY Crane and thus, there was no coverage for NY Crane. Zurich relied on a 2011 First Department decision, Admiral v. East 51st Street, which involved an identical situation involving another Manhattan crane collapse in 2008. Notwithstanding, this decision appeared to be exactly on point, I was able to distinguish it on the grounds that the “working for” requirement in the Zurich endorsement only applied where the accident arose out of the work of an entity working for the named insured. Here, because Sorbara itself was operating the crane, the “working for” condition was inapplicable. The argument involved a comparative analysis of the Zurich additional insured endorsement and the Admiral endorsement and turned on the precise punctuation and indentation in the Zurich endorsement.

The Court also granted NY Crane’s motion to strike Zurich’s attempted reservation of rights based on the expected/intended acts exclusion that was set forth as an affirmative defense in an amended answer served after the District Attorney secured an indictment based on the collapse. I argued that the amended answer was procedurally defective since it was served without leave of court. I also argued that the assertion of the exclusion was untimely as a matter of law based on Insurance Law Section 3420(d).

Finally, the court agreed that the $11 million of Zurich’s excess coverage would contribute on a pro-rata basis with NY Crane’s own excess coverage even though the lease only required the lessee to provide $5 million in coverage.

Unfortunately, the court would not declare that NY Crane was entitled to be indemnified under the Zurich policy, holding this was an issue that required resolution by the trier of fact. The court found it was pre-mature to determine that the accident occurred, in part, due to the acts or omissions of Sorbara, notwithstanding that Sorbara was operating the crane at the time of the incident. I anticipate the the matter will go up on appeal and if so, NY Crane may cross appeal this finding.

Friday, January 14, 2011

Second Department Significantly Undermines the Asbestos Exclusion

Great American Restoration Services, Inc. v. Scottsdale Ins.
78 A.D.3d 773, 911 N.Y.S.2d 142
N.Y.A.D. 2 Dept.,2010.

This coverage case demonstrates that one must never underestimate the courts’ tendency to interpret insurance policies in favor of the insured. Here, the Court found that an asbestos exclusion did not apply because because of the purported ambiguity as to whether it applied to the accidental dispersal of asbestos. It must have been a surprise to the carrier that this ubiquitous exclusion only applied to insureds who intentionally disturbed asbestos.

The Court also did not find that asbestos was a “pollutant” excluded by the pollution exclusion, even though the Court of Appeals has found otherwise Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 609 N.E.2d 506 N.Y.,1993 (“Asbestos could certainly be an irritant, contaminant or pollutant of the type encompassed by the [pollution exclusion] clause).

Here, plaintiff was retained to perform “emergency water damage service” at a commercial premise. After plaintiff’s work allegedly caused asbestos to be “dispersed throughout the building and premises” the building owner’s insurance carrier brought a subrogation action against plaintiff for property damage. The complaint alleged that plaintiff held itself out as “possessing staff” trained in water damage cleaning and asbestos removal. Plaintiff denied ever holding itself out as a company that performs asbestos removal or disposal and contended that it immediately ceased all work at the facility when it was informed that asbestos had been found in the past.

Plaintiff’s carrier Scottsdale Insurance Company (hereinafter Scottsdale), disclaimed coverage based upon the asbestos exclusion clause in the policy or based on the policy's pollution exclusion clause.

The asbestos exclusion provides inter alia that coverage does not apply to “bodily injury” or “property damage” arising out of the “removal” of asbestos from products or structures, or the “...disposal” of asbestos or products containing asbestos. The pollution exclusion states that coverage does not apply to “'property damage’ arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’ ” “Pollutants” are defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

The Supreme Court denied Scottsdale's motion for summary judgment and the Second Department affirmed finding that “neither of the particular exclusory provisions relied upon by Scottsdale negates its duty to defend under the facts in this case.” The Second Department went further and granted the plaintiff’s cross motion declaring that Scottsdale was obligated to defend it in the underlying action.

The Court stated “[a]lthough the asbestos exclusion clause states that no coverage is provided for property damage arising out of the “removal,” “disposal,” or “use” of asbestos, the subject clause includes no terms indicating that coverage will not be provided for damages arising out of the unknowing or accidental release or dispersal of asbestos.” Here, the Court clearly seems to be over-reaching as there appears nothing ambiguous about the exclusion. Indeed, it seems clear that the Court is improperly reading ambiguity into the exclusion. Exclusions frequently exclude for events, such as nuclear war or fire, flood or smoke. Whether such conditions were accidental or intentional would not otherwise appear relevant to the construction of the exclusion. Nor does the Court cite to any authority in support of its contention.