16‐3332‐cv
Zurich Am. Ins. Co. v. Liberty Mut. Ins. Co., et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST
CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 5th day of October, two thousand seventeen.
PRESENT: DENNY CHIN,
CHRISTOPHER F. DRONEY,
Circuit Judges,
JANE A. RESTANI,
Judge.*
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ZURICH AMERICAN INSURANCE COMPANY,
Plaintiff‐Appellant,
v. 16‐3332‐cv
LIBERTY MUTUAL INSURANCE COMPANY,
Defendant‐Appellee,
WAUSAU BUSINESS INSURANCE COMPANY,
Defendant‐Cross‐Claimant‐Appellee,
TRAVELERS CONSTITUTION STATE INSURANCE
COMPANY,
Defendant‐Cross‐Defendant.
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* Jane A. Restani, Judge for the United States Court of International Trade, sitting by
designation.
FOR PLAINTIFF‐APPELLANT: NICHOLAS L. PAONE, White, Fleischner &
Fino, LLP, New York, New York.
FOR DEFENDANT‐APPELLEE and MARSHALL POTASHNER (Janet J. Lee, on the
DEFENDANT‐CROSS‐CLAIMANT‐ brief), Jaffe & Asher LLP, New York, New York.
APPELLEE:
Appeal from the United States District Court for the Southern District of New
York (Carter, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiff‐Appellant Zurich American Insurance Company (ʺZurichʺ) appeals an
August 29, 2016 judgment of the district court, entered pursuant to an August 29, 2016
opinion and order, granting summary judgment in favor of Defendant‐Cross‐Claimant‐
Appellee Wausau Business Insurance Company (ʺWausauʺ). The district court
concluded that, under a general liability policy issued by Wausau to non‐party
Montesano Brothers, Inc. (ʺMontesanoʺ), Wausau need not reimburse Zurich for costs
that Zurich incurred in defending non‐parties Brooks Shopping Centers, LLC,
(ʺBrooksʺ) and Macerich Management Company (ʺMacerichʺ) against a lawsuit arising
out of Montesanoʹs allegedly negligent construction activities at the Cross County
Shopping Center (the ʺShopping Centerʺ). We assume the partiesʹ familiarity with the
facts, procedural history, and issues on appeal.
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BACKGROUND
Brooks owns and Macerich operates the Shopping Center, which is located in
Yonkers, New York. In 2008, Brooks contracted with Whiting‐Turner Contracting
Company (ʺWhiting‐Turnerʺ) to serve as the general contractor for a construction
project at the Shopping Center. Under their contract, Whiting‐Turner was required to
obtain insurance for itself, its subcontractors, and their employees against claims arising
out of work in connection with the project. Whiting‐Turner obtained such a policy for
the year from August 1, 2009 to August 1, 2010, from Zurich (the ʺZurich Policyʺ), under
which Brooks and Macerich qualify as additional insureds. The Zurich Policy carried a
per occurrence liability limit of $2 million and a $500,000 deductible for each occurrence
arising from bodily injury. The Zurich Policy also contained a subrogation provision as
to this deductible (the ʺSubrogation Provisionʺ), stating that Zurich has Whiting‐
Turnerʹs ʺrights . . . to recover . . . any Deductible Amount from anyone liable for the
injury or damagesʺ covered under the Zurich Policy and that Whiting‐Turner ʺwill do
everything necessary to protect those rights for [Zurich] and to help [Zurich] enforce
them.ʺ App. 657.
On September 22, 2009, Whiting‐Turner entered into a subcontract with
Montesano to perform underground utility work at the Shopping Center (the
ʺSubcontractʺ). Under the Subcontract, Montesano was also required to carry general
liability insurance and name Whiting‐Turner as an additional insured. Montesano
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purchased such a policy from Wausau (the ʺWausau Policyʺ), which covered the period
from January 1, 2010 to January 1, 2011. As is relevant here, the Wausau Policy included
an additional insured provision extending coverage to ʺany . . . organization to whomʺ
Montesano was ʺobligated by written agreement to procure additional insured coverage
. . . for ʹbodily injuryʹ . . . caused . . . by your acts or omissions or the acts or omissions of
those acting on your behalf . . . [i]n performance of your ongoing operations . . . .ʺ App.
285. The Wausau Policy also contained an exclusion (the ʺConstruction Exclusionʺ)
providing that ʺ[t]his insurance does not apply to . . . [a]ny construction, renovation,
demolition or installation operations performed by or on behalf of you, or those
operating on your behalf.ʺ App. 286.
In June 2011, a woman commenced a lawsuit in New York Supreme Court, New
York County (the ʺNew York Actionʺ), alleging that, on April 5, 2010, she was injured
while walking through a construction site at the Shopping Center. She further alleged
that Brooksʹs and Macerichʹs negligence maintaining the construction site caused her to
slip and fall and that she suffered $1 million in damages as a result. Neither Whiting‐
Turner nor Montesano was named in the New York Action. Nevertheless, on October 3,
2011, Whiting‐Turner reported the complaint to Zurich and stated that, in its view,
Montesano was responsible for the allegedly dangerous condition that caused the
womanʹs injury. On November 29, 2011, Zurich notified Montesano and Wausau of the
New York Action and demanded a defense and indemnification for Brooks and
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Whiting‐Turner under the Wausau Policy. Zurich eventually retained counsel for
Brooks and Macerich to defend the New York Action. On May 8, 2012, Zurich filed a
third‐party complaint against Montesano, alleging that Montesanoʹs negligence had in
fact caused the womanʹs injuries.
On September 21, 2015, the New York Supreme Court entered summary
judgment in the New York Action in favor of Brooks, Macerich, and Montesano,
holding that (1) Brooks and Macerich lacked actual or constructive notice of the
putatively dangerous condition that injured the plaintiff and (2) ʺʹthe alleged defect
causing [the plaintiffʹs] fall was de minimis and therefore not actionable.ʹʺ S. App. 5
(quoting the state court decision). The decision was affirmed on March 16, 2017. See
Robinson v. Brooks Shopping Ctrs., LLC, 148 A.D.3d 522 (1st Depʹt 2017).
Zurich filed this insurance coverage action in the district court on May 9, 2014
and amended its complaint on September 22, 2014, inter alia, to name the correct
Wausau entity as a defendant. The amended complaint alleges that Wausau had a duty
to defend and indemnify Brooks as an ʺadditional insuredʺ under the Wausau Policy
and, accordingly, must ʺreimburse Zurich, Whiting, and [Brooks] for the costs of the
defense incurred . . . in connection withʺ the New York Action. App. at 43. On October
3, 2014, more than two years after Zurich had first demanded coverage for Whiting‐
Turner and Brooks, Wausau filed an answer to Zurichʹs complaint disclaiming coverage
under the Wausau Policy.
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After discovery, the parties cross‐moved for summary judgment on January 11,
2016. Zurich argued, inter alia, that Wausau had failed to timely disclaim coverage on
the basis of the Construction Exclusion under N.Y. Ins. Law § 3420(d)(2) and that
Brooks and Whiting‐Turner are additional insureds under the Wausau Policy provision
discussed above. The district court denied Zurichʹs motion and granted Wausauʹs
motion, reasoning that (1) N.Y. Ins. Law § 3420(d)(2) does not apply to claims between
insurers and (2) the claims asserted in the New York Action fell within the Construction
Exclusion. Accordingly, the district court entered summary judgment in favor of
Wausau. This timely appeal followed.
DISCUSSION
We review de novo the district courtʹs summary judgment ruling, ʺconstruing the
evidence in the light most favorable to the non‐moving party and drawing all
reasonable inferences in [its] favor.ʺ Mihalik v. Credit Agricole Cheuvreux N. Am., Inc., 715
F.3d 102, 108 (2d Cir. 2013). A movant is entitled to summary judgment if ʺthere is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.ʺ Fed. R. Civ. P. 56(a). ʺBecause interpretation of an insurance agreement
is a question of law, we review the district courtʹs construction of the [Wausau Policy]
de novo.ʺ U.S. Fid. & Guar. Co. v. Fendi Adele S.R.L., 823 F.3d 146, 149 (2d Cir. 2016)
(quoting VAM Check Cashing Corp. v. Fed. Ins. Co., 699 F.3d 727, 729 (2d Cir. 2012)). Here,
as the parties agree, the Wausau Policy is governed by New York law.
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New York courts interpret insurance policies according to principles of contract
law, giving policy language its ʺplain and ordinary meaningʺ and construing
ambiguities in favor of the insured. Selective Ins. Co. of Am. v. Cty. of Rensselaer, 26
N.Y.3d 649, 655‐56 (2016) (quoting White v. Contʹl Cas. Co., 9 N.Y.3d 264, 267 (2007)). In
making a coverage determination, exclusions from policy coverage are ʺaccorded a
strict and narrow constructionʺ ‐‐ ʺbefore an insurance company is permitted to avoid
policy coverageʺ it must establish that the exclusions ʺapply in the particular case [and]
are subject to no other reasonable interpretation.ʺ Pioneer Tower Owners Assʹn v. State
Farm Fire & Cas. Co., 12 N.Y.3d 302, 307 (2009) (internal quotation marks omitted).
The New York Insurance Law provides:
If under a liability policy issued or delivered in this state, an
insurer shall disclaim liability or deny coverage for death or
bodily injury arising out of a motor vehicle accident or any
other type of accident occurring within this state, it shall
give written notice as soon as is reasonably possible of such
disclaimer of liability or denial of coverage to the insured
and the injured person or any other claimant.
N.Y. Ins. Law § 3420(d)(2). New York courts have noted that this notice provision is
ʺdesigned to protect the insured . . . against the risk, posed by a delay in learning the
insurerʹs position, of expending . . . resources in an ultimately futile attempt to recover
damages from an insurer.ʺ Bovis Lend Lease LMB, Inc. v. Royal Surplus Lines Ins. Co., 27
A.D.3d 84, 92 (1st Depʹt 2005). ʺRecognizing that these are not risks to which another
insurer seeking contribution is subject,ʺ id., New York courts have uniformly held that
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§ 3420(d) does not apply to claims between insurers. See JT Magen v. Hartford Fire Ins.
Co., 64 A.D.3d 266, 271 (1st Depʹt 2009) (collecting cases).
On appeal, Zurich does not contest that the claims asserted in the New York
Action fall within the Wausau Policyʹs Construction Exclusion. Instead, it argues that,
(1) under § 3420(d)(2) Wausau waived that exclusion on account of its nearly three‐year
delay in disclaiming coverage, which waiver Zurich may invoke ʺon behalf of its
insureds and additional insureds,ʺ Appellantʹs Br. 11, and (2) Whiting‐Turner, Brooks,
and Macerich are not bound by the district courtʹs holding that the claims in the New
York Action fall within the Wausau Policyʹs Construction Exclusion. We address each
argument in turn.
As to the first argument, Zurich has given us no reason to depart from the litany
of New York cases holding that § 3420(d) does not apply to claims between insurers.
See, e.g., JT Magen, 64 A.D.3d at 271. Indeed, Zurich concedes that it is not in the ʺzone
of interestʺ that § 3420(d)(2) protects, but asserts that it nevertheless should be allowed
to claim the protections of that provision ʺon behalf of its insured Whiting‐Turner given
the unique . . . deductible provisionsʺ in the Zurich Policy ʺwhich require Whiting‐
Turner to reimburse Zurich up to $500,000 for . . . defense fees incurredʺ in defending
Brooks and Macerich in the New York Action. Appellantʹs Br. 12‐13. The defect in this
argument is twofold. First, the amended complaint was brought in Zurichʹs name and
does not purport to seek relief on behalf of anyone but Zurich. This is so despite the
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fact that Zurich could have demanded that Whiting‐Turner join the case as a plaintiff
pursuant to the Subrogation Provision in the Zurich Policy, which, as noted, requires
Whiting‐Turner ʺto do everything necessary to protectʺ its rights under the Zurich
Policy and ʺto help [Zurich] enforce them.ʺ App. 657. Second, as the district court
noted, New York courts have held that an insurer cannot invoke the protection of
§ 3420(d)(2) against a co‐insurer, even in cases where ʺthe mutual insureds remained
personally protectedʺ by that provision. S. App. 15 (citing Greater N.Y. Mut. Ins. Co. v.
Chubb Indem. Ins. Co., 105 A.D.3d 523, 525 (1st Depʹt 2013)). Accordingly, the district
court did not err in concluding that Wausauʹs disclaimer of coverage under the
Construction Exclusion was timely vis‐à‐vis Zurich.
As to the second argument, it is unclear what Zurich seeks to accomplish by
arguing on appeal that Whiting‐Turner, Brooks, and Macerich are not bound by the
district courtʹs judgment and are free to invoke the protections of § 3420(d)(2)
themselves in subsequent coverage actions based on the Wausau Policy. After all,
Zurich has conceded, and we agree with the district court, that all of the claims in the
New York Action fall within the Construction Exclusion. To the extent that Zurich is
asking us to render an advisory opinion as to whether the judgment precludes its
insureds from arguing in other cases that, as to them, Wausau waived the Construction
Exclusion under § 3420(d)(2), we lack the power to do so. See Flast v. Cohen, 392 U.S. 83,
95‐96 (1968).
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We have reviewed Zurichʹs remaining arguments and conclude they are without
merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk
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