Erie Insurance Exchange v. J.M. Pereira & Sons, Inc.

Peradotto, J.P.

(dissenting). I respectfully dissent because I disagree with the majority that plaintiff failed to establish, as a matter of law, that the second exception to exclusion G in the “Business Catastrophe Liability Policy” (Business Corporation Law policy) issued to defendant J.M. Pereira & Sons, Inc. (JMP) does not apply. In my view, plaintiff established that exclusion G precludes coverage, and therefore the order insofar as appealed from should be reversed and judgment should be granted to plaintiff declaring that it is not required to provide a defense or indemnity in the underlying actions or third-party actions.

Under the Business Corporation Law policy, which provides commercial liability umbrella coverage, plaintiff agreed to “pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘retained limit’ because of ‘bodily injury’... to which th[e] insurance applies.” Unless certain exceptions are applicable, however, exclusion G to the Business Corporation Law policy *1885excludes employer’s liability coverage for bodily injuries to JMP employees “arising out of and in the course of . . . [e]mployment by [JMP]; or . . . [performing duties related to the conduct of [JMP’s] business.” The second exception provides that exclusion G “does not apply to the extent that valid ‘underlying insurance’ for the employer’s liability risks described above exists or would have existed but for the exhaustion of the underlying limits for ‘bodily injury’. Coverage provided will follow the provisions, exclusions and limitations of the ‘underlying insurance’ unless otherwise directed by this insurance.” The term “underlying insurance” is defined as “any policies of insurance listed in the declarations” in the applicable schedule, which includes, as relevant here, employer’s liability coverage under a policy issued to JMP by the State Workers’ Insurance Fund of Pennsylvania (SWIF). The employer’s liability part of the SWIF policy applies only “to work in the State of Pennsylvania,” or employment that is “necessary or incidental to [JMP’s] work” in Pennsylvania.

The only reasonable interpretation of the plain and unambiguous language is that the Business Corporation Law policy would provide JMP with employer’s liability coverage (i.e., the exclusion would not apply) only to the extent that such coverage existed under the SWIF policy. Inasmuch as the SWIF policy does not provide employer’s liability coverage for JMP’s work outside of Pennsylvania, I agree with plaintiff that no “valid ‘underlying insurance’ for [JMP’s] liability risks” exists for bodily injuries to its employees insofar as such injuries arise out of or in the course of their employment by JMP or their performance of duties related to the conduct of JMP’s business.

Contrary to the majority’s determination, the “follow form” provision contained in the second sentence of the second exception to exclusion G is relevant when, and only when, valid underlying insurance for the employer’s liability risks exists pursuant to the first sentence of that exception. In that instance, the Business Corporation Law policy would “conform[ ] to the terms” of the underlying SWIF policy (Federal Ins. Co. v International Bus. Machs. Corp., 18 NY3d 642, 646 [2012]) by “following its] provisions, exclusions and limitations,” i.e., the Business Corporation Law policy would “match the coverage provided” by the SWIF policy (Highrise Hoisting & Scaffolding, Inc. v Liberty Ins. Underwriters, Inc., 116 AD3d 647, 648 [2014], lv denied 24 NY3d 908 [2014]), “unless otherwise directed by [the Business Corporation Law policy].” Here, however, there is no “[c] overage provided” by the SWIF policy for the Business *1886Corporation Law policy to match or “follow form.”

Present— Peradotto, J.P, Carni, Lindley and Scudder, JJ.