Admiral Insurance Company v. Builders Choice of New York, Inc.

Background

Admiral insured Builders Choice under a policy covering certain bodily-injury and property-damage claims. The policy included a contractor-conditions endorsement requiring contractors hired by Builders Choice to have “adequate insurance,” among other requirements. Builders Choice hired Exterior Pro Builders for roofing and siding work at a condominium site. Exterior Pro’s employee, Polivio Valdivieso, was injured when a roof collapsed while he was installing shingles.

Valdivieso and his wife filed an underlying New York state-court personal-injury action against several parties, including Builders Choice. Builders Choice sought defense and indemnity from Admiral. Admiral initially agreed to participate in the defense while reserving its rights. Admiral also sought coverage for Builders Choice as an additional insured under Exterior Pro’s policy with Evanston. Evanston later disclaimed coverage based on policy provisions concerning injury to an employee of the named insured and the absence of coverage for the named insured. Admiral then denied coverage to Builders Choice based on the contractor-conditions endorsement.

The parties filed cross-motions for summary judgment, a procedure allowing judgment without a trial when there is no genuine dispute over a material fact and the moving party is entitled to judgment under the law.

Admiral’s Coverage Disclaimer

Admiral argued that Builders Choice failed to satisfy the contractor-conditions endorsement because Exterior Pro did not have adequate insurance. Builders Choice argued that Admiral’s disclaimer was invalid because Admiral did not give timely written notice under New York Insurance Law § 3420(d).

The court held that the relevant delay was the 31 days between Admiral’s receipt of Evanston’s disclaimer and Admiral’s disclaimer to Builders Choice. The court explained that the insurer had to give notice as soon as reasonably possible after learning the grounds for denying coverage. Admiral argued that it had reasonably retained coverage counsel because of the complexity of the policy and the applicable law.

The court rejected that explanation. Admiral’s reservation-of-rights letter had already identified the contractor-conditions endorsement, and Admiral’s claims representative testified that a disclaimer by a subcontractor’s insurer would trigger a violation of that endorsement. The court found no evidence that Admiral questioned whether the condition applied, needed additional facts, or relied on legal research in deciding to deny coverage. It therefore held that Admiral’s 31-day delay was unreasonable as a matter of law and that its disclaimer was invalid.

The court denied Admiral’s motion for summary judgment and granted Builders Choice’s cross-motion for summary judgment in the initial action.

Evanston’s Coverage of Builders Choice

Evanston’s policy extended additional-insured coverage only for bodily injury caused, in whole or in part, by Exterior Pro’s negligent acts or omissions. The court held that this language covered Builders Choice only for vicarious liability arising from Exterior Pro’s negligence.

The pleadings in the underlying action did not identify Exterior Pro or allege that Exterior Pro caused Valdivieso’s injuries. Builders Choice’s third-party complaint alleged that Exterior Pro’s negligence caused the injuries, but the court found those allegations conclusory and unsupported by specific facts.

The court also considered evidence outside the pleadings. A supervisor testified that the roof collapsed because it was inadequately built, that Exterior Pro’s work involved siding and shingles, and that the work could have been performed from a ladder. Although the supervisor testified that ladders, ropes, and harnesses were available and that he did not direct Valdivieso to use certain safety equipment, Builders Choice presented no evidence showing that Exterior Pro’s conduct proximately caused the roof collapse. The court concluded that Exterior Pro merely furnished the occasion for the injury and that there was no reasonable possibility that Exterior Pro’s negligence caused it.

Because Builders Choice was not an additional insured under Evanston’s policy, the court held that Evanston had no duty to defend or indemnify Builders Choice and was not required to provide a timely disclaimer. The court granted Evanston’s motion for summary judgment and denied Builders Choice’s cross-motion in the third-party action.

Disposition

The court denied Admiral’s motion for summary judgment and granted Builders Choice’s cross-motion for summary judgment in the initial action. It granted Evanston’s motion for summary judgment and denied Builders Choice’s cross-motion for summary judgment in the third-party action. The court directed the Clerk to enter judgment for Builders Choice in the initial action, enter judgment for Evanston in the third-party action, and terminate the third-party action.