Colony Insurance Company v. Riverside Center Site 5 Owner LLC

Background

Colony Insurance Company insured Riverside Center Site 5 Owner LLC. Jose Sanchez, a construction-site worker, was injured and sued Riverside in New York Supreme Court, alleging negligence. Colony initially provided Riverside with a defense while reserving its rights under the insurance policy.

After Riverside supplied information indicating that Sanchez was employed by J. Carroll & Associates, Colony disclaimed coverage on February 19, 2020, based on a policy exclusion. Colony then brought this federal action seeking a declaration that it had no coverage obligation. Riverside counterclaimed for coverage.

Policy exclusion and disputed facts

The exclusion applies to injuries arising from work or operations performed by independent contractors or subcontractors who were directly paid, hired, or contracted by Riverside, except for the contractors listed in the policy. The court stated that Colony, as the insurer, had the burden to prove that the exclusion applied.

The court identified three matters Colony had to establish: Sanchez worked for or performed activities for an independent contractor or subcontractor of Riverside; Riverside directly paid, hired, or contracted with that contractor or subcontractor; and the contractor or subcontractor was not among those permitted under the policy.

The parties disputed which company Sanchez worked for. Colony relied on information from Riverside and asserted that Sanchez worked for J. Carroll, which Riverside had engaged for punch-list work or services. The Workers’ Compensation Board, however, found in a September 3, 2019 decision that Sanchez worked for ACJ Building Solutions, Inc.

The court also found unresolved questions about who hired and paid ACJ Building Solutions. The record suggested that J. Carroll may have supplied workers to other contractors at the work site and could have been a joint employer with ACJ. The court further observed that Colony’s disclaimer letter identified J. Carroll rather than ACJ as Sanchez’s employer and appeared to rely on information supplied by Riverside. The court stated that Riverside could not benefit from an inadequate disclaimer letter that Riverside itself caused.

Ruling and next steps

The court denied Colony’s motion for summary judgment and denied Riverside’s cross-motion for summary judgment. Summary judgment is a decision without a trial when the evidence shows no genuine dispute about facts important to the result. Here, the court concluded that the contractor relationships and related coverage facts required further discovery.

The court ordered the parties to complete discovery, including depositions, concerning the contractors and their relationships at the work site. It directed each party to present a discovery plan for a conference scheduled for September 25, 2024, with discovery to conclude by October 25, 2024. The court stated that a motions schedule would be set at a later conference on November 1, 2024. It also cautioned Colony’s counsel to follow the federal and local summary-judgment rules and not incorporate previous papers by reference. The Clerk was directed to terminate ECF entries 73 and 79.