American European Insurance Company v. Erie Concrete Inc.

Background

American European Insurance Company insured Eire Concrete Inc. under a primary policy and an umbrella policy covering February 7, 2020, through February 7, 2021. The policies provided coverage for covered bodily-injury claims but contained similar exclusions for injuries to employees, contractors, and employees of contractors.

Eire’s subcontract with ARA Construction Corp. required Eire to name ARA and the project owner as additional insureds. The court found that ARA was an additional insured under the policy. ARA had hired Nu-Way Heating & Cooling, Inc. to perform heating, ventilation, and air-conditioning work on a project to build an Amazon warehouse. Jose Villegas, a Nu-Way employee, fell and was injured while installing components at the project site.

Villegas sued RLF II Bassett, LLC, ARA, and Amazon.com Services, LLC in New York state court. The action later named Eire as a direct defendant and included negligence and New York Labor Law claims. ARA and RLF II Bassett also brought third-party claims involving Nu-Way and Eire. Eire tendered the claim to American European, seeking defense, indemnification, and additional-insured coverage. American European disclaimed coverage.

Motions and Arguments

American European moved for summary judgment under Rule 56 against ARA, Eire, and Villegas, and for default judgment under Rule 55 against RLF II Bassett, Amazon.com, and Nu-Way. Eire cross-moved for summary judgment. American European sought a declaration that it had no duty to defend or indemnify any defendant for the claims in the underlying action.

American European relied on the policies’ employee and contractor exclusions. The primary policy excluded bodily injury to an employee of “any insured,” as well as bodily injury to any contractor or any employee of a contractor arising from the contractor’s services. The umbrella policy contained materially similar language. The defendants argued that the exclusions should be limited by the policies’ separation-of-insureds provisions and should apply only to an employee or contractor connected directly to the insured seeking coverage. They also argued that the exclusion required a direct contractual relationship, or privity, between the relevant contractor and that insured.

Legal Standard and Analysis

Under New York law, an insurer seeking to enforce an exclusion must show that the exclusion is clear and unmistakable. The court held that the policies’ use of “any insured,” rather than “the insured,” was important. New York decisions generally treat an exclusion referring to “any insured” as applying even when the injured person was an employee of another insured under the policy. Reading “any insured” to mean only the insured seeking coverage would erase the distinction between those two phrases.

The court also concluded that the contractor portion of the exclusion applied to contractors of any insured. ARA was an additional insured, and Nu-Way was ARA’s contractor. Villegas was Nu-Way’s employee, and his injuries arose from work performed under Nu-Way’s contract with ARA. The court rejected the argument that Nu-Way had to be in privity with Eire specifically. Because the policy applied to contractors of “any insured,” privity with ARA was sufficient.

The separation-of-insureds provisions did not change that result. The court explained that those provisions generally require coverage to be considered separately for each insured, but the specific “any insured” language in the exclusions superseded that limitation for these claims. The court also rejected reliance on the general purpose of employee exclusions because it could not rewrite the clear policy language.

Disposition

The court held that the exclusions unambiguously barred coverage for Villegas’s claim. It granted American European’s motion for summary judgment against ARA, Eire, and Villegas and granted default judgment against RLF II Bassett, Amazon.com, and Nu-Way. It declared that the policies did not require American European to defend or indemnify any defendant for the claims in the underlying state-court action, including third-party claims, cross-claims, and counterclaims. The court denied Eire’s motion for summary judgment and directed the Clerk of Court to close the two motion docket entries. Judge Lewis J. Liman signed the opinion and order.