Illinois Union Insurance Company v. Acer Restorations LLC

Background

Illinois Union Insurance Company and Ace Property Insurance Company sued Acer Restoration LLC over whether four insurance policies covered damages claims arising from a March 3, 2017, fire during Acer’s renovation of an apartment in Trump Tower. The insurers alleged that Acer falsely stated in its insurance applications that its operations did not involve wood-floor sanding, stripping, or refinishing. The insurers sought rescission of the policies and a declaration that the policies provided no coverage. Acer had not appeared, and the court had stayed an order concerning default judgment while resolving the motion at issue.

Ivan Ortiz and Maria Solange De La Rocha Alam moved under Rules 19 and 24 of the Federal Rules of Civil Procedure to intervene or join as interested parties. They were defendants in related New York state-court lawsuits arising from the fire. They said that if Acer lacked insurance, they could face liability for damage to other apartments, and they had asserted claims against Acer for contribution, indemnification, and failure to procure insurance. They also argued that they might be additional insureds under Acer’s policies.

The movants relied on a certificate of insurance listing them as additional insureds for general liability when required by a written contract or agreement. The certificate stated that it was issued for information only, conferred no rights on the certificate holder, did not change the policies, and was subject to the policies’ terms and conditions. The policies required a written contract or agreement to establish additional-insured status. The movants did not produce such a contract or agreement. They also could not locate certain agreements connected to an alteration agreement for the apartment.

Legal standards

Rule 24(a) permits intervention as of right when the motion is timely, the applicant has an interest relating to the action, the interest may be impaired by the action’s disposition, and existing parties do not adequately protect that interest. Failure to satisfy any one of these requirements is enough to deny the request. The interest must be direct, substantial, and legally protectable rather than remote or dependent on a series of future events.

Rule 24(b) permits intervention with the court’s permission when the applicant’s claim or defense and the main action share a question of law or fact. The court stated that courts generally consider substantially the same factors for permissive intervention as for intervention as of right. Rule 19 requires a person to be joined in certain circumstances when complete relief cannot be granted among the existing parties or when the person’s claimed interest could be impaired or expose existing parties to multiple or inconsistent obligations.

Court’s analysis

The court denied intervention under Rule 24 because the movants failed to establish both an interest in the action and that disposition of the action could impair that interest. The certificate of insurance, standing alone, did not establish coverage or additional-insured status. Its express disclaimer and the policies’ requirement of a separate written agreement meant that the movants had not shown a direct interest in the insurers’ request to rescind the policies.

The court also rejected the argument that possible liability arising from the alteration agreement justified intervention. Even without participating in this case, the movants could pursue redress against Acer through their existing state-court claims. Resolving the federal insurance dispute would not change their position in relation to Acer in a way that impaired their ability to protect their interests.

Joinder and disposition

To the extent the motion sought joinder under Rule 19, the court denied that request for the same reasons: the movants had not shown an interest in the action or that disposition in their absence could impair that interest. The court’s conclusion concerned participation in the insurance-rescission action; it did not decide whether the insurers could rescind the policies or whether the policies provided coverage.

Judge Lorna G. Schofield denied the movants’ motion to intervene under Rules 19 and 24 and directed the Clerk of Court to close the motion at Docket No. 42.