Continental Indemnity Company v. Bulson Management, LLC

Background

Continental sued Bulson Management, LLC and Ri Xian Wang. Continental asserted claims for breach of contract, fraud, and unjust enrichment, and sought damages plus a declaration that Workers’ Compensation and Employer’s Liability Insurance Policy No. 46-277428-01-02 did not provide coverage.

The policy covered Bulson from May 7, 2016, to May 7, 2017, and required complete and accurate payroll reports as a material condition of continuing coverage. On July 19, 2016, Wang fell from a ladder at a Brooklyn worksite owned by Industria and managed by Bulson. The complaint alleged that Wang suffered serious injuries, including a spinal cord injury causing complete paralysis in both arms and legs. Wang sought workers’ compensation benefits while claiming that he was a Bulson employee, even though Bulson had not listed him in its payroll reports.

Continental alleged that Bulson initially represented Wang was an employee of a Bulson subcontractor. Continental then defended Bulson before the New York State Workers’ Compensation Board. The Board determined that Wang was a Bulson employee and ordered either Bulson or Continental to pay benefits; it also ordered Continental to pay Wang’s medical bills. Continental said it paid those amounts while reserving its rights under the policy.

Wang separately sued Industria in state court over his injuries. Industria later brought Bulson into that lawsuit as a third-party defendant, asserting claims concerning Bulson’s duties to defend and indemnify Industria and its alleged failure to obtain appropriate liability insurance. Continental was defending Bulson in that lawsuit while reserving its rights. Bulson and Wang did not answer or otherwise appear in this federal case. Continental voluntarily dismissed its claims against Wang.

Motions to Intervene

Continental moved for a judgment based on Bulson’s failure to respond. Before that request was decided, Industria Superstudio Overseas, Inc., Industrial World LLC, Industria @ Sea, Inc., and Borgo Guglielmo, LLC, collectively called Industria, moved to intervene. Massachusetts Bay Insurance Company, which the opinion identifies as Industria’s general-liability insurance provider, filed a separate motion to intervene. Both sought intervention as of right and permissive intervention under Federal Rule of Civil Procedure 24.

Intervention as of Right

Intervention as of right requires the proposed intervenor to show four things: a timely application, an interest related to the subject of the case, possible impairment of that interest, and inadequate protection by an existing party. Failure to satisfy any one requirement is enough to deny the motion.

The court held that neither Industria nor MBIC satisfied the required-interest element. The proposed intervenors argued that they had an interest in whether Bulson could satisfy a possible judgment in the state-court Wang Litigation. The court found that this interest depended on two future events: Wang’s success against Industria and Industria’s success on its third-party claims against Bulson. Because that was a “double contingency,” the interest was not direct and significantly protectable.

The court also concluded that the result of Continental’s federal case would not change the proposed intervenors’ legal position regarding Bulson. Although the federal case might affect Bulson’s practical ability to pay a possible judgment, the court explained that a merely economic interest in litigation is generally insufficient for intervention. Having found no qualifying interest, the court did not address the other requirements for intervention as of right.

Permissive Intervention

Permissive intervention is discretionary. It requires a timely motion and a claim or defense sharing a common question of law or fact with the main case. The court must also consider whether intervention would delay or prejudice the existing parties and whether it would materially contribute to resolving the factual and legal issues.

The court found that Industria and MBIC also failed under this standard. Their interests were not direct and protectable, and they did not show that the federal case could seriously impair those interests. Under New York law, the court stated, a default judgment against one party generally does not bind a nonparty in later litigation. Therefore, a default judgment in this case would not meaningfully impair Industria’s or MBIC’s interests.

The proposed intervenors argued that they could help develop facts about Wang’s relationship with Bulson. The court concluded that those facts had already been substantially developed and represented only part of the dispute. The more relevant issues involved interpreting the Continental Policy and evaluating communications between Continental and Bulson, to which Industria and MBIC were not parties or privy. The court further found that they could not provide insight into the claims for breach of contract, fraud, or unjust enrichment, or into many of the related issues in Continental’s request for declaratory relief.

Disposition and Other Orders

Judge Jesse M. Furman denied Industria’s and MBIC’s motions to intervene. The court rescheduled the hearing on Continental’s pending default-judgment motion for November 19, 2020, by telephone, and directed Bulson to file any opposition by November 17, 2020. The court also ordered Continental to serve Bulson with the opinion and file proof of service, and directed the Clerk of Court to terminate ECF Nos. 33 and 51. The opinion did not decide Continental’s pending default-judgment motion.