JMG Improvements, Inc. v. Arch Specialty Insurance Company

Background

JMG Improvements, Inc. sought a declaration that Arch Specialty Insurance Company breached an insurance policy by denying coverage for a lawsuit arising from an injured employee of JMG’s subcontractor. Be & Yo Realty Inc., initially a defendant, was realigned as a plaintiff and also sought coverage. Armour Risk Management Inc. processed claims for Arch as a third-party claims administrator.

Be & Yo had hired JMG to perform stucco work, including installation of an exterior insulation and finish system, commonly called EIFS. JMG subcontracted that work to New York Stucco & General Construction LLC. An employee of New York Stucco, Luis Alberto Hernandez Salazar, was injured after falling from scaffolding at the construction site. Salazar later sued Be & Yo and the property owners, and Be & Yo brought a third-party claim involving New York Stucco and JMG. JMG sought coverage under its policy with Arch.

The policy contained an EIFS exclusion for bodily-injury claims that, in whole or in part, arose out of, related to, or resulted from EIFS work. It also contained a separate New York limitation concerning written agreements, insurance, and indemnification by subcontractors. Arch denied coverage based on both provisions. The parties filed cross-motions for summary judgment, which asks whether the undisputed evidence requires judgment for one side as a matter of law.

Court’s Analysis

The court held that the EIFS exclusion did not require the underlying complaint itself to allege an EIFS-related injury. The policy language applied to any claim, suit, demand, or loss alleging bodily injury that was connected to EIFS work, and the court found that the plaintiffs’ narrower reading was not reasonable.

The court then applied the exclusion to Salazar’s injury. The undisputed evidence showed that the scaffolding’s purpose was to install EIFS, and the work performed at the property involved EIFS installation. The court ruled that the exclusion applied even if Salazar was not literally installing EIFS at the precise moment he fell, because the policy required only that the injury relate to or arise from EIFS installation.

The EIFS exclusion barred indemnification, meaning payment for a covered loss. The court separately considered Arch’s duty to defend, which is generally broader and may apply when the underlying pleadings allege a potentially covered occurrence. It concluded that Arch properly disclaimed that duty because the evidence showed that the accident involved EIFS installation. The court also found Arch’s disclaimer to JMG timely: Arch received the purchase order identifying the work as EIFS installation on November 2, 2017, and sent its disclaimer 26 days later.

For Be & Yo, the court found that Arch received notice no earlier than August 20, 2018, and that its disclaimer on September 19, 2018, was reasonable. The court therefore ruled that Arch owed Be & Yo neither a duty to defend nor a duty to indemnify. Because the EIFS exclusion resolved the coverage issue, the court did not decide whether the New York limitation supplied an additional basis for denying coverage or whether a disclaimer under that provision was timely.

Armour and Disposition

The court also granted summary judgment for Armour. Armour was not a party to the insurance policy, and the plaintiffs presented no facts showing that Armour owed them a duty, breached an agreement, or otherwise had a substantive role in the dispute. The court rejected the plaintiffs’ reliance on speculation about what further discovery might reveal.

Judge Ronnie Abrams denied the plaintiffs’ motions for summary judgment and granted the defendants’ motion for summary judgment. Specifically, the plaintiffs’ motions as to Armour were denied and Armour’s motion was granted. The Clerk was directed to terminate the pending motions and close the action.