In For A Penny, In For Two Pounds? (NY)
In a recent case decided by the New York Supreme Court, the court warns insurers that “in for a penny” might mean more than “in for a pound,” but rather two pounds. In 101 West 78th Street v. Sweet Construction and New York Mercantile and General Insurance Company, (2020 NY Slip Op 32737), the court provided a lengthy opinion detailing a lengthy insurance dispute between an insurer and both its named insured (Sweet, the construction manager on a specific project) and an additional insured (101 West 78th Street) that hired Sweet to perform work at its commercial building.
The dispute originally began when Ocean Grill sued 101 for property damages arising out of a construction project, whereby 101 began construction work that included scaffolding being placed directly in front of Ocean Grill’s entrance. Ocean Grill also alleged the construction caused excessive noise vibrations, odors and conditions which required Ocean Grill to temporarily close and lose nearly $1.5 million in lost income. The action by Ocean Grill against 101 was for breach of contract for 101’s failure to allow egress and ingress to the restaurant and in failing to prevent excessive noise vibrations and odors from entering.
101 hired Sweet as construction manager and included in that agreement was the requirement that Sweet purchase CGL insurance for claims including property damage and commercial umbrella/excess liability, and that Sweet agree to defend and indemnify 101 in any and all legal proceedings brought against 101 pertaining to the project.
Sweet purchased CGL coverage for the project and NYM had already been required to defend Sweet after previous motion practice. Ocean Grill subsequently settled the underlying action with 101, and by way of motion for summary judgment, 101 was now seeking all past defense costs against Sweet and NYM.
NYM had taken the position in denying coverage to 101 that coverage was limited to “liability for property damage caused in whole or in part by” the acts or omissions of Sweet or those acting on its behalf in the performance of Sweet’s ongoing operations for 101 at the location designated. NYM argued (among other things) that Sweet was not identified in the underlying complaint as a cause of the property damage and that even if Ocean Grill had sustained property damage, the underlying complaint did not allege that the alleged damage resulted from an occurrence during the policy period.
The court however, noting the well-settled premise of “exceedingly broad” coverage for insureds and additional insureds, found no merit in NYM’s argument that because the Ocean Grill did not specifically name or refer to Sweet in its complaint that this was in and of itself a reason to deny coverage. Further, the court relied on the fact that there were allegations of unintended physical damage to the property, and necessity for repair or replacement of the pipe provided enough demonstration for coverage. Thus, after having previously been ordered to defend Sweet, the court now held NYM was also required to pay for past legal fees of 101.
Thanks to Tom Bracken for his contribution to this post. If you have any questions or comments, please contact Colleen Hayes.