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New York Contractor Battles For Coverage (NY)

June 26, 2020

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<p style="text-align: justify;">Queens Pioneer Construction Corp. (“Queens Pioneer”) commenced a breach of insurance contract <a href="">action</a> in the United States District Court for the Eastern District of New York seeking damages and a declaratory judgment associated with insurer Illinois Union’s coverage disclaimer and withdrawal from the defense of a civil suit.</p>
<p style="text-align: justify;">The underlying lawsuit was initiated by Juan Algeria Reyes, an employee of Queens Pioneer, who was allegedly injured while working on a construction project. Mr. Reyes brought a personal injury action against ILE Construction Group, the general contractor who was responsible for hiring Reye’s employer, Queens Pioneer, to perform work at the project. In turn, ILE impleaded plaintiff's employer, Queens Pioneer.</p>
<p style="text-align: justify;">Queens Pioneer tendered to its liability insurer, Illinois National, who initially assumed the defense of the claims against Queens Pioneer. However, they later sent a follow-up letter stating, “we regret to inform you that no coverage exists.” Queens Pioneer states in their Complaint, that as a result of their reliance on Illinois National initially controlling the defense, Queens Pioneer did not hire personal counsel or pursue early resolution.</p>
<p style="text-align: justify;">Illinois National’s decision to revoke the defense coverage stemmed from language in the policy limiting the type of work that can qualify for coverage when an incident occurs. Queens Pioneer asserts in their complaint that the specific type of work they perform falls under the policy's covered classifications - including carpentry, wall installation, door assembly, dry wall, painting, flooring, siding and masonry.</p>
<p style="text-align: justify;">Queens Pioneer’s breach of contract action against its insurer illustrates the challenges both construction companies and insurers face when a contractor's trade is not clearly documented in the construction agreements, scope of work, certificates of insurance, or by policy endorsement. Notwithstanding the current pandemic, the construction industry in New York has maintained a relatively stable pace of production, without any signs of slowing down. Accordingly, now, more than ever, it is incumbent on both owners and general contractors to take into account a prospective contractor’s general liability coverage to the same degree as they would consider costs and reputation.</p>
<p style="text-align: justify;">Thanks to James Papadakis for his contribution to this post. Please email <a href="">Heather Aquino</a> with any questions.</p>

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