County of Erie v Selective Insurance Company of America
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Attorneys and Parties
Brief Summary
Insurance coverage in a construction-related personal injury case, specifically whether two commercial general liability insurers owed the County of Erie a defense and reimbursement of defense costs as an additional insured.
Supreme Court denied Selective Insurance Company of America's (Selective) motion to strike or compel discovery, granted summary judgment to the County against both Selective and Zurich American Insurance Company (Zurich), denied Selective's cross-motion, and declared that both insurers had to defend the County in the underlying personal injury action and reimburse its reasonable defense costs.
The Appellate Division reversed the order on appeal No. 1 and also reversed the portion of the order and judgment on appeal No. 2 that granted summary judgment against Selective. It left intact the declaration requiring Zurich to defend and reimburse the County.
Zurich failed to show that the underlying allegations fell wholly within the professional services exclusion because the complaint alleged negligent ownership, operation, maintenance, management, construction, control, and design, not only professional engineering services. As to Selective, the contract between the County and contractor Destro & Brothers Concrete Company, Inc. (Destro) was ambiguous about whether park paving work was included, so neither side was entitled to summary judgment. The trial court also erred in treating Selective's discovery motion as moot merely because Selective also cross-moved for summary judgment.
Background
The County of Erie hired Destro & Brothers Concrete Company, Inc. (Destro) for paving work and hired LiRo Engineers, Inc. (LiRo) for construction management services on a paving project. Selective insured Destro, and Zurich insured LiRo. The County was named as an additional insured under both commercial general liability policies. In the underlying personal injury action, a bicyclist alleged that she was injured when she fell after moving from the pavement edge to the grass at a County-owned park. She sued the County, Destro, and LiRo, alleging negligence in the ownership, operation, maintenance, management, construction, control, and design of the pavement. After Selective and Zurich denied coverage to the County, the County brought this declaratory judgment and breach of contract action seeking a declaration that both insurers had to defend it and reimburse its defense costs.
Lower Court Decision
Supreme Court, Erie County, denied Selective's motion seeking to strike the complaint, compel the County to provide deposition testimony, or preclude the County from offering evidence on coverage. The court then granted the County's summary judgment motion against both insurers, denied Selective's cross-motion for summary judgment, and declared that Selective and Zurich were obligated to defend the County in the underlying lawsuit and reimburse the County for reasonable defense costs incurred to date.
Appellate Division Reversal
The Appellate Division unanimously reversed the appealed order and remitted the matter to Supreme Court, Erie County. It held that Zurich remained obligated to defend the County because Zurich did not establish that the professional services exclusion applied solely and entirely to the allegations in the underlying complaint. But it held that the lower court should not have granted summary judgment against Selective because the County-Destro contract was ambiguous on whether the paving project included work in the parks. Although the contract addenda referenced park work and were incorporated into the contract, the stated bid amount excluded park work, creating an ambiguity that required consideration of extrinsic evidence. The Appellate Division further held that the lower court wrongly deemed Selective's motion to compel discovery moot simply because Selective had also cross-moved for summary judgment. The matter was sent back for Supreme Court to decide Selective's discovery motion and then reconsider the County's motion against Selective and Selective's cross-motion anew.
Legal Significance
The decision reinforces New York's broad duty-to-defend standard and the heavy burden on an insurer seeking to avoid that duty through a policy exclusion. It also confirms that summary judgment is inappropriate where a contract governing additional-insured status is reasonably susceptible to more than one interpretation and the parties' intent depends on extrinsic evidence. In addition, it makes clear that a party may pursue discovery relief and summary judgment in the alternative without rendering the discovery request moot.
Zurich had to defend because its exclusion did not plainly eliminate all possible coverage, while Selective's duty to defend could not be resolved on summary judgment because the underlying contract was ambiguous and discovery remained outstanding.