350 East Houston Street, LLC v Travelers Indemnity Company of America
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Attorneys and Parties
Brief Summary
This construction insurance and indemnification dispute arose from excavation, micropiling, and foundation work for a Manhattan building project that allegedly damaged an adjacent property.
The motion court conditionally granted the property owner plaintiffs summary judgment on contractual indemnification against Copps Foundations, Inc. (Copps), denied unconditional indemnification, denied Copps summary judgment on negligence claims, granted Temple Insurance Company summary judgment dismissing the coverage claim for late notice, granted Noble Construction Group, LLC (Noble) leave to file a late summary judgment motion and then dismissed the third-party complaint against Noble while awarding Noble contractual indemnification against Copps, and denied plaintiffs' motion to preclude Peterson Geotechnical Construction LLC's expert.
The Appellate Division modified only the Noble order by denying dismissal of Copps's third-party complaint, reinstating Copps's common-law indemnification and contribution claims, and changing Noble's award on its contractual indemnification counterclaim from unconditional to conditional.
Although Noble showed good cause for its late motion under CPLR 3212(a) [summary judgment motions; late motion may be considered on good cause shown], the record contained triable fact issues about whether Noble and Copps were negligent in supervising Peterson's work and whether they participated in rejecting a proposed change in means and methods after unexpected subsurface conditions were encountered. Those factual disputes also made Noble's contractual indemnification against Copps only conditional.
Background
350 East Houston Street, LLC owned the project site at 11 Avenue C in Manhattan and hired Noble as construction manager. Noble entered into a trade contract with Copps for support of excavation and foundation piles work. Copps subcontracted with Peterson to install micropiles and a dewatering system. In March 2017, the owner of a neighboring building claimed that excavation-related work damaged its foundation and caused the building to shift. Plaintiffs later sought contractual indemnification from Copps and insurance coverage from Temple under Copps's excess liability policy. Copps, in turn, pursued third-party claims against Noble.
Lower Court Decision
The lower court held that plaintiffs were entitled to contractual indemnification from Copps only if 350 East Houston Street, LLC was ultimately found free from negligence; refused to declare unconditional indemnification; denied Copps summary judgment on negligence and related cross-claims; granted Temple summary judgment because notice of the neighboring property's claim was not given as soon as practicable and plaintiffs had already settled the claim before notifying Temple; allowed Noble's late summary judgment motion; dismissed Copps's third-party complaint against Noble and awarded Noble contractual indemnification against Copps; and denied plaintiffs' request to preclude Peterson's expert.
Appellate Division Reversal
The Appellate Division affirmed nearly all rulings but modified the order concerning Noble. It held that Copps's third-party claims for common-law indemnification and contribution should not have been dismissed because triable issues existed under CPLR 1401 [contribution among joint tortfeasors] and related common-law indemnification principles. It also held that Noble's counterclaim for contractual indemnification against Copps should have been granted only conditionally, not absolutely, because factual disputes remained about who directed and controlled the means and methods of the work.
Legal Significance
The decision underscores several recurring New York construction-law principles. First, a broad contractual indemnification clause covering damages "in any way or measure caused by, arise out of or in connection with the Work" can be triggered without proof that the indemnitor was itself at fault, but indemnification remains conditional where the indemnitee's own negligence is still in dispute. Second, excess insurers may obtain dismissal where notice is not given promptly and the insured settles before notice, triggering Insurance Law § 3420(c)(2)(B) [creates an irrebuttable presumption of prejudice when an insured settles before giving notice] and § 3420(c)(2)(C) [prejudice exists where the insurer is deprived of the opportunity to investigate or defend]. Third, courts may excuse a late summary judgment motion for good cause under CPLR 3212(a), but factual disputes about supervision and control will still defeat dismissal or unconditional indemnification. Fourth, inadequate expert disclosure under CPLR 3101(d)(1)(i) [expert disclosure requirements] does not automatically warrant preclusion under CPLR 3126(2) [sanctions for disclosure failures, including preclusion] absent willful, deliberate, and contumacious noncompliance and prejudice.
Broad construction indemnity clauses are enforceable, but they will be only conditional when the owner's or contractor's own negligence remains unresolved; late notice and pre-notice settlement can forfeit insurance coverage; and factual disputes over supervision, control, and rejected means-and-methods changes can preserve contribution and common-law indemnification claims.