In 720-730 Fort Washington Ave. Owners Corp. v. Utica First Ins. Co., — N.Y.S.2d —-, 2009 WL 3645656 (N.Y.Sup. 2009), an insurance policy was purchased to protect against injuries sustained by workers injured during roofing work. Somehow, the policy included three exclusions: an employee exclusion, an exclusion for roofing work, and an exclusion for any liabilities assumed under contract or agreement. Sure enough, during the construction work, an accident occurred in which an employee of the subcontractor was injured when a concrete block allegedly fell on him.
The insurance company disclaimed coverage based upon the three exclusions and the building owner commenced a declaratory judgment action. The defendant insurer moved for summary judgment, dismissal of the plaintiffs complaint and a declaration that it has no duty to defend or indemnify because the injured person was employed to do roofing repair work. The logical absurdity of the insurers position is incorporated into Justice Paul A. Victor’s concise framing of the issue presented: Should written exclusions inserted into a general commercial liability insurance policy which render the supposed coverage almost meaningless, be declared unenforceable as violative of the public policy and core objective of New York State to protect construction workers?
Justice Victor reluctantly concluded that precedent and the lack of specific legislation mandating the terms of construction site insurance policies precluding the court from doing so. The property owner did not argue the inapplicability of the exclusions, but instead argued, among other things, that the insurance policy is illusory and should be held to be against public policy since it did not provide any of the insureds with the usual construction site coverage required under the agreements between it, the general contractor and its subcontractor.
The public policy referred to is Labor Law section 240, which establishes a non-delegable duty on the part of owners and general contractors to provide scaffolds and other proper protective devices to workers at construction sites, and imposes absolute liability when a construction worker is injured as a result of one of the hazards which section 240 was enacted to eradicate and the worker was not provided with proper protection. Public policy notwithstanding, Justice Victor, quoting from Court of Appeals precedent, held that the absence of statutorily mandated coverage precluded the court from finding the exclusions unenforceable.
Justice Victor contrasted this situation from situations involving statutorily-mandanted minimum fire insurance coverage, and it would also contrast in a situation involving a motor vehicle insurance policy that did not conform to the requirements of Insurance Law section 3420. Justice Victor was obviously not pleased that precedent constrained his decision. He described the policy as being “misleading” and “worthless”. He noted thatthe lack of aprohibition againstconstruction site insurance policies from containing exclusions of the type involved in the case, coupled with the fact that many construction companies have no assets beyond the funds provided by insurance to pay a damage award, the laudable core objective of promoting worker safety and providing injured workers with extra protection “becomes an empty gesture without insurance coverage.”
As a result, Justice Victor suggeststhe Legislature amend the Insurance Law to include astatutorily-mandated “uniform construction site insurance policy” that precluded an insurance carrier from incorporating the exclusions involved in this case, or declared any such exclusions in a policy unenforceable as violative of public policy. Particularly galling is the fact, as mentioned in Justice Victor’s decision, that the defendant, Utica First, has been repeatedly successful in having its insurance policy exclusions judicially upheld.
Thus Utica First is engaging in a deliberate pattern of collecting premiums for insurance policies in which it has placed exclusions that effectively enables it to avoid having to pay on claims of the very type the insured attempted to cover against in the first place. Utica First’s conduct sounds like fraud. Justice Victor leaves the construction industry with the words, -“caveat emptor” – let the buyer beware – until such time as the Insurance Law and Insurance Department regulations provide explicit guidance or protections for insureds as to the minimum requirements for a construction site insurance policy.
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