Category: Language

Cragg v Allstate Indem. Corp., 2011 NY Slip Op 04767 (Ct. App. 2011)

Insurance contracts must be interpreted according to common speech and consistent with the reasonable expectations of the average insured (see Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 326-327 [1996]). To the extent that there is any ambiguity in an exclusionary clause, we construe the provision in favor of the insured. Moreover, "'exclusions or exceptions from policy coverage . . . are not to be extended by interpretation or implication, but are to be accorded a strict and narrow construction. Indeed, before an insurance company is permitted to avoid policy coverage, it must satisfy the burden which it bears of establishing that the exclusions or exemptions apply in the particular case, and that they are subject to no other reasonable interpretation'" (Pioneer Towner Owners Assn. v State Farm Fire & Cas. Co., 12 NY3d 302, 307 [2009], quoting Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311 [1984]). Allstate has not met that burden here.

The language of the policy exclusion — excluding coverage "whenever any benefit of this coverage would accrue directly or indirectly to an insured" — is ambiguous. It could be interpreted, as Allstate urges, to mean that bodily injury to an insured is not covered whenever any benefit — including coverage itself in the form of defense and indemnification — would accrue to an insured. However, as plaintiff points out, this interpretation ascribes meaning only to the first clause of the exclusion — "[w]e do not cover bodily injury to an insured person." Since the right to defense and indemnification universally accrues to an insured, under Allstate's interpretation the condition of the second clause of the exclusion would always be met. However, the second part of the exclusion must somehow modify the first part of the clause in order to have any meaning. In this context, a benefit must mean something other than coverage itself and is more naturally read to mean proceeds paid under the policy. In light of our obligation to interpret the exclusion in a manner that gives full force and effect to the policy language and does not render a portion of the provision meaningless (see County of Columbia v Continental Ins. Co., 83 NY2d 618, 628 [1994]), we find plaintiff's interpretation of the clause to be more in keeping with these well-settled principles of contract interpretation.

The current version of the exclusion at issue was brought about in response to the decision in Allstate Ins. Co. v Pestar (168 AD2d 931 [4th Dept 1990]). The prior version of the exclusion had excluded coverage for bodily injury to an insured. In Pestar, a child was injured when she dove into a State-owned lake. Her parents filed a negligence action against the State and the State counterclaimed seeking contribution. Despite the policy exclusion, the Appellate Division determined that Allstate had a duty to defend and indemnify the parents on the State's counterclaim, finding that "the liability at issue . . . is not the parents' liability to [the insured child] but rather the parents' potential liability to the State on a claim of equitable apportionment" (Pestar, 168 AD2d at 931-932). The insurer subsequently added language to the exclusion stating that bodily injury to an insured is not covered "whenever any benefit of this coverage would accrue directly or indirectly to an insured person" (see 9A Couch on Insurance 3d § 128:4).

Assuming the insurer intended this language to exclude coverage under the policy entirely for bodily injury to insureds, it did not accomplish the desired result. Instead of making the exclusion broader, the additional language can be read as limiting the application of the exclusion to situations where an insured would receive a benefit (i.e. payment) under the policy. The amendment, then, can be seen as the insurer's attempt to cut off indirect claims, such as claims for contribution. As relevant to this appeal, however, the exclusion fails to bar unambiguously payment to a noninsured plaintiff, that is to say it does not clearly cut off the nonresident distributee's wrongful death claims arising from the fatal injury to an insured.

Other jurisdictions have observed that there are valid policy reasons for excluding coverage in cases such as this one. They have noted that homeowner's insurance is generally meant to cover bodily injury to noninsureds (see Cincinnati Indem. Co. v Martin, 85 Ohio St 3d 604, 608; 710 NE2d 677, 680 [1999]) and that coverage is excluded in these types of situations in order to avoid imposing liability on the insurer in a case where the insured, due to a close relationship with the injured party, might be unmotivated to assist the insurer in defending against the claim (see Whirlpool Corp. v Ziebert, 197 Wis 2d 144, 149; 539 NW2d 883, 885 [1995])^[FN1]. However, faced with a very similar case addressing the identical exclusion, the Wisconsin Supreme Court recently held that "Allstate has failed to meet its burden to demonstrate that the policy term 'benefit' unambiguously includes the contractual right to receive a defense or the contractual right to indemnification" (Day v Allstate Indem. Co., 2011 WI 24, ¶57 [decided April 29, 2011]). We agree with this analysis.

We therefore find that judgment should have been granted in plaintiff's favor, as the exclusion did not operate to bar coverage for the noninsured plaintiff's wrongful death claim for the death of the insured decedent.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court for further proceedings in accordance with this opinion.

Brennan Beer Gorman/ Architects, LLP v Cappelli Enters., Inc., 2011 NY Slip Op 04825 (App. Div., 1st 2011)

On May 19, 2008, plaintiff submitted a proposal for architectural and engineering services to defendants relating to a proposed casino resort project (the project). Four days later, plaintiff informed defendants that it was still "working on a formal agreement," but nonetheless asked defendants to provide authorization to proceed. Defendants authorized plaintiff to start working, but expressly noted that plaintiff's "proposal and associated pricing" were "still under review and . . . subject to a formal agreement." Although plaintiff proceeded to work on the project, the parties continued to exchange contract drafts and comments for several months, never coming to an express agreement on price and other terms. It is thus evident on this record that the parties' minds never met on the material terms of their agreement, including price (see Yenom Corp. v 155 Wooster St. Inc., 23 AD3d 259, 259-260 [2005], lv denied 6 NY3d 708 [2006]). Accordingly, defendants are entitled to summary judgment dismissing plaintiff's first and third causes of action for breach of an express contract.

Defendants are also entitled to summary judgment dismissing plaintiff's fourth cause of action for breach of an implied contract. As noted, the record establishes that the parties never reached an express agreement on the material term of price. Moreover, defendants' statement that they would be bound only by a formal agreement and their repeated rejection of plaintiff's proposal for lump-sum pricing overrides their act of paying plaintiff's August 2008 invoice, which billed for work performed in June 2008 on a lump-sum basis (see Jordan Panel Sys. Corp. v Turner Constr. Co., 45 AD3d 165, 179 [2007]).

Defendants' consistent objections to plaintiff's invoices requires dismissal of the fifth cause of action for an account stated (cf. Herrick, Feinstein LLP v Stamm, 297 AD2d 477, 478-479 [2002]).

Because plaintiff's express and implied contract claims should be dismissed, plaintiff's second cause of action for attorneys' fees should also be dismissed, as that claim is premised exclusively on the attorneys' fees provision contained in plaintiff's May 2008 proposal.

Supreme Court properly declined to dismiss plaintiff's sixth cause of action for quantum meruit, since triable issues of fact exist as to whether plaintiff could have reasonably expected to be compensated for its services and the reasonable value of those services (see generally Fulbright & Jaworski, LLP v Carucci, 63 AD3d 487, 488-489 [2009]). Although the parties never reached an agreement on price, the record indicates that defendants acknowledged the need to pay plaintiff at least some amount for its services. Indeed, on July 3, 2008, defendants directed plaintiff to bill "for now on a [time and materials] basis until we have reached conclusion on the contract," and, on August 18, 2008, defendants asked plaintiff to prepare a summary of spending and payment status, noting that they wanted "to make sure we are staying current."

We reject defendants' contention that plaintiff cannot establish that defendants benefitted from plaintiff's services. The plaintiff asserting a valid claim in quantum meruit "recovers the reasonable value of his performance whether or not the defendant in any economic sense benefitted from the performance" (Martin H. Bauman Assoc. v H & M Intl. Transp., 171 AD2d 479, 484 [1991] [internal quotation marks and citation omitted]).

We also reject defendants' contention that plaintiff cannot establish the reasonable value of its services because it did not maintain itemized billing records detailing how it spent the asserted 5,800 man-hours of work. There are other means of establishing the reasonable value of services rendered, including the plaintiff's invoices and evidence of the number of hours of service rendered (see Paul F. Vitale, Inc. v Parker's Grille, Inc., 23 AD3d 1147, 1147 [2005], lv denied 6 NY3d 707 [2006]; Clark v Torian, 214 AD2d 938, 938 [1995]), both of which are available in the record. Moreover, plaintiff has submitted the affidavit of a licensed architect who, based on his review of the record, opined that plaintiff's schematic design work had a fair market value of at least $1.3 million.

We note that, on appeal, plaintiff does not seek summary judgment on its quantum meruit claim. In any event, we find that plaintiff is not entitled to such relief due to unresolved issues of material fact. We further note that defendant makes no argument with respect to plaintiff's seventh cause of action for a declaratory judgment.

Goldman Sachs Group, Inc. v Almah LLC, 2011 NY Slip Op 04725 (App. Div. 1st 2011)

Before any discovery was conducted, GS moved to dismiss the counterclaims pursuant to CPLR 3211(a)(1) and (7)(21)^[FN1]. GS argued that it was entitled to dismissal of the first counterclaim (breach of contract) because all the transaction documents submitted established that it "received" no "payment" of any kind as a result of the assignment and sublease. Preliminarily, the motion court acknowledged that, because Art. 12.6(a) of the lease speaks in terms of actual payment, GS's interpretation limiting the profit-sharing obligation to money received was reasonable. Nevertheless, the court denied the motion to dismiss as to the first counterclaim, finding that the term "other consideration" was ambiguous and should be interpreted with the aid of extrinsic evidence, reasoning that, since "sum" means money, if "other consideration" is to have any non-redundant meaning, it must mean more than just money, in accordance with the broad legal concept that consideration may be many forms of value.

Whether a contract is ambiguous is a question of law for the court and is to be determined by looking "within the four corners of the document" (Kass v Kass, 91 NY2d 554, 566 [1998], citing W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162-163 [1990]). A contract is unambiguous if "on its face [it] is reasonably susceptible of only one meaning" (Greenfield v Philles Records, 98 NY2d 562, 570 [2002]; see also Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978]). Conversely, "[a] contract is ambiguous if the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings" (Feldman v National Westminster Bank, 303 AD2d 271, 271 [2003], lv denied 100 NY2d 505 [2003] [internal quotation marks and citations omitted]).

The existence of ambiguity is determined by examining the "entire contract and consider[ing] the relation of the parties and the circumstances under which it was executed," with the wording to be considered "in the light of the obligation as a whole and the intention of the parties as manifested thereby" (Kass at 566 [internal quotations marks and citation omitted]). The " intent of the parties must be found within the four corners of the contract, giving a practical interpretation to the language employed and the parties' reasonable expectations'" (Del Vecchio v Cohen, 288 AD2d 426, 427 [2001], quoting Slamow v Del Col, 174 AD2d 725, 726 [1991], affd 79 NY2d 1016 [1992]).

Applying these principles, we find that the language of Article 12.6, when considered as an integrated whole and not in isolation, conveys the parties' intent that only actual "payment" made by the assignee and "receipt" by the assignor as consideration would trigger the profit-sharing clause. Indeed, Article 12.6 lists several types of "consideration" and all of the examples consist of amounts payable, for one reason or another, to the Tenant. The examples of "other consideration" include "sums paid for the sale or rental of Tenant's fixtures, leasehold improvements, equipment, furnishings or other personal property . . . " Additionally, Article 12.6 indicates that any "consideration" would consist of "sums" that a Tenant "receives" and against which the Tenant's expenses can be netted. This language in Article 12.6 conveys the parties' clear intent that only tangible consideration such as cash or notes payable to the tenant could trigger the profit-sharing clause, and that any intangible benefits inuring to the tenant from the assignment and sublease, as the owner posits, in the form of inherent "value" does not suffice. Even though the word "consideration" might seem to suggest a broader meaning in general, the word should be limited to the particular object that the parties intended here. Accordingly, because it is undisputed that no "payment" was "received" as consideration for the assignment of the lease, tenant GS was entitled to a dismissal of the counterclaim in its entirety.

Ellington v Sony/ATV Music Publ. LLC, 2011 NY Slip Op 04733 (App. Div., 1st 2011)

Plaintiff failed to set forth a basis for terminating the parties' copyright royalties agreement. Viacom's sale of defendant Famous Music, a party to the agreement, to defendant Sony/ATV did not repudiate the agreement by assigning plaintiff's rights and rendering Famous incapable of performing its obligations. In any event, an assignment is permissible in the absence of an express prohibition (see Eisner Computer Solutions v Gluckstern, 293 AD2d 289 [2002]; Matter of Stralem, 303 AD2d 120, 122 [2003]). Plaintiff's conclusory characterization of the agreement as an unassignable personal services contract (see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 482 [2006], cert dismissed 548 US 940 [2006]) was contradicted by the overall tenor of the agreement, which was cast as a sale of "assets" and did not provide for the management of plaintiff's artistic career or talents. The extraordinary remedy of rescission was unwarranted since, among other reasons, there was an adequate remedy at law (see Rudman v Cowles Communications, 30 NY2d 1, 13 [1972]).

The fiduciary breach claim was duplicative of the contract claims (see William Kaufman Org. v Graham & James, 269 AD2d 171, 173 [2000]), plaintiff's artificial separation of the royalty mis-routing allegation from the "negative adjustment" contract claims notwithstanding. The unjust enrichment claim was not viable in light of the undisputedly valid contract claims (see EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 23 [2005]).

Malekan v Sakai, 2011 NY Slip Op 04751 (App. Div., 1st 2011)

Supreme Court correctly determined that Sakai is the rightful owner of the antique. Plaintiff Malekan's contention that the agreement in Farsi was an agreement to forbear, akin to a covenant not to sue, lacks support in the record. Furthermore, there is no dispute that Malekan also signed a bill of sale written in English concerning the antique, and under the circumstances, Malekan is bound by what he signed (see Shklovskiy v Khan, 273 AD2d 371, 372 [2000]).

Suazo v Maple Ridge Assoc., L.L.C., 2011 NY Slip Op 04762 (App. Div., 1st 2011)

The right of a party to recover indemnification on the basis of a contractual provision depends on the intent of the parties and the manner in which that intent is expressed in the contract (see Kurek v Port Chester Hous. Auth., 18 NY2d 450 [1966]). The promise to indemnify should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding facts and circumstances (see Hooper Assoc., Ltd., v AGS Computers, 74 NY2d 487 [1989]). A contract that provides for indemnification will be enforced so long as the intent to assume such role is sufficiently clear and unambiguous (see Bradley v Earl B. Feiden, Inc., 8 NY3d 265 [2007]).

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