New York State Court of Claims

New York State Court of Claims

GUTIERREZ v. THE STATE OF NEW YORK, #2006-029-605, Claim No. 110205, Motion Nos. M-71948, CM-72214 CM-72220 CM-72229 CM-72231


State contractor that was obligated to obtain liability insurance naming the State as an additional insured, and elected to purchase a policy that provided for a $1 million Self Insurance Reserve, was deemed an “insurer” within the meaning of Court of Claims Act section 9(9-a).

Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):
Third-party defendant(s):
Claim number(s):
Motion number(s):
Cross-motion number(s):
CM-72214 CM-72220 CM-72229 CM-72231
Claimant’s attorney:
Defendant’s attorney:
ELIOT SPITZER, ATTORNEY GENERALBy: Judith C. McCarthy, Assistant Attorney General
Third-party defendant’s attorney:
See page 27
Signature date:
December 19, 2006
White Plains

Official citation:

Appellate results:

See also (multicaptioned case)


At issue on these motions is the obligation, if any, of the third-party defendants to provide a defense for the State of New York in this claim and to indemnify the State for the amount of any judgment rendered against it in favor of claimant. The underlying claim arises out of an alleged July 14, 2004 incident in which claimant, an employee of a food services provider on the campus of the State University of New York at Purchase, slipped and fell on a wet floor in the “cloak room” in “the SUNY Purchase College building located at 735 Anderson Hill Drive” (Claim, ¶¶ 67, 2). The SUNY Police incident report states the place of the accident as “the women’s room in the main dining hall kitchen” ( Exhibit “O” [1]). Although the claim (denominated a Verified Complaint, verified on November 18, 2004) was filed on December 10, 2004, defendant alleges it was “not properly served upon the Office of the Attorney General until March 24, 2005” (Reply Affirmation, ¶ 19). Since both these dates are more than 90 days following accrual, and since defendant’s [2] answer does not allege that the court lacks jurisdiction resulting from a failure to interpose the claim within 90 days of accrual as required by Court of Claims Act § 10(3), it seems likely that claimant served a notice of intention within such period. However, none of the papers before the court addresses this issue and the court cannot be sure. The sole jurisdictional defense in the answer alleges that the claim fails to comply with Court of Claims Act § 11(b) by not containing an adequate description of the place where the claim accrued, the “condition alleged” as the cause of the incident and “the State’s conduct in regard to it” (Answer, ¶ 12). This issue is also not discussed in the instant motion papers.

Following service of its answer in June 2005, defendant initiated a third-party claim by notice of impleader and third-party claim, dated January 26, 2006, against nine separate third-party defendants pursuant to Court of Claims Act § 9(9-a). The relief demanded is a declaratory judgment that the third-party defendants are obligated to “defend and indemnify” the State in this claim. In a stipulation of discontinuance dated April 25, 2006, defendant discontinued the third-party claim against Aon Risk Services, Inc. of the Carolinas, leaving eight third-party defendants, as follows:

Purchase College Association (PCA), a not-for-profit corporation, contracted with SUNY to provide “auxiliary services” on the campus (Exhibit “K”). [3] As part of that agreement, PCA was allowed to enter into subcontracts, and it agreed to indemnify and hold the State harmless in connection with legal proceedings arising from its own acts or omissions or those of any subcontractor. PCA procured a policy of property and general liability insurance from One Beacon Insurance Company that was in effect on the date of the alleged incident and which covered the area in question (Exhibit “L”).

In an agreement dated July 1, 2002, Compass Group USA, Inc. (“Compass”), by and through its Chartwells division, contracted with PCA to operate food services on the Purchase campus (Exhibit “M”). In fulfillment of its obligation under Article 19.3 of the agreement to maintain primary general liability insurance of $1 million per occurrence naming PCA, SUNY Purchase and the State of New York as additional insureds, Compass procured an insurance policy from Zurich American Insurance Company which, according to a Certificate of Liability Insurance dated February 28, 2006 (Exhibit “N”) referencing the period of the alleged underlying incident (September 30, 2003 through September 30, 2004), provided primary general liability coverage of $2 million per occurrence.

Cambridge Integrated Services Group, Inc. (“Cambridge”) is represented herein by the same counsel that represents Compass/Chartwells and is described as a company separate from and unrelated to Compass that is a “third-party administrator” for Compass that “administers lawsuits” for Compass and its subsidiaries, including Chartwells (Affidavit of James Gleeson, Claims Examiner for Cambridge, Exhibit “B” to CM-72229).

Ace American Insurance Company issued an excess liability policy to Compass, providing the first layer of excess coverage up to $10 million, after exhaustion of primary coverage.

American International Group, Inc. (AIG) is the name under which New Hampshire Insurance Company was sued herein. [4] New Hampshire issued an Excess of Loss Public and Products Liability Policy to Compass Group, Plc., apparently a British company, providing coverage, after exhaustion of primary coverage and the first layer of excess coverage, for liability in excess of $10 million.

Defendant now moves for summary judgment on the third-party claims against each of the eight remaining third-party defendants “declaring that the third-party defendants are obligated to defend and indemnify the third-party claimant State of New York under the existing policies of insurance as a matter of law” (Notice of Motion). Six of the third-party defendants have submitted four separate cross-motions [5] requesting various relief, three of which request dismissal of the third-party claims. One third-party defendant (Ace American) opposes the State’s motion but did not cross-move to dismiss the third-party claim asserted against it. Purchase College Association, although it filed an answer [6], did not appear on the motion.

Prior to addressing the status of each of the third-party defendants relative to the claim of Maria Gutierrez against the State of New York, a number of preliminary items need to be noted. The first is that the court’s jurisdiction over these issues and over the third-party defendants derives from and is defined by Court of Claims Act § 9(9-a) which provides that the court has jurisdiction “[t]o make a declaratory judgment as defined in [CPLR 3001] with respect to any controversy involving the obligation of an insurer to indemnify or defend a defendant in any action pending in the court of claims.” This is an exception to the general rule that the Court of Claims is not a court of equity and has no power to grant a declaratory judgment. The statute limits the court’s jurisdiction in two respects: it may not direct entry of judgment against an insurer for money damages and it may not adjudicate a controversy if the insurer would have the right to a trial by jury. Neither of these limitations apply here as there is no request for entry of a money judgment and there has been no demand by any party for a trial by jury of any issue (see Sangirardi v State of New York, 152 Misc 2d 423, 428 [Ct Cl, Weisberg, J., 1991]).

The purpose of the statute, which was added to the Court of Claims Act in 1989, was expressed in the legislative memorandum in support of the amendment of Section 9:
“The Court of Claims currently is authorized only to award monetary damages against the State, having no power to impose equitable remedies or issue declaratory judgments. Consequently, when a dispute arises between the defendant (the State or one of its entities) and an insurer regarding the obligations of the insurer under its contract to defend and indemnify the defendant that dispute must be resolved elsewhere. In recent years, as many as 15 such disputes have been presented to the Insurance Department or the Supreme Court. In order to make a determination, the fact finder, in each case, had to familiarize himself with the facts and background already known to the Court of Claims judge.

“By allowing the Court of Claims judge to resolve the dispute by means of a declaratory judgment, the time of the court system and the Attorney General's office will be saved. This is consistent with the objectives of the Individual Assignment system, where one judge, familiar with a case, hears all aspects.” (Quoted in Gordon v State of New York, 146 Misc 2d 479, 480-481).
As the Legislature noted, the facts of the underlying claim are often relevant to the determination of the coverage issues that are the subject of § 9(9-a). Here, the factual background currently before the court is extremely limited. The only filings from claimant are the claim (and an “Amended Claim” filed March 17, 2005 which is actually an identical copy of the initial claim) and an affirmation from counsel submitted on this motion merely noting, unsurprisingly, counsel’s agreement with the concept of insurance coverage. The court is not aware of a bill of particulars having been served or depositions or any other disclosure having been undertaken. All that the court knows at this point (assuming the truth of claimant’s allegations) is that claimant slipped on a wet floor somewhere in a SUNY building and that it may have been caused by a leaky pipe in the ceiling. There is no basis for the court to even begin to determine, as some of the parties herein request, whether the State, Purchase College Association or Compass has potential liability for the incident or whether the relevant facts exclude potential liability of any of these parties. Indeed, the court can envision factual scenarios – all consistent with the limited factual allegations currently before the court – that could implicate all three of these parties or any combination thereof and thus must assume, for the purpose of this motion, that all such potential scenarios remain viable for the purpose of determining the coverage obligations of the various parties herein.

Finally, it must be noted that although defendant requests declaratory judgments with respect to each of the third-party defendant’s obligations to “defend and indemnify,” the motion must be denied insofar as it seeks a determination of any party’s obligation to indemnify the State of New York because “any determination as to the obligation of the insurer[s] to indemnify its insured[s] would now be premature and must await the resolution of the underlying claim” (Spoor-Lasher Co. v Aetna Casualty and Surety Co., 39 NY2d 875, 876 [1976]). As noted, the bare-bones factual allegations that form the basis of the underlying claim could develop into potential liability on the part of the State, Purchase College Association and/or Compass or could result in a determination that the State was not at fault, thus obviating the necessity for any further proceeding or determination in this court. “As a general rule, a claim for indemnification does not accrue until payment has been made by the party seeking indemnification” (State of New York v Syracuse Rigging Co., 249 AD2d 758 [3d Dept 1998]; see also Bay Ridge Air Rights v State of New York, 44 NY2d 49 [1978]). Although the enactment of § 9(9-a) represents an exception to the principle that the time in which to bring a claim begins with its accrual – in that it allows for a third-party claim seeking determination of an insurer’s obligation to “defend and indemnify” to be interposed prior to the formal “accrual” of the claim – it does not require, or imply, that the indemnification aspect of such a claim be determined prior to resolution of the main action, as opposed to the defense aspect which, by its nature, need be determined at the outset. Indeed, it would only be an exceptional case – where circumstances, including the absence of pertinent issues of fact, support entry of a “conditional judgment of indemnification” – where departure from the “general rule” is warranted (see State of New York v Syracuse Rigging Co., supra, 249 AD2d 758; O’Brien v Key Bank, 223 AD2d 830 [3d Dept 1996]).

Thus, although the claims seeking a defense and indemnification are properly before the court, the request to resolve the indemnification portion of the claims by summary judgment is premature and defendant’s motion is denied to the extent that it seeks a declaratory judgment with respect to the obligation of any party to indemnify.

Nevertheless, it is basic that the “obligation of [an] insurance company to defend its insured, however, is separate and distinct” (Spoor-Lasher Co. v Aetna Casualty and Surety Co., supra, 39 NY2d 875, 876) and an insurer seeking to avoid its obligation under a contract of insurance bears the “heavy burden” of demonstrating “as a matter of law that there is no possible factual or legal basis on which the insurer might eventually be held to indemnify the insured” (City of Johnstown, New York v Bankers Standard Ins. Co., 877 F.2d 1146 [2d Cir 1989]). That the facts before the court are insufficient to even evaluate the relative fault, if any, of the parties and thus address any potential claim for indemnification is irrelevant. “The duty to defend is broader than the underlying potential insurance company liability” (Tishman Interiors Corp. of New York v Fireman’s Fund Ins. Co,, 236 AD2d 385, 386 [2d Dept 1997]) and such duty is triggered where “facts alleged in the complaint fall within the scope of coverage intended by the parties at the time the contract was made” (New Hampshire Ins. Co. v Jefferson Ins. Co., 213 AD2d 325, 326-327 [1st Dept 1995]), regardless of the fact that any determination as to the liability of any insurer cannot be determined until after trial of the underlying action (Munzer v St. Paul Fire and Marine Ins. Co., 145 AD2d 193 [3d Dept 1989]). While only the application of law to proven facts, as reflected in a judgment, can provide the basis to determine issues of indemnification, it is the unproven allegations of the pleadings that determine the boundaries of an insurer’s duty to defend.

The obligation of an insurer to provide a defense to its insured is a creature of contract, not of law (see e.g. Freedman v Glens Falls Ins. Co., 27 NY2d 364, 367 [1971]: “the contractual obligation to defend is dependent upon the coverage of the policy”). Indeed, the basis for the principle that the obligation to provide a defense is broader than the obligation to indemnify is the recognition that an “insured’s right to representation and the insurer’s correlative duty to defend suits, however groundless, false or fraudulent, are in a sense ‘litigation insurance’ expressly provided by the insurance contract” (Servidone Construction Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 423-424 [1985]; see also Goldberg v Lumber Mutual Casualty Ins. Co. of N.Y., 297 NY 148 [1948]). Cases holding that the obligation to provide a defense is broader than the obligation to indemnify all start from the proposition that the insurance contract specifically articulated such an obligation: “when a policy represents that it will provide the insured with a defense, we have said that it actually constitutes ‘litigation insurance’ in addition to liability coverage” (BP Air Conditioning Corp. v One Beacon Ins. Group, 33 AD3d 116, 120 [1st Dept 2006]). Absent a contractual provision providing for defense of an action by an insurer, no such duty exists.

Resolution of the issues remaining on the motion and cross-motions involves application of the foregoing principles to the particular facts and circumstances surrounding each of the third-party defendants:

American International Group, Inc.

As noted, although defendant named AIG as a third-party defendant, the actual policy was issued by New Hampshire Insurance Company. AIG Europe (UK) Limited, located in London, is described in the policy (Exhibit “A” to CM-72231) as the General Agent for New Hampshire. The appearance was on behalf of New Hampshire, “incorrectly sued as” AIG, but no party makes an issue over that mistaken nomenclature.

New Hampshire’s policy, issued to Compass Group Plc., provides coverage for liability in excess of $10 million. The policy is not reflected in the Certificate of Liability Insurance issued to Compass Group USA, Inc. and Chartwells. It contains no mention of any additional insureds and no mention of any obligation to provide a defense to anyone, not surprising given that it is an excess liability policy. There is no basis to impose any obligation on New Hampshire to provide a defense to the State in this action.

Additionally, the policy provides that its coverage “excludes all liability . . . in respect of injury . . . by an employee which arises out of and in the course of his employment by the Insured in the Business” (Endorsement Number 2, emphasis added). The allegations herein are that claimant, an employee of the Chartwells division of Compass was injured while on the job. New Hampshire maintains that the quoted language refers to a claim arising out of an injury to an employee, but if that was the intent it is awkwardly worded and somewhat unclear. Nevertheless, it is undisputed that any obligation of New Hampshire under the contract begins at $10 million, the amount demanded in the claim, and that absent some extraordinary occurrence, its obligation to indemnify will never become an issue. The policy also provides that the law of England shall govern its interpretation and the courts of England shall have exclusive jurisdiction over disputes connected with the policy.

The court finds that New Hampshire/AIG has established that the third-party claim and cross-claims asserted against it have no merit and that it is entitled, at this point, to judgment of dismissal (CPLR 3212 [b]). Cross-Motion CM-72231 is granted. The court declares that New Hampshire/AIG has no obligation to provide a defense or indemnification against any liability assessed against the State in this claim as currently pled. This finding is without prejudice to any party’s right to seek indemnification from New Hampshire should damages reach or exceed the policy’s $10 million threshold.

Ace American Insurance Company

Ace American issued an excess liability policy to Compass for amounts over the limit of the primary policy, up to $10 million. The actual policy has not been provided to the court, however there is no dispute that it provides the first layer of excess coverage or that the State of New York is an additional insured, both of which are reflected on the Certificate of Liability Insurance. Nothing before the court demonstrates that the contract of insurance includes the obligation to defend, a provision that would be unusual in an excess liability policy. To the extent that defendant seeks a judgment declaring that Ace American is obligated to provide a defense, the motion must be and hereby is denied because defendant has not produced any evidence that Ace American contractually obligated itself to provide such a defense.

With respect to the issue of indemnification, Ace American correctly notes that defendant’s motion is premature, undoubtedly the same reason why it did not request summary judgment of dismissal of the third-party claim asserted against it. As noted, this branch of the motion is denied subject to renewal at the appropriate time.

Zurich American Insurance Company

Zurich issued a commercial general liability policy to Compass Holdings, Inc.[7] and does not dispute that the policy was in effect on the date of claimant’s alleged injury or that the State of New York is entitled to coverage under the policy as an additional insured. The Zurich policy was the primary policy in Compass’s insurance structure, as reflected on the Certificate of Insurance. Zurich’s cross-motion to dismiss the third-party claim is based on the terms of that policy.

The policy was obtained by Compass pursuant to Article 19 of the Food Services Agreement with PCA (Exhibit “M”) which requires Compass to maintain primary general liability coverage of $1 million, commercial automobile coverage of $1 million and umbrella liability coverage, in excess of the liability and automobile coverage, of $10 million. The agreement requires that these policies be purchased from “licensed, admitted insurance carriers approved by the New York State Insurance Department” (id.).

As Zurich notes, defendant did not submit a copy of the insurance contract to the court despite requesting the court to issue a judgment declaring that Zurich is obligated to provide a defense to the State in this action. Zurich has attached portions of the contract – the Declarations page, two out of 16 pages of a Commercial General Liability Coverage Form, and the Self Insured Retention (SIR) endorsement (collectively, Exhibit “A” to CM-72214) – but not the entire contract. These excerpts contain no mention of the State of New York being an additional insured, but Zurich does not dispute that such was the case and the State was named on the Certificate of Insurance.

Zurich’s position herein derives entirely from the SIR endorsement. It provides for an SIR of $1 million per occurrence and specifically sets forth, in two places (¶¶ I.A.1 and I.B) that Compass shall be responsible for payment of all damages “and defense costs,” as they are incurred, up to a total of $1 million. The SIR obligates Compass to employ a “claim service provider” for the purpose of providing claim settlement services with respect to losses within the SIR amount.

Paragraph 1.a of the Commercial General Liability Coverage Form provides that Zurich will have “the right and duty to defend the insured” against any lawsuit seeking damages covered by the insurance. However, the first sentence of the SIR endorsement states: “[t]he insurance provided by this policy is subject to the following additional provisions, which in the event of conflict with any other provisions elsewhere in the policy, shall control the application of insurance to which this endorsement applies.” As noted, one of those additional provisions is that Zurich has no obligation to defend or indemnify Compass for any amounts under the $1 million SIR threshold, obviously an intentional modification of the quoted portion of the standard terms of the Commercial General Liability Coverage Form.

On its cross-motion Zurich seeks judgment declaring that it has no duty to defend or indemnify the State in connection with this action unless and until the $1 million SIR is exhausted. Zurich contends, correctly, that its obligations to the State of New York, an additional insured, are the same as its obligations to Compass (Pecker Iron Works of New York v Traveler’s Ins. Co., 99 NY2d 391 [2003]), and specifically that the terms of the SIR endorsement apply equally to its obligations to additional insureds as well as the named insured (Power Auth. of the State of New York v National Union Fire Ins. Co. of Pittsburgh, 306 AD2d 139 [1st Dept 2003]). None of the parties offer any argument why the court should not give effect to the terms of the contract, deny the State’s motion with respect to Zurich and grant Zurich’s cross-motion. The court finds such relief is warranted. Moreover, the terms of the Zurich policy mandate the denial of One Beacon’s cross-motion seeking a determination that Zurich is obligated to defend and indemnify One Beacon, a discussion that is premature until paid damages and expenses exceed Zurich’s $1 million threshold.

One Beacon Insurance Company

One Beacon issued a commercial property and general liability policy (Exhibit “L”) to Purchase College Association covering five separate buildings on the SUNY Purchase campus, including the Main Dining Hall, all of which have the address 735 Anderson Hill Road, Purchase, New York. Defendant maintains that it is entitled to a defense from One Beacon in this claim because (1) defendant’s contract with PCA (Exhibit “K”) obligates PCA to “indemnify and hold harmless” the State for any damages or expenses arising occasioned by any act or omission of PCA and (2) the One Beacon policy, with PCA as the named insured, covered the area of claimant’s accident.

Defendant’s analysis ignores one critical fact: nowhere in the One Beacon insurance contract (Exhibit “L”) is there any mention of SUNY, SUNY Purchase or the State of New York as an additional insured entitled to benefits under the policy. In fact, the one portion that mentions additional insureds, on page 6 of the Policy Declarations, reads as follows: “The named insured is to read as follows: Purchase College Association, Inc. (The) [,] SUNY Purchase College Association [,] Purchase Auxiliary Services Co.” The identity of these various entities, and their relationship with SUNY and/or the State of New York, is a mystery unsolved by this record. While the court cannot infer an obligation to defend the State from the quoted language, the possibility that such obligation may exist cannot be excluded on these papers. Thus, the State’s motion must be denied with respect to One Beacon, without prejudice to a further application supported by proof of an obligation running from One Beacon to the State. The only relief One Beacon requests on its cross-motion is a determination that Zurich is obligated to defend and indemnify it, relief that is not warranted, as discussed above.

Cambridge Integrated Services Group, Inc.

Cambridge has submitted an affidavit from James Gleeson, a claims examiner, who states that Cambridge is not an insurance carrier and does not issue insurance policies but is a third-party claims administrator, retained by Compass but unrelated to it. Defendant does not dispute these assertions and does not argue that Cambridge has any duty to provide it with a defense in this action despite having made a third-party claim against Cambridge and moving for summary judgment on that claim.

It is apparent that Cambridge is not an insurer within the meaning of Court of Claims Act § 9(9-a) and there is no basis for this court to exercise jurisdiction over it. Defendant’s motion must be denied with respect to Cambridge and the cross-motion dismissing the third-party claim is granted.

Compass Group USA, Inc.

In support of its cross-motion to dismiss, Compass argues that the same principle that mandates dismissal of the third-party claim against Cambridge also applies against Compass. Citing Sangirardi v State of New York (152 Misc 2d 423 [Ct Cl, Weisberg, J., 1991]) and Lopez v State of New York (Ct Cl, Silverman, J., Claim No. 84701, unreported Memorandum Decision and Order filed March 30, 1993), Compass maintains that it is not an insurer within the meaning of the statute and thus the court lacks jurisdiction and the third-party claim must be dismissed as a matter of law. Defendant maintains that the authorities relied upon by Compass are distinguishable and that Compass is indeed an insurer, thus providing the basis for this court to determine its obligation to provide a defense in this action.

Sangirardi involved third-party claims against a State contractor and an insurance company that issued a policy to the contractor. Although the court declared that the insurance company was required to defend the State, it held that “a contractor with a tort or contractual obligation to indemnify a defendant in this court is not an insurer within the meaning of section 9(9-a)” and that the court therefore lacked jurisdiction over the contractor (152 Misc 2d 423, 428). Similarly, in Lopez, the court held that the fact that the contractor was contractually obligated to indemnify the State did not render the contractor an insurer within the meaning of the statute and provide Court of Claims jurisdiction over the contractor (accord, Neely v State of New York, Claim No. 110262, M-70981, UID No. 2006-016-028 [Marin, J., April 26, 2006]; Scott v State of New York, Claim No. 107168, M-68376, UID No. 2004-013-064 [Patti, J., December 30, 2004]).

The basis for defendant’s contention herein that Compass is an insurer within the meaning of the statute is not that it is a State contractor with the contractual obligation to indemnify the State, but that, under the specific circumstances set forth herein, Compass’s decision to act as a self-insurer renders it subject to the jurisdiction of the court as an insurer.

Article 19 of Compass’s Food Services Agreement dated July 1, 2002 (Exhibit “M”) provides that “Compass shall indemnify, defend and save harmless PCA, SUNY, the New York State and SUNY against any claim for liability, including, but not limited to, any physical damage to tangible property, bodily injury, sickness or death caused by the willful or negligent acts or omissions of Compass, its agents, employees or assigns arising out of this Agreement.” (¶ 19.1). The agreement further provides that Compass “shall maintain insurance,” including “Primary General Liability Coverage of $1,000,000 per occurrence and $3,000,000 aggregate” which “shall be purchased from licensed, admitted insurance carriers approved by the New York State Insurance Department” (¶ 19.3) that a certificate of insurance “will be furnished” on 30 days’ notice (¶19.4)and that any such certificate shall specifically indicate the State of New York as an additional insured (¶ 19.5).

The Certificate of Liability Insurance (Exhibit “N”) provided to PCA contains a description of the coverage provided to Compass, including the Commercial General Liability issued by Zurich, the excess liability policies issued by Ace American and AIG/New Hampshire discussed supra and various automobile and workers’ compensation policies not relevant herein. The description of the Zurich liability policy indicates that its limits are $2 million per occurrence and $10 million aggregate. The certificate states that the State University of New York is named as an additional insured on all policies other than the workers’ compensation and employer’s liability policies.

In general language applicable to all the policies, part of the preprinted form states: “This Certificate is not intended to specify all endorsements, coverages, terms, conditions and exclusions of the policies shown.” Typed on the form, next to the quoted sentence, are the words “SIR May Apply.” As previously noted, the Zurich policy was in fact subject to the $1 million Self-Insurance Retention endorsement (SIR), providing that Compass would be self-insured for the first $1 million of potential liability and defense costs, modifying the standard provision that the insurer was obligated to defend claims and requiring that Compass employ a claims adjuster.

In addition to agreeing to insure SUNY and the State of New York against any liability arising from its negligence, Compass specifically agreed to “defend” SUNY and the State against any claim of liability, language that implicates a patently different obligation than the sole duty to indemnify. The duty to defend is customarily found in primary liability insurance contracts. Compass does not dispute that its obligations under the Food Services Agreement included the obligation to “defend” the State. Rather, it argues that this court has no jurisdiction to declare that it has such an obligation because it is not an insurer as that term is used in Court of Claims Act § 9(9-a) and it suggests that “there is nothing to prevent New York from bringing its claim against Compass for breach of contract to indemnify or purchase insurance in the New York Supreme Court, the natural and proper venue for such claims” (Reply Affirmation in Support of Cross-Motion CM-72229). What is currently at issue before the court is not the obligation to indemnify (because that issue is premature) or any claim of a breach of a contract to purchase insurance (because no such claim has been asserted) but rather the distinct claim that Compass has the contractual obligation to “defend” the State in this action. Although Compass raises two substantive reasons why the court should declare that it is not so obligated, the primary thrust of its opposition to the third-party claim is that it is not an insurer and is thus beyond the jurisdiction of this court. However, the injection of the SIR into the equation makes this an issue of first impression notwithstanding the authorities cited by Compass, all of which address an issue different from that presented here; i.e., whether the mere agreement to indemnify the State renders a contractor an insurer.

Compass maintains that any decision in favor of the State would require the court to “judicially re-write the statute providing it with jurisdiction to . . . [enter a] declaratory judgment [against] every owner, general contractor, sub-contractor, commercial tenant or any such entity that purchases insurance for [the State of] New York that contains either a deductible or a SIR” (id.). The court finds that Compass’s contentions are spurious and that, under the specific circumstances of this case, Compass has acted in all respects as an insurer. Any other holding would be contrary to the intent of the Legislature when it enacted § 9(9-a) and would enable Compass to escape the consequences of its own voluntary decisions.

Most of the reported judicial discussion of the nature of self-insurance arise in the context of a dispute between an insurance company attempting to reduce its obligations by applying principles governing allocation of responsibility where there are multiple insurance policies to a self-insurer. For example, in Aetna Casualty & Surety Co. v World Wide Rent-A-Car (28 AD2d 286 [1st Dept 1967]) – where an insurer which had issued a policy covering non-owned (leased) vehicles to a company which had leased a vehicle from World Wide, a leasing company that was self-insured pursuant to VTL § 316 [9] – it was held that the insurer could not avoid its obligation to defend and indemnify by contending that the lessor’s self-insurance was primary, because all that “self-insurance” meant in that context was that the lessor had sufficient means to pay a judgment. Since the lessor, in obtaining self-insurance, “did not undertake to insure third parties against liability” (id., 289), there was no basis for the court to impose an obligation to defend and indemnify.

Similarly, in Consolidated Edison Company of New York v Liberty Mutual (193 Misc 2d 399 [Sup Ct NY Co 2002], the court held that self-insurance was not “other applicable insurance” in the context of an insurance company contending that its defense and indemnification obligations should be split 50/50 with a self-insurer pursuant to a contractual provision providing that the insurance coverage was to be shared with, or in excess of, other applicable insurance. The court noted that a “majority of jurisdictions across the nation subscribe to the . . . view of self-insurance as ‘not insurance’ in, inter alia, an ‘other insurance’ context” (id. 401) and that the insurer could not deflect part of its obligation to fully defend and indemnify onto a self-insurer (accord, American Casualty of Reading, Pa. v St. Charles Hospital and Rehabilitation Center, 21 AD3d 914 [2d Dept 2005]; FedEx Ground Package System v Transcontinental Ins. Co., 4 Misc 3d 1001[A] [Sup Ct Kings Co 2004]).

Other decisions, not on the issue of whether self-insurance constitutes “other insurance,” recognize that characterizing the nature of self-insurance is sometimes not so clear. Matter of Allstate Ins. Co. v Shaw (52 NY2d 818 [1980]) addressed the issue of whether a car rental company, self-insured pursuant to VTL § 370, 1[0] was subject to the requirement of the Insurance Law that “all motor vehicle liability insurance policies provide uninsured motorist coverage” (id., 819). The court rejected a literal reading of the statute – a certificate of self-insurance is not an insurance policy – observed that the statute “must be interpreted as a whole, giving the words a meaning which serves rather than defeats the over-all legislative goals” (id., 820) and found that the intent of the Legislature would be served by implying mandatory uninsured motorist coverage to self-insurers.1[1]

ELRAC v Ward (96 NY2d 58 [2001]) concerned a self-insured car rental company, sued by plaintiffs who were injured in accidents with vehicles it owned, who attempted to enforce a standard clause in its lease agreements requiring the renter to indemnify it for liability to injured third parties. The court held that because common carriers, including rental companies, were required to maintain insurance coverage in minimum amounts prescribed by statute that would inure to the benefit of any permissive user of the vehicle including the renter, the owner/lessor could not seek indemnification from renters for liability up to the amount of the minimum required coverage despite the language of the rental contracts specifically allowing such claims. The court rejected ELRAC’s argument that because it was self-insured, it was not subject to the minimum liability insurance requirements, and specifically held that the antisubrogation rule – under which “[a]n insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered” (Pennsylvania Gen. Ins. Co. v Austin Powder Co., 68 NY2d 465, 468 [1986]) – applied to self insurers:
“By electing to self-insure under section 370, ELRAC undertook the obligation to provide primary insurance coverage for itself and its permissive users up to the statutory minimums. With that, ELRAC undertook all the duties and responsibilities of an insurer. As noted, ELRAC may not, merely because it is a self-insurer, decrease the obligations that it owes to its insureds (see, Allstate Ins. Co. v Shaw, supra, 52 NY2d, at 820)” (96 NY2d 58, 77).
One may make a legitimate analogy between the self-insured car rental companies in Allstate and ELRAC and Compass in that all were self-insured but owed obligations to third parties arising out of that self-insurance. The victims of uninsured motorists in Allstate and the permissive drivers in ELRAC are each quite similarly situated to New York State, to whom Compass owed a contractual duty to provide a defense and indemnification in the case at bar.

The issue here is whether Compass is an insurer within the meaning of § 9(9-a). What is before the court is not, as asserted by Compass, whether any contractor who is obligated to indemnify the State is an insurer, or whether any insured with a deductible amount in its liability policy is an insurer, but rather whether the specific circumstances of this matter render Compass an insurer within the meaning of the statute so that this court may decide the issue of Compass’s obligation to provide the State with a defense. The statute does not define the term “insurer” and the court believes that the guiding principle in evaluating the issue must be the purpose of the statute and the underlying intent of the Legislature.

As already noted, Compass did much more than agree to indemnify the State. It specifically agreed to “defend” the State and to procure “Primary General Liability Coverage” of $1 million from a licensed insurance carrier, but it then obtained a policy providing for self-insurance for liability up to that sum, it obligated itself to retain an adjuster for such claims and the policy was modified to remove the otherwise-standard requirement that the primary insurer provide a defense. Providing a defense to additional insureds and retaining claims adjusters are not normally attributes of a mere indemnitor. They are, however, typical obligations and activities undertaken by insurers. The combination of the contractual duty to defend and the SIR-related modifications to the Zurich policy in effect made Compass the primary insurer and rendered the coverage provided by the ostensible primary carrier, Zurich, excess coverage. Such holding no more offends the dictionary than does the Court of Appeals’ finding that a car rental company, not an insurance company, that elected to self-insure “undertook all the duties and responsibilities of an insurer” (ELRAC, supra, 52 NY2d at 77) and could not avoid obligations owed to “its insureds” (id.).

The factors, combined with application of the purpose of the statute – which is to resolve insurance issues in the same forum as the underlying lawsuit – lead to the conclusion that Compass should be deemed an insurer subject to the jurisdiction of this court pursuant to § 9(9-a). Moreover, to the extent that the court’s jurisdiction under § 9(9-a) is equitable in nature (see First National Stores v Yellowstone Shopping Center, 21 NY2d 630, 637 [1968]; Guibord v Guibord, 2 AD2d 34, 36 [1st Dept 1956]), permitting Compass – which agreed to indemnify and defend the State and agreed to obtain insurance coverage for a minimum of $1 million from a licensed carrier naming the State as an additional insured, and which fulfilled its obligations by entering into a insurance contract providing that it would self-insure the first $1 million of liability – to contradict that position by successfully arguing that it is not an insurer because it is not an insurance company would be as inconsistent with principles of equity as it is with the purpose and intent of § 9(9-a).

Outside of its erroneous assertion that the court does not have jurisdiction over it in this proceeding, Compass offers two substantive arguments why it should not be required to indemnify or defend the State herein. First, relying on an affidavit from the Senior Director of Dining Services on the campus stating that he was aware of recurrent plumbing leaks and had made complaints to the facilities department, Compass argues that it is not responsible for claimant’s accident and the State owes it indemnification pursuant to the contract. This contention is irrelevant to the issue of Compass’s contractual duty to defend the State. As previously noted, allocation of responsibility for claimant’s accident is premature at this point. In any event, Compass is not before this court as a tortfeasor responsible for the accident. The current jurisdiction of this court is limited to issuing a judgment deciding Compass’s contractual obligations as an insurer to provide the State of New York with a defense. Ultimately, liability for the accident is not relevant to this inquiry.

Finally, Compass argues that, assuming the court has jurisdiction over it as an insurer, paragraph 19.2 of its contract provides that its obligation to defend the State is contingent upon the State providing it with notice of an event giving rise to a “claim” within 30 days of its receipt of the claim. Compass measures the 30 days from the filing of the instant claim (which it alleges was November 17, 2004 but was in fact December 10, 2004) and maintains that it was first given notice by the State on April 5, 2005. Defense counsel states that defendant was “not properly served” with the claim until March 24, 2005. As previously noted, since (1) claimant’s accident occurred on July 14, 2004, (2) Court of Claims Act § 10(3) required that the claim be served and filed within 90 days of accrual unless a notice of intention was served within that period and (3) the defense of untimeliness was not raised in the answer, the court strongly suspects that claimant served a notice of intention prior to serving and filing the claim. Under these circumstances, the court cannot determine whether ¶ 19.2 constitutes a valid defense to the third-party claim against Compass. The parties have not addressed the relevance, if any, of a notice of intention to this determination, nor have they addressed whether the State had the obligation to provide Compass of notice of an event of which Compass was undoubtedly aware before any State employee.

Accordingly, the court finds and declares as follows, pursuant to Court of Claims Act § 9(9-a) and CPLR 3001:

Defendant’s motion for summary judgment, and any cross-motions seeking indemnification, are denied as premature with respect to all issues relating to indemnification although the court retains jurisdiction over this element when it becomes timely. Defendant’s motion for summary judgment declaring that the third-party defendants have the duty to provide defendant with a defense herein is denied with respect to all defendants other than Compass;

Cross-Motion CM-72214 is granted and the court declares that Zurich American Insurance Company has no obligation to defend or indemnify the State of New York until its policy’s $1 million SIR is exhausted, at which point, Zurich shall assume the costs of defending this action;

Cross-Motion CM-72220 in which One Beacon seeks a judgment declaring that Zurich has the obligation to defend and indemnify One Beacon is denied;

Cross-Motion CM-72229 is granted to the extent that the court declares that Cambridge Integrated Services Group, Inc. has no obligation to defend or indemnify the State of New York herein and the third-party claim asserted against it is dismissed. With respect to Compass, the cross-motion is denied at this time, subject to the further conditions set forth herein;

Cross-Motion CM-72231 is granted, the court declares that American International Group, Inc./New Hampshire Insurance Company has no obligation to defend or indemnify the State of New York herein and the third-party claim and any cross-claims asserted against such third-party defendant are dismissed.

Additionally, defendant and Compass are directed to submit further papers addressing – via evidence and argument – the issue of whether Compass should be relieved of its obligation to provide the State with a defense herein because the State did not provide timely notice of the occurrence to Compass. Such papers are to be received by the court within 45 days of the filing date hereof. Both parties shall have ten days from their receipt of opposing papers to submit reply material. The court will then issue a declaratory judgment addressing Compass’s obligation to provide the State with a defense.

December 19, 2006
White Plains, New York

Judge of the Court of Claims

The following appearances were made on behalf of the third-party defendants:

For Compass Group USA, Inc., Chartwells and Cambridge Integrated Services, Inc.:

Gordon & Silber, P.C.

By: Jon D. Lichtenstein, Esq.

For Ace American Insurance Company:

Wilson, Elser, Moskowitz, Edelman & Dicker, LLP

By: Deborah J. Denenberg, Esq.

For Zurich American Insurance Company:

Melito & Adolfsen, P.C.

By Francis A. Garufi, Esq. and Ignatius John Melito, Esq.

For One Beacon Insurance:

Law Office of Bruce A. Lawrence

By Eric A. Schnittman, Esq.

For New Hampshire Insurance Company, sued as American International Group, Inc.:

Law Offices of Martin P. Lavelle

By Nicholas Kalfa, Esq.

The court considered the following papers:

Notice of Motion, Affirmation and Exhibits (M- 71948);

Notice of Cross-Motion, Affirmation, Exhibit and Memorandum of Law (CM-72214);

Notice of Cross-Motion and Affirmation (CM-72220);

Affirmation in Opposition of Francis A. Garufi on CM-72220;

Reply Affirmation of Eric A. Schnittman on CM-72220;

Notice of Cross-Motion, Affirmation and Exhibits (CM-72229);

Reply Affirmation of Jon D. Lichtenstein on CM-72229

Affidavit of Nicholas Mennillo on CM-72229;

Notice of Cross-Motion, Affirmation and Exhibits (CM-72231);

Affirmation in Opposition of Deborah J. Denenberg;

Affirmation of Tom Stickel;

Reply Affirmation of Judith C. McCarthy, Assistant Attorney General

[1].Unless otherwise indicated, all exhibit references are to exhibits to defendant’s Notice of Motion.
[2].References to “defendant” are to the State of New York. The court has sua sponte stricken the three other named defendants from the caption – two (State University of New York at Purchase and SUNY Purchase College) because such entities are part of the State of New York and lack independent legal existence and one (Westchester County) because the Court of Claims lacks jurisdiction over that entity.
[3].The agreement submitted by defendant is dated August 27, 2004, after the date of the subject incident. This discrepancy is not addressed in the papers before the court. Presumably there was an earlier agreement.
[4].Counsel appeared on behalf of “third-party defendant New Hampshire Insurance Company (‘New Hampshire’), incorrectly sued herein as ‘American International Group, Inc.’ ” (Notice of Cross-Motion CM-72231).
[5].Compass, Chartwells and Cambridge are covered by one cross-motion.
[6].Purchase College Association’s answer consists of general denials and three generic affirmative defenses relating to damages and contains no challenge to the court’s jurisdiction to grant the relief requested in the third-party claim.
[7].The precise relationship among Compass Holdings, Inc., Compass Group Plc. and Compass Group USA, Inc., the third-party defendant herein, was not addressed in any of the papers before the court.
[8].It appears that Chartwells is simply a division of Compass, without independent corporate existence. Compass’s counsel refers to his client as “Compass Group USA, Inc., Chartwells (hereinafter ‘Compass’)” and the court will adopt that nomenclature.
[9].VTL § 316 allows the owner of 25 or more motor vehicles to apply to the Commissioner of Insurance for a certificate of self-insurance, which will be issued if the commissioner is satisfied that the owner has the financial means to satisfy any judgment entered arising out of the operation of its vehicles.
1[0].VTL § 370 allows anyone engaged in transporting passengers for hire, or someone engaged in renting or leasing vehicles to be used for such purpose, to meet the State’s mandatory motor vehicle insurance requirements by self-insuring via a corporate surety bond.
[1]1.The court quoted “Learned Hand’s warning against making ‘a fortress out of the dictionary’ since ‘statutes always have some purpose or object * * * whose sympathetic and imaginative discovery is the surest guide to their meaning” (id., 821, quoting Cabell v Markham, 148 F2d 737, 739 [2d Cir 1945]).