| Westport Ins. Co. v Altertec Energy Conservation, LLC |
| 2011 NY Slip Op 02652 [82 AD3d 1207] |
| March 29, 2011 |
| Appellate Division, Second Department |
| Westport Insurance Company, Respondent, v AltertecEnergy Conservation, LLC, Defendant, and Energy Spectrum Developers, LLC,Appellant. |
—[*1] Bruce Somerstein & Associates, P.C., New York, N.Y. (Christopher A. Wong of counsel),for respondent.
In a subrogation action to recover damages for negligence and breach of contract, thedefendant Energy Spectrum Developers, LLC, appeals from an order of the Supreme Court,Kings County (Kramer, J.), dated February 16, 2010, which denied its motion for summaryjudgment dismissing the complaint insofar as asserted against it, with leave to renew upon thecompletion of discovery.
Ordered that the order is reversed, on the law, with costs, and the motion of the defendantEnergy Spectrum Developers, LLC, for summary judgment dismissing the complaint insofar asasserted against it is granted.
The plaintiff issued an insurance policy to Park House Hotel Corp. (hereinafter Park Hotel)for its hotel, located in Brooklyn (hereinafter the premises). This policy covered the Park Hotelfor any damages, costs, and/or expenses resulting from, among other things, a fire. On November5, 2006, a fire occurred within the premises.
Prior to the fire, Park Hotel had retained the defendant Altertec Energy Conservation, LLC(hereinafter Altertec), to install an electric generator system at the premises.
Thereafter, pursuant to a repair agreement executed May 5, 2004, Park Hotel retained thedefendant Energy Spectrum Developers, LLC (hereinafter Energy Spectrum), to complete theinstallation. The agreement stated that Energy Spectrum was "agreeable to providing. . . services to [Park Hotel], but only upon the express terms and conditions as setforth in this Agreement."
Paragraph two of the agreement provided that Energy Spectrum made "no representation orwarranty whatsoever as to the condition of the [electric generator] System, or as to its operationalcapacity or capability after the repairs [we]re undertaken or actually made." The agreementreiterated in paragraph four that Energy Spectrum's work was "not warrantied in any mannerwhatsoever, as to either parts or services."[*2]
Paragraph seven of the agreement provided that ParkHotel thereby indemnified and held Energy Spectrum harmless from and against any and allclaims arising directly or indirectly, from, inter alia, "any capability or warranty for the System toactually work and/or perform as may have been discussed with, guaranteed by, or implied by, anyother contractors . . . or the service, maintenance or other working status of theSystem on the date hereof or at any date in the future" and "[a]ny other matter not due to [EnergySpectrum's] willful misconduct under this Agreement." It was agreed that the indemnificationprovision would survive termination of the agreement.
As a result of the fire, Park Hotel submitted a claim in the sum of $101,096 to the plaintiff.The plaintiff indemnified Park Hotel for that loss and became subrogated to Park Hotel's rightsagainst the defendants.
The plaintiff, as subrogee of Park Hotel, commenced this action against Altertec and EnergySpectrum to recover damages for negligence and breach of contract. After Energy Spectrumanswered the complaint, it moved for summary judgment dismissing the complaint insofar asasserted against it.
In its motion, Energy Spectrum argued that the provisions of the agreement precluded theplaintiff, as Park Hotel's subrogee, from asserting claims of negligence and breach of contractagainst it. The plaintiff opposed the motion on the ground that it was premature, since discoveryhad not been completed. The plaintiff had yet to depose a representative of Energy Spectrumabout the "terms and conditions of th[e] 'Repair Agreement.' " In reply, Energy Spectrum arguedthat since the plaintiff did not seek to recover damages for any willful misconduct on its behalfand failed to assert that the agreement was not authentic or that its terms were ambiguous, anaward of summary judgment in its favor was appropriate.
The Supreme Court denied Energy Spectrum's motion with leave to renew upon thecompletion of discovery in accordance with CPLR 3212 (f). The Supreme Court found that theindemnification provision in the agreement was void and unenforceable, relying on Itri Brick& Concrete Corp. v Aetna Cas. & Sur. Co. (89 NY2d 786, 794 [1997]). It found that aquestion of fact existed with respect to Energy Spectrum's negligence and, therefore, a depositionof a representative of Energy Spectrum was necessary with respect to the negligence claim.Energy Spectrum appeals. We reverse.
"Subrogation, an equitable doctrine, allows an insurer to stand in the shoes of its insured andseek indemnification from third parties whose wrongdoing has caused a loss for which theinsurer is bound to reimburse" (Kaf-Kaf, Inc. v Rodless Decorations, 90 NY2d 654, 660[1997]; see Gulf Ins. Co. v Quality Bldg. Contr., Inc., 58 AD3d 595, 597 [2009]). Theinsurer's rights against a third party are derivative and limited to the rights the insured wouldhave against that third party (see Humbach v Goldstein, 229 AD2d 64, 67 [1997]).Therefore, "[an] insurer can only recover if the insured could have recovered and its claim assubrogee is subject to whatever defenses the third party might have asserted against its insured"(id. at 67).
Here, the plaintiff could only recover damages from Energy Spectrum for negligence andbreach of contract if Park Hotel could recover damages for those claims. Since the agreementclearly provided that Energy Spectrum would be held harmless by Park Hotel against all claimsexcept any claims premised upon a theory of willful misconduct and Energy Spectrumdisclaimed any warranties for the work, neither the plaintiff nor Park Hotel could recoverdamages resulting from Energy Spectrum's negligence or breach of contract (see Greenfield vPhilles Records, 98 NY2d 562, 569 [2002]; Johnston v MGM Emerald Enters., Inc.,69 AD3d 674, 677 [2010]; Henrich v Phazar Antenna Corp., 33 AD3d 864, 867 [2006]).By submitting a copy of the agreement in support of its motion, Energy Spectrum established itsentitlement to judgment as a matter of law, since clear and complete agreements will be enforcedaccording to their terms (see Greenfield v Philles Records, 98 NY2d at 569; Johnstonv MGM Emerald Enters., Inc., 69 AD3d at 677; Henrich v Phazar Antenna Corp., 33AD3d at 867).
The provision in the agreement requiring Park Hotel to indemnify and hold Energy Spectrumharmless for damages resulting from Energy Spectrum's negligence was not unenforceable [*3]pursuant to General Obligations Law § 5-322.1 (seeFisher v Biderman, 154 AD2d 155 [1990]; see e.g. Board of Educ., Union Free SchoolDist. No. 3, Town of Brookhaven v Valden Assoc., 46 NY2d 653 [1979]; Failla v A. F.A. Protective Sys., 139 AD2d 693 [1988]).
General Obligations Law § 5-322.1 (1) provides that: "A covenant, promise,agreement or understanding in, or in connection with or collateral to a contract or agreementrelative to the construction, alteration, repair or maintenance of a building, structure,appurtenances and appliances . . . purporting to indemnify or hold harmless thepromisee against liability for . . . damage to property contributed to, caused by orresulting from the negligence of the promisee, his agents or employees, or indemnitee, whethersuch negligence be in whole or in part, is against public policy and is void and unenforceable. . . This subdivision shall not preclude a promisee requiring indemnification fordamages arising out of . . . damage to property caused by or resulting from thenegligence of a party other than the promisee, whether or not the promisor is partially negligent."
However, in enacting this statute, in 1975, the Legislature sought, "to prevent a prevalentpractice in the construction industry of requiring subcontractors to assume liability by contractfor the negligence of others. The Legislature concluded that such 'coercive' bidding requirementsunnecessarily increased the cost of construction by limiting the number of contractors able toobtain the necessary hold harmless insurance, and unfairly imposed liability on subcontractors forthe negligence of others over whom they had no control. The agreements also needlessly createdexpensive double coverage for hold harmless or general liability insurance" (Itri Brick &Concrete Corp. v Aetna Cas. & Sur. Co., 89 NY2d at 794, citing Brown v Two Exch.Plaza Partners, 76 NY2d 172, 179-180 [1990], citing Mem of Assemblyman Brown, 1975NY Legis Ann, at 311).
When interpreting a statute, a court's primary function is "to ascertain and effectuate thepurpose of the Legislature" by looking at the entire statute, its legislative history and any relatedstatutes (Rankin v Shanker, 23 NY2d 111, 114 [1968]; see Fumarelli v MarsamDev., 92 NY2d 298, 303 [1998]). In considering the legislative purpose behind GeneralObligations Law § 5-322.1, it is apparent that the Legislature did not intend to precludeagreements like the subject agreement made between sophisticated business entities free to agreeto any terms they choose (see Itri Brick & Concrete Corp. v Aetna Cas. & Sur. Co., 89NY2d at 794; Brown v Two Exch. Plaza Partners, 76 NY2d at 179-180; Fisher vBiderman, 154 AD2d 155 [1990]; see generally Venetoklis Family L.P. v Kora Devs.,LLC, 74 AD3d 1057, 1058 [2010]; Hollander v Lipman, 65 AD3d 1086, 1087[2009]). "Nothing in [the] legislative history [of General Obligations Law § 5-322.1]appears to support the invalidation of the indemnification provisions of the contracts in issue" oran owner's valid business decision to become, in essence, a self-insurer (Fisher vBiderman, 154 AD2d at 162).
Here, it is the owner of the premises which has agreed to indemnify the contractor. Protectingthe owner in such a situation, where it was free to contract in any manner it chose, does not servethe legislative purpose. Consequently, since the parties set down their agreement in a clear,complete document, their writing should be enforced according to its terms (see Henrich vPhazar Antenna Corp., 33 AD3d at 867). "A contract will be interpreted in accordance withthe intent of the parties as expressed in the language of the agreement" (Johnston v MGMEmerald Enters., Inc., 69 AD3d at 677; see Greenfield v Philles Records, 98 NY2d at569).
Since General Obligations Law § 5-322.1 does not bar the enforceability of theindemnification provision in the subject agreement, it was improper for the Supreme Court tohave denied Energy Spectrum's [*4]motion on the ground thatdiscovery on the issue of negligence was necessary.
In response to Energy Spectrum's establishment of its entitlement to judgment as a matter oflaw, the plaintiff failed to raise a triable issue of fact or establish that additional discovery wasnecessary to oppose the motion. While the plaintiff claimed that discovery was necessary, itfailed to submit any affidavits establishing that facts existed which were essential to justifyopposition to the motion but were not in its possession in light of the fact that discovery had yetto be completed (see CPLR 3212 [f]; Rodriguez v DeStefano, 72 AD3d 926[2010]; Juseinoski v New York Hosp. Med. Ctr. of Queens, 29 AD3d 636, 637 [2006])."The mere hope or speculation that evidence sufficient to defeat a motion for summary judgmentmay be uncovered during the discovery process is insufficient to deny the motion" (Arpi vNew York City Tr. Auth., 42 AD3d 478, 479 [2007]; see Orange County-PoughkeepsieLtd. Partnership v Bonte, 37 AD3d 684, 687 [2007]). Consequently, the Supreme Courtshould have granted Energy Spectrum's motion for summary judgment dismissing the complaintinsofar as asserted against it. Dillon, J.P., Balkin, Belen and Austin, JJ., concur.