| Dryden Mut. Ins. Co. v Goessl |
| 2014 NY Slip Op 03363 [117 AD3d 1512] |
| May 9, 2014 |
| Appellate Division, Fourth Department |
[*1]
| Dryden Mutual Insurance Company, Respondent, vStanley Goessl et al., Defendants, and AP Daino & Plumbing, Inc., et al.,Appellants. |
Kenney Shelton Liptak Nowak LLP, Buffalo (Jesse J. Cooke of counsel), fordefendants-appellants.
Knych & Whritenour, LLC, Syracuse (Peter W. Knych of counsel), forplaintiff-respondent.
Appeal from a judgment (denominated order and judgment) of the Supreme Court,Oswego County (James W. McCarthy, J.), entered October 29, 2012 in a declaratoryjudgment action. The judgment, among other things, declared that plaintiff has no duty todefend or indemnify defendant Stanley Goessl.
It is hereby ordered that the judgment so appealed from is reversed on the lawwithout costs and judgment is granted as follows:
It is Adjudged and declared that plaintiff is obligated to defend and indemnifydefendant Stanley Goessl in the underlying action, and that plaintiff is obligated toreimburse defendant Stanley Goessl for the reasonable attorneys' fees and expenses heincurred in defending the underlying action, and
It is further adjudged and declared that defendant The Main Street America Group isnot obligated to defend or indemnify defendant Stanley Goessl in the underlyingaction.
Memorandum: Plaintiff, Dryden Mutual Insurance Company, commenced this actionseeking a declaration that it is not obligated to defend or indemnify defendant StanleyGoessl in the underlying tort action pursuant to a business general liability insurancepolicy (hereafter, Dryden policy) that it issued to Goessl, who was doing business asS&K Plumbing. The underlying action arose from a fire at a residence that occurredwhile Goessl was engaged in plumbing work there. Plaintiff disclaimed coverage on thegrounds that, inter alia, Goessl was an employee of defendant AP Daino &Plumbing, Inc. (AP Daino) and was acting within the scope of his employment at thetime of the fire. AP Daino was insured by defendant The Main Street America Group(MSA) under a "contractors policy" (MSA policy). MSA disclaimed coverage on theground that Goessl was not an employee of AP Daino at the time of the fire and thereforewas not an "insured" within the meaning of the MSA policy. After a bench trial, SupremeCourt issued a judgment declaring that plaintiff had no duty to defend or indemnifyGoessl in the underlying action and that MSA had a duty to "defend and potentiallyindemnify" Goessl in that action. In addition, the court ordered MSA to reimburseplaintiff and Goessl for costs they had incurred relative to Goessl's defense in theunderlying action. We conclude that the court erred, and instead conclude, inter alia, thatplaintiff must indemnify Goessl in the underlying action while MSA has no suchduty.
It is well settled that, "[o]n appeal from a judgment following a bench trial, thisCourt may independently consider the probative weight of the evidence and theinferences that may be drawn therefrom, and grant the judgment that we deem the factswarrant" (Blakesley v State of New York, 289 AD2d 979, 979 [2001], lvdenied 98 NY2d 605 [2002]; see Crane-Hogan Structural Sys., Inc. v State of New York, 88AD3d 1258, 1260 [2011]). "In determining a dispute over insurance coverage, wefirst look to the language of the policy" (Consolidated Edison Co. of N.Y. v AllstateIns. Co., 98 NY2d 208, 221 [2002]; see Fieldston Prop. Owners Assn., Inc. v Hermitage Ins. Co.,Inc., 16 NY3d 257, 264 [2011]). "As with any contract, unambiguous provisionsof an insurance contract must be given their plain and ordinary meaning . . ., and the interpretation of such provisions is a question of law for the court" (White v Continental Cas. Co.,9 NY3d 264, 267 [2007]). "If the plain language of the policy is determinative, wecannot rewrite the agreement by disregarding that language" (Fieldston Prop. OwnersAssn., Inc., 16 NY3d at 264; see White, 9 NY3d at 267). "Unless otherwisedefined by the policy, words and phrases are to be understood in their plain, ordinary,and popularly understood sense, rather than in a forced or technical sense" (HartfordIns. Co. of Midwest v Halt, 223 AD2d 204, 212 [1996], lv denied 89 NY2d813 [1997]; see Rocon Mfg. v Ferraro, 199 AD2d 999, 999 [1993]). Thus, "[t]hemeaning of the language used in the policy must be found in the common sense andcommon speech of the average person" (Stainless, Inc. v Employers Fire Ins. Co.,69 AD2d 27, 32-33 [1979], affd 49 NY2d 924 [1980]; see Canfield v PeerlessIns. Co., 262 AD2d 934, 934 [1999], lv denied 94 NY2d 757 [1999]).
Here, we conclude that the Dryden policy unambiguously provides coverage forGoessl in the underlying action. The Dryden policy states that, "if the namedinsured is an individual, both the individual and his/her spouse areinsureds but only with respect to the conduct of abusiness of which he/she is the sole proprietor." "Business" is broadlydefined in the Dryden policy as "a trade, profession, or other occupation, includingfarming, all whether full or part time." The record in this case establishes that Goessl wasthe sole proprietor of S&K Plumbing and that, at the time of the fire, he wasengaged in the conduct of his "trade, profession, or other occupation" as a plumbingsubcontractor for AP Daino. Because the injury in the underlying action allegedly aroseout of the conduct of Goessl's plumbing business, plaintiff is obligated to defend andindemnify him in the underlying action (see Cataract Sports & Entertainment Group, LLC v Essex Ins.Co., 59 AD3d 1083, 1084 [2009]).
We reach the contrary conclusion with respect to the MSA policy. That policyprovides that AP Daino's "employees" are insureds for acts committed "within the scopeof their employment by [AP Daino] or while performing duties related to the conduct of[its] business." The term "employee" is not defined in the MSA policy, and shouldtherefore be given its plain or ordinary meaning (see Curry v Atlantic Mut. Ins.Co., 283 AD2d 937, 938 [2001], lv denied 96 NY2d 721 [2001]). Where, ashere, the dispute involves a business insurance policy, "[a]n important guidepost wheninterpreting [such] a . . . policy is to examine the reasonable expectation andpurpose of the ordinary business [person] when making an ordinary business contract"(Baughman v Merchants Mut. Ins. Co., 87 NY2d 589, 593 [1996] [internalquotation marks omitted]; see Moshiko, Inc. v Seiger & Smith, 137 AD2d170, 176 [1988], affd 72 NY2d 945 [1988]). Here, the record establishes that APDaino and Goessl intentionally structured their business relationship as a long-termsubcontracting arrangement rather than an employment relationship. AP Daino did notprovide Goessl with health insurance or other employee benefits, and did not withholdtaxes or pay social security or unemployment taxes on his behalf. Goessl determined hisown hourly rate, submitted invoices to AP Daino on behalf of S&K Plumbing, andreceived a Form 1099-MISC, for miscellaneous income, as opposed to a W-2 wagestatement. At AP Daino's request, Goessl obtained his own liability coverage, which isfurther evidence that neither party considered Goessl to be an "employee" under theMSA policy.
Although it is undisputed that Goessl was an insured under AP Daino's workers'compensation policy, the record indicates that the workers' compensation carrier requiredAP Daino to include uninsured subcontractors on its policy, and Goessl was listed as anuninsured subcontractor, not as an employee, on the policy. AP Daino initially askedGoessl to obtain his own workers' compensation policy, but Goessl was advised by hisinsurance carrier that he did not need such coverage because he was an independentcontractor. Further, we conclude that the fact that AP Daino's owner, a master plumber,signed Goessl's journeyman's card as his "employer" and paid the required fee isinsufficient to render Goessl an "employee" under the MSA policy. Goessl testifiedwithout contradiction that a master plumber is permitted to sign for a subcontractor orindependent contractor.
Inasmuch as the record establishes that AP Daino and Goessl intentionally enteredinto a business arrangement whereby Goessl was an independent contractor rather thanan employee, we conclude, upon our independent review of the record (see generallyBlakesley, 289 AD2d at 979), that neither AP Daino nor Goessl expected that Goesslwould be considered an "employee" under the MSA policy (see generallyBaughman, 87 NY2d at 594). We thus conclude that Goessl is not insured under theMSA policy and, therefore, that MSA has no duty to defend or indemnify him in theunderlying action (see generallyFarm Family Cas. Ins. Co. v Nason, 89 AD3d 1401, 1402 [2011]).
All concur except Sconiers, J., who dissents and votes to affirm in the followingmemorandum: I respectfully dissent because I conclude that Supreme Court properlydetermined, after conducting a nonjury trial, that defendant Stanley Goessl was anemployee of defendant AP Daino & Plumbing, Inc. (AP Daino) and that defendantThe Main Street America Group, which insured AP Daino, is obligated to "defend andpotentially indemnify" Goessl in the underlying tort action arising from a fire at theresidence of a customer of AP Daino. While it is a closer question, I also conclude thatthe court properly declared that plaintiff is not obligated to defend and indemnify Goessl,whom plaintiff insured as the sole proprietor of S&K Plumbing, in the underlyingaction.
It is well settled that, "[o]n an appeal from a judgment rendered after a nonjury trial,our scope of review is as broad as that of the trial court (see Matter of Capizola v VantageIntl., 2 AD3d 843, 844 [2003]). Upon such a review, the record should be'viewed in the light most favorable to sustain the judgment' (Farace v State of NewYork, 266 AD2d 870, 871 [1999]; see Parone v Rivers, 84 AD2d 686[1981]), and this Court should evaluate 'the weight of the evidence presented and grantjudgment warranted by the record, giving due deference to the trial court's determinationsregarding witness credibility, so long as those findings could have been reached upon afair interpretation of the evidence' (New York Tel. Co. v Harrison & Burrowes Bridge Contrs.,3 AD3d 606, 608 [2004] [internal quotation marks and citations omitted]). '[T]hedecision of the fact-finding court should not be disturbed upon appeal unless it isobvious that the court's conclusions could not be reached under any fair interpretation ofthe evidence, especially when the findings of fact rest in large measure on considerationsrelating to the credibility of witnesses' (Thoreson v Penthouse Intl., 80 NY2d490, 495 [1992] [internal quotation marks omitted], rearg denied 81 NY2d 835[1993])" (Matter of City ofSyracuse Indus. Dev. Agency [Alterm, Inc.], 20 AD3d 168, 170 [2005]).
In my view, the court properly considered and gave appropriate weight to theevidence in determining that Goessl was an employee of AP Daino. Specifically, on theday of the fire, Goessl went to AP Daino's Central Square office, picked up a van, anddrove his crew of AP Daino employees to the designated work site; Goessl previouslywas employed by AP Daino before being approached about working for AP Daino as an"independent contractor"; Goessl was paid on an hourly basis; Goessl performed thesame type of work as other AP Daino employees; Goessl introduced himself to customersas "Stan from AP Daino"; and, in all respects, AP Daino directed the work, told Goesslwhere to go, and told him what to do. Also, Goessl worked 40 hours per week as aplumber for AP Daino and used AP Daino tools for that work. Notably, the underlyingloss occurred in 2009 and, in 2010, Labor Law § 861-c was enacted andWorkers' Compensation Law § 2 was amended precisely because"unscrupulous employers [were] intentionally reporting employees as independentcontractors to state and federal authorities or workers' compensation carriers in recordnumbers" (NY Bill Jacket, 2010 S.B. 5847, ch 418 at 9). Moreover, Goessl's designationas an independent contractor by AP Daino for income tax reporting purposes wasimproper (see Betty Wang, IRS Cracking Down on 'IndependentContractors',http://blogs.findlaw.com/free_enterprise/2013/07/irs-cracking-down-on-independent-contractors.html, July 31, 2013 [accessed Apr. 23, 2014]; see also Robert W. Wood,IRS Inspector Urges Crackdown On Mislabeling 'Independent Contractors',http://www.forbes.com/sites/robertwood/2013/07/30/irs-inspector-urges-crackdown-on-mislabeling-independent-contractors/, July 30, 2013 [accessed Apr. 23, 2014]). As aresult, I respectfully submit that the majority's rejection of the court's factual finding thatGoessl was an employee of AP Daino is not only contrary to the well-settled standardthat we apply when reviewing nonjury verdicts, but it is also contrary to theoverwhelming evidence presented at trial and the strong public policy that militatesagainst the improper and unscrupulous classification of employees as independentcontractors.
With respect to the insurance policy that plaintiff issued to Goessl, I conclude thatthe language of that policy is not ambiguous and that Goessl was not "conduct[ing]. . . a business of which he[ ] is the sole proprietor" when he wasworking as an employee of AP Daino (emphasis added). Notably, plaintiff insuredGoessl as the sole proprietor of a plumbing business with no employees, and Goesslundoubtedly reported his business revenue, which would be used for underwritingpurposes, only insofar as such revenue included payments for work performed for APDaino, as well as the payments for the small amount of work he performed for his owncustomers. At trial, Goessl described working on crews with one, two or possibly moreAP Daino employees under circumstances where he sometimes supervised an apprenticeplumber and where he, based on his experience, was the de facto foreman when workingwith other AP Daino employees. If the majority's analysis is correct, Goessl would bepotentially liable not only for his own negligence, but also for the negligence of APDaino employees working on the same crew, thereby creating greater liability exposurefor plaintiff than plaintiff knowingly contracted for. While I see no merit to plaintiff'sposition that it had a right to disclaim coverage based on Goessl's willfulmisrepresentation, I conclude that plaintiff had a right to disclaim coverage because itexpressly insured a one-person plumbing business, not a plumber who was employed bya much larger plumbing business. Present—Scudder, P.J., Fahey, Peradotto,Lindley and Sconiers, JJ.