ZURICH AMERICAN INSURANCE COMPANY v. Baroco Contracting Corp., Defendant. (2025)

Order, Supreme Court, New York County (Louis L. Nock, J.), entered December 15, 2023, which, to the extent appealed from as limited by the briefs, denied the motion of plaintiff Zurich American Insurance Company (Zurich) for summary judgment declaring that defendant Alterra America Insurance Company (Alterra) wrongfully denied excess coverage to RC Dolner, LLC (RC Dolner) and defendant Baroco Contracting Company (Baroco) with respect to an underlying action, declared that Alterra's obligation to provide additional insured coverage to RC Dolner is on an excess basis upon exhaustion of Zurich's policy, and granted Alterra's motion for summary judgment dismissing Zurich's second and fourth causes of action, unanimously affirmed, with costs.

The court properly declared that Alterra does not owe coverage to Baroco on the basis that Baroco did not enter a written contract with its subcontractor Fine Line Carpentry & Renovations Inc. (Fine Line) as required for coverage under Alterra's Insurance Requirement endorsement.  We reject Zurich's contention that Fine Line was not Baroco's subcontractor.  For these purposes we adopt the definition of “subcontractor” “as one who assumes performance of some part of the contract, so that labor or other service, and not merely the furnishing of materials, is involved” (A & J Buyers v. Johnson, Drake & Piper, 25 N.Y.2d 265, 271, 303 N.Y.S.2d 841, 250 N.E.2d 845 [1969]).  This definition is consistent with the “plain and ordinary meaning” of the word (Burlington Ins. Co. v. NYC Tr. Auth., 29 N.Y.3d 313, 321, 57 N.Y.S.3d 85, 79 N.E.3d 477 [2017] [internal quotation marks omitted]).  By furnishing labor, Fine Line performed a portion of Baroco's contract and therefore was Baroco's subcontractor.  We also reject Zurich's reliance on Labor Law § 861–c, which is concerned with classification of employees and would not be in line with the “reasonable expectations of a businessperson” (Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 383, 763 N.Y.S.2d 790, 795 N.E.2d 15 [2003]).

The court properly declared that Alterra's obligation to provide additional insured coverage to RC Dolner is on an excess basis upon exhaustion of Zurich's policy because of the horizontal exhaustion rule (see Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 855 N.Y.S.2d 459 [1st Dept. 2008]).  Zurich's argument that this issue is not ripe until a determination as to whether RC Dolner is entitled to contractual indemnification is unpersuasive.  Even if there is a subsequent finding that RC Dolner is entitled to indemnification from Baroco, the court still properly declared that Alterra's obligation is to provide additional insured coverage to RC Dolner on an excess basis upon exhaustion of Zurich's policy (see id. at 154–155, 855 N.Y.S.2d 459;  compare Scottsdale Ins. Co. v. Mt. Hawley Ins. Co., 213 A.D.3d 442, 183 N.Y.S.3d 83 [1st Dept. 2023], lv dismissed in part, denied in part, 41 N.Y.3d 932, 205 N.Y.S.3d 763, 229 N.E.3d 628 [2024] [horizontal exhaustion rule inapplicable where contractual indemnification entitlement has already been determined]).

We have considered Zurich's remaining contentions and find them unavailing.