Jose Fidel Guaraca Quiroga, Plaintiff, v. ALLIED WORLD SURPLUS LINES INSURANCE COMPANY JOHN EVAN CONTRACTING CORP NCC CONTRACTING SERVICES CORP (2026)

The following papers efiled on NYSCEF were used on this motion: Doc Nos. 20-26, 31-32, 35-38.

Upon the foregoing papers, having heard oral argument, and due deliberation having been had, the within motion is determined as follows.

Background

On March 14, 2025, Third-Party Plaintiff 5706 Realty NY LLC ("5706 Realty") entered into a construction agreement with one of the third-party defendants, John Evan Contracting Corp. ("John Evan"), for a construction project at 5706 New Utrecht Avenue (the "Subject Premises"), owned by 5706 Realty (see NY St Cts Elec Filing [NYSCEF] Doc No. 22 ¶ 8). On June 20, 2025, John Evan entered into a subcontract agreement with NCC Contracting Services Corp. ("NCC") (see id. ¶ 10.) Third-Party Defendant Allied World Surplus Lines Insurance Company ("Allied World") issued a general liability insurance policy to 5706 Realty for the policy period from March 28, 2025 to March 28, 2026 (see id. ¶ 13).

Jose Fidel Guaraca Quiroga ("Plaintiff"), an employee allegedly working for NCC, claims to have sustained injuries while working at the Subject Premises and commenced a personal injury action against 5706 Realty to seek damages (see NYSCEF Doc No. 23). After Allied World denied 5706 Realty's request to indemnify it under the insurance policy — asserting that an "Action Over Exclusion" in the policy excluded coverage for bodily injury claims of any employee working on an insured's behalf — 5706 Realty then commenced a third-party action against Allied World to seek insurance coverage (declaratory judgment and breach of contract); the third-party action also alleged claims of contractual and common law indemnification, contribution, and failure to procure insurance against John Evan and NCC (see NYSCEF Doc No. 22).

Allied World now moves to sever the insurance coverage claims from the underlying personal injury action pursuant to CPLR 603 (see NYSCEF Doc No. 20).

Third Party-Defendant's Contentions

Allied World argued that it would be prejudicial if the insurance coverage claims are not severed from the personal injury action because "it is inherently prejudicial to insurers to have the issue of insurance coverage tried before the jury that considers the underlying liability claims, even where common questions of law and fact exist" (NYSCEF Doc No. 21 ¶ 15 [internal quotation marks omitted], quoting Hershfeld v JM Woodworth Risk Retention Group, Inc., 164 AD3d 1423, 1425 [2d Dept 2018], and citing Christensen v Weeks, 15 AD3d 330 [2d Dept 2005]; Schorr Bros. Dev. Corp. v Cont. Ins. Co., 174 AD2d 722 [2d Dept 1991]; Dreizen v Morris I. Stoler, Inc., 98 AD2d 759 [2d Dept 1983]; Schwartz v Jonathan Woodner & Co., 40 AD2d 1027 [2d Dept 1972]). Additionally, according to Allied World, trying two claims together is fundamentally prejudicial since they would have to spend additional resources in litigating the personal injury action, which has no bearing on the insurance coverage claims (see NYSCEF Doc No. 21 ¶ 20).

Allied World also argued that the insurance coverage issues are independent causes of action and does not share common questions of law or fact with the personal injury action (see id. ¶ 21). Citing to Federal Ins. Co. v Milestone Constr. Mgt. Serv., Inc. (2012 NY Slip Op 31876[U], *6 [Sup Ct, Nassau County 2012]), Allied World emphasized that the personal injury action is based on the element of negligence, whereas the insurance coverage claims are based on judicial construction of the insurance policy (see NYSCEF Doc No. 21 ¶ 21).

Third-Party Plaintiff's Opposition

5706 Realty contended that there are common questions of fact and law between the insurance coverage claims and the personal injury action because both actions require determinations concerning the work, responsibilities, oversight, employment, duties, and supervision over Plaintiff insofar as they relate to the proximate cause of his alleged injuries. According to 5706 Realty, this affects both the liability in the underlying personal injury action and the applicability of Allied World's insurance policy. Therefore, severance may result in inconsistent verdicts. (See NYSCEF Doc No. 31 ¶¶ 17-27.) In addition, 5706 Realty argued that even if trying the claims together would cause prejudice, Allied World failed to show that any prejudice could not be mitigated and avoided completely with proper jury instructions (see NYSCEF Doc No. 31 ¶¶ 28-36, citing Calle v 2118 Flatbush Ave. Realty, LLC, 209 AD3d 961 [2d Dept. 2022]; Sumi Chuang Yeh v Leonardo, 134 AD3d 695 [2d Dept. 2015]; Chiarello v Rio, 101 AD3d 793 [2d Dept 2012]). Furthermore, citing to Bahnken v Dance Soiree, Inc. (224 AD2d 567 [2d Dept 1996]), 5706 Realty also argued that the court could try the third-party action before the underlying personal injury action in order to determine the question of coverage (see NYSCEF Doc No. 31 ¶16).

Third-Party Defendant's Reply

Allied World argued that the insurance coverage claims share no common questions of law or fact with the personal injury action and present no risk of inconsistent verdicts because the claims involve "different contracts, different parties, and different factual issues" (NYSCEF Doc No. 36 at 3, quoting McGinty v Structure-Tone, 140 AD3d 465, 466 [1st Dept. 2016]). It contended that the personal injury action is about negligence, while the claims against NCC and John Evan are about contractual indemnification obligations, both of which are distinct from the insurance coverage claims (see NYSCEF Doc No. 36 at 3-4). Allied World further argued that the claims do not share common questions of fact just because there is a dispute over who is Plaintiff's employer. The precise identity of Plaintiff's employer is irrelevant because Allied World's insurance policy bars any coverage for an employer's liability regardless of who the exact employer is (see id. at 4-5.) Furthermore, there is no factual dispute over who is Plaintiff's employer, as Plaintiff alleged in the Complaint that NCC is his employer, and NCC never denied that in its answer (see id. at 5.)

Allied World contended that prejudice is presumed as a matter of law when the insurance claims are tried together with the main action (see id. at 6-7.) Quoting from Kelly v Yannotti, 4 NY2d 603, 607 [2d Dept 1958], Allied World argued that it is difficult for one to suppose that the third-party defendant here — an insurance company — would not be subjected to some prejudice if both the main and third-party action were to be tried before the same jury (see NYSCEF Doc No. 31 at 6-7.)

Besides, Allied World argued that the prejudice cannot be mitigated or avoided by proper jury instructions because the prejudice arises from the jury's knowledge that an insurance company is involved in the case (see id. at 7-9.) Allied World maintained that the cases cited by 5706 Realty are inapplicable to support the argument that proper jury instructions can mitigate or avoid the prejudice. According to Allied World, Calle v 2118 Flatbush Ave. Realty, LLC (209 AD3d 961 [2d Dept. 2022]) involved a property damage subrogation action brought by the insurer to recover the amount paid under the property owner's insurance policy rather than an insurance coverage claim against the insurer. Moreover, Allied World contended that Bahnken v Dance Soiree, Inc. (224 AD2d 567 [2d Dept 1996]) is also inapplicable because that case involved claims against an insurance agency for failure to procure insurance instead of insurance coverage claims against the insurer. (See NYSCEF Doc No. 36 at 7-8.)

Discussion

Under CPLR 603, "In furtherance of convenience or to avoid prejudice the court may order a severance of claims, or may order a separate trial of any claim, or of any separate issue." Severance is inappropriate when it would cause prejudice to a substantial right of the parties (see Dolce v Jones, 145 AD2d 594, 595 [2d Dept 1988]). At the same time, "it has long been recognized that it is inherently prejudicial to insurers to have the issue of insurance coverage tried before the jury that considers the underlying liability claims, even where common questions of law and fact exist" (Hershfeld, 164 AD3d at 1425; see Kelly, 4 NY2d at 607). Here, 5706 Realty is bringing the insurance coverage claims to the underlying personal injury action, and the jury who considers the personal injury action will also be considering the insurance coverage claims. Therefore, it would be prejudicial to Allied World if the insurance coverage claims are not severed from the underlying personal injury claims.

Moreover, "[s]everance is inappropriate where the claims against the defendants involve common factual and legal issues, and the interests of judicial economy and consistency of verdicts will be served by having a single trial." (New York Cent. Mut. Ins. Co. v McGee, 87 AD3d 622, 624 [2d Dept 2011]). Prejudice may be outweighed by the possibility of inconsistent verdicts if the actions were tried separately or when prejudice can be mitigated with the appropriate jury instructions (see Chiarello, 101 AD3d at 797; Sumi Chuang Yeh, 134 AD3d at 696; Hanover Ins. Group v Mezansky, 105 AD3d 1000, 1001 [2d Dept 2013]). Nevertheless, insurance coverage claims "have no relevance to the underlying liability action" (Smith v Waste Mgt. of New York, LLC, 2016 NY Slip Op. 32285[U], *4 [Sup Ct, Kings County 2016]; see McGinty, 140 AD3d at 466). Here, as Allied World pointed out, the insurance coverage claims primarily involve judicial construction of the insurance policy, while the underlying action will determine liability under the common law negligence theory. The question of who is Plaintiff's employer does not constitute a common question of fact either, because, under Allied World's insurance policy, the precise identity of Plaintiff's employer is irrelevant to the insurance coverage claims. Therefore, the claims do not share common questions of law or fact, and severance would not create a risk of inconsistent verdicts.

Conclusion

Accordingly, it is hereby ORDERED that the motion of Third-Party Defendant Allied World Surplus Lines Insurance Company to sever the third-party action as against it from the main action is GRANTED; and it is further

ORDERED that the caption of this action shall be amended to read as follows:

JOSE FIDEL GUARACA QUIROGA,

Plaintiff,

against

5706 REALTY NY LLC,

Defendant.

5706 REALTY NY LLC,

Third-Party Plaintiff,

against

JOHN EVAN CONTRACTING CORP. and NCC CONTRACTING SERVICES CORP.,

Third-Party Defendants.

Index No. 537992/2025

and it is further

ORDERED that within ten days of entry of this Order, Third-Party Defendant Allied World Surplus Lines Insurance Company shall serve a copy of this Order along with notice of entry on all other parties; and it is further

ORDERED that within ten days of entry of this Order, Third-Party Defendant Allied World Surplus Lines Insurance Company shall serve a copy of this Order along with notice of entry and the respective forms required by statute and regulation on the County Clerk to inform her of the amendment of the caption; and it is further

ORDERED that within 30 days of entry of this Order, Third-Party Plaintiff 5706 Realty NY LLC shall purchase a new index number under which they will preserve their third-party claims against severed Third-Party Defendant Allied World Surplus Lines Insurance Company; and it is further

ORDERED that upon receipt of this Order with notice of entry and the respective forms required by statute and regulation to provide notice of amendment of a caption, the County Clerk shall amend the caption of this matter to reflect the new caption set forth above.

FOOTNOTES

FOOTNOTE.  

Aaron D. Maslow, J.* FN* This Court acknowledges the assistance of Guannan (Cassie) Zhu, judicial intern and second year student at Brooklyn Law School, in the preparation of this decision.