CASTILLO v. Western Heritage Insurance Company, third third-party defendant-appellant. (2016)

In an action to recover damages for personal injuries, etc., and a third third-party action, inter alia, for a judgment declaring that the third third-party defendant, Western Heritage Insurance Company, is obligated to defend and indemnify the second third-party defendant/third third-party plaintiff, King's Construction & Supplies, LLC, in the second third-party action, entitled Metal Stone Construction, Inc. v. King's Construction & Supplies, LLC, pending in the Supreme Court, Kings County, under Index No. 75831/12, the third third-party defendant, Western Heritage Insurance Company, appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Walker, J.), dated May 27, 2014, as denied that branch of its motion which was for summary judgment dismissing the third third-party complaint, and granted the cross motion of the second third-party defendant/third third-party plaintiff, King's Construction & Supplies, LLC, for summary judgment, in effect, declaring that it is obligated to defend and indemnify King's Construction & Supplies, LLC, in the second third-party action.

ORDERED that the order is affirmed insofar as appealed from, with costs to the second third-party defendant/third third-party plaintiff, King's Construction & Supplies, LLC, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the third third-party defendant, Western Heritage Insurance Company, is obligated to defend and indemnify the second third-party defendant/third third-party plaintiff, King's Construction & Supplies, LLC, in the second third-party action.

“In determining a dispute over insurance coverage, we first look to the language of the policy” (Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208, 221). Although the insurer has the burden of proving the applicability of an exclusion (see Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304, 311), it is the insured's burden to establish the existence of coverage (see Lavine v. Indemnity Ins. Co., 260 N.Y. 399, 410). Thus, “[where] the existence of coverage depends entirely on the applicability of [an] exception to the exclusion, the insured has the duty of demonstrating that it has been satisfied” (Borg–Warner Corp. v. Insurance Co. of N. Am., 174 A.D.2d 24, 31).

“[I]n construing an insurance policy, any ambiguities must be resolved in favor of the insured and against the insurer” (Kassapidis v. Maryland Cas. Co., 265 A.D.2d 379, 379; see White v. Continental Cas. Co., 9 NY3d 264, 267; Yeshiva Viznitz v. Church Mut. Ins. Co., 132 AD3d 853, 854). The “apartments” exception to the “Habitational Construction” exclusion in the subject policy is ambiguous as to whether there is coverage for the structure at issue. Since that ambiguity must be resolved in favor of the insured, the Supreme Court properly denied that branch of the motion of Western Heritage Insurance Company (hereinafter Western Heritage) which was for summary judgment dismissing the third third-party complaint, and granted the cross motion of King's Construction & Supplies, LLC (hereinafter King's Construction) for summary judgment declaring that Western Heritage was obligated to defend and indemnify it in the second third-party action.

Western Heritage's remaining contention is not properly before this Court, as it was raised for the first time in its reply papers (see Zarabi v. Movahedian, 136 AD3d 895; Leavy v. Merriam, 133 AD3d 636).

Since this is, in part, a declaratory judgment action, the matter must be remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that Western Heritage is obligated to defend and indemnify King's Construction in the second third-party action (see Lanza v. Wagner, 11 N.Y.2d 317, 334).