Motion for Child Support in Zurich American Insurance Company v. First Specialty Insurance Corporation, Western Beef Retail, Inc., Western Beef Properties, Inc.| Trellis.Law

On May 11, 2018 a Motion-Secondary was filed involving a dispute between Zurich American Insurance Company, and First Specialty Insurance Corporation, Western Beef Properties, Inc., Western Beef Retail, Inc., for Commercial - Insurance in the District Court of New York County.

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
---------------------------------------------------------------X
ZURICH AMERICAN INSURANCE COMPANY,
Index No.: 652336/2018
Plaintiff,

-against-

FIRST SPECIALTY INSURANCE CORPORATION,
WESTERN BEEF RETAIL, INC. and WESTERN
BEEF PROPERTIES, INC.,

Defendants.
----------------------------------------------------------------X

ZURICH AMERICAN INSURANCE COMPANY’S MEMORANDUM
OF LAW IN REPLY AND OPPOSITION

Gabriel Darwick, Esq.
Ross Toback, Esq.
Coughlin Midlige & Garland LLP
Wall Street Plaza
88 Pine Street, 28th Floor
New York, New York 10005
(212) 483-0105
Attorneys for Plaintiff,
Zurich American Insurance Company

Of Counsel:

Gabriel E. Darwick, Esq.
Ross Toback, Esq.

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TABLE OF CONTENTS

TABLE OF AUTHORITIES......................................................................................ii, iii

INTRODUCTION………………………………………..………………………….….1

PRELIMINARY
STATEMENT...................................................................................................................1

ARGUMENT……….……..…………………………………………….……................3

I. WESTERN BEEF IS EQUITABLY ESTOPPED
FROM DISCLAIMING A DUTY TO DEFEND
AND INDEMNIFY SEROTA…………………………..………….…...3

A. Equitable Estoppel Applies To Western Beef’s
Misconduct In The Same Fashion It Applies
Any Wrongdoer…….………………………….……………..…..….3

B. Western Beef’s Disclaimer on the First Day
of Trial is Prejudicial ………………………….……………..…..….3

II. BESTERN BEEF HAD A DUTY TO DEFEND
AND INDEMNIFY SEROTA AS AN ADDITIONAL
INSURED UP TO ITS $450,000 SIR……………………..……….…...10

CONCLUSION………………………………………………………………....…........14

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TABLE OF AUTHORITIES

Page(s)

Cases

1515 Broadway Fee Owner, LLC v. Seneca Ins. Co., Inc.,
90 A.D.3d 436 (1st Dep’t 2011) ..................................................................................11, 12, 13

American Transit Ins. Co. v. Mendon Leasing Corp.,
241 A.D.2d 436 (1st Dep’t 1997) ..............................................................................................6

Boston Old Colony Ins. Co. v. Lumbermens Mut. Cas. Co.,
889 F.2d 1245 (2d Cir. 1989).....................................................................................................8

Brandon v. Nationwide Mut. Ins. Co.,
97 N.Y.2d 491 (2002) ................................................................................................................7

Christ the King Regional High School v. Zurich Ins. Co. of Am.,
91 A.D.3d 806 (2d Dep’t 2012) ...............................................................................................13

Continental Cas. Ins. Co. v. Employer’s Ins. Co. of Wausau,
60 A.D.3d, 128, 134, 136-137 (1st Dep’t 2008) (“CNA”) ........................................................7

Fireman’s Fund Ins. Co. v. Zurich Am. Ins. Co.,
37 A.D.3d 521 (2d Dep’t 2007) .................................................................................................8

General Stencils, Inc. v. Chiappa,
18 N.Y.2d 125 (1996) ................................................................................................................3

Indemnity Ins. Co. of N. Am. v. Charter Oaks Ins. Co.,
235 A.D.2d 521 (2d Dep’t 1997) ...............................................................................................8

Jean Maby H. v. Joseph H.,
246 A.D.2d 282 (2d Dep’t 1998) ...............................................................................................3

Jenet Mgt. Corp. v. Pacific Ins. Co.,
55 A.D.3d 313 (1st Dep’t 2008) ..............................................................................................11

Kamco Supply Corp. v. On the Right Track, LLC,
149 A.D.3d 275 (2d Dep’t 2017) ...............................................................................................3

Liberty Ins. Underwriters, Inc. v. Arch Ins. Co.,
61 A.D.3d 482 (1st Dep’t 2009) ............................................................................................6, 8

Merchants Mut. Ins. Group v. Travelers Ins. Co.,
24 A.D.3d 1179 (4th Dep’t 2005) ..............................................................................................8

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New York Convention Center Operating Corp. v. Morris Cerullo World
Evangelism, Inc.,
269 A.D.2d 275 (1s Dep’t 2000) .............................................................................................11

Paramount Ins. Co. v. Federal Ins. Co.,
174 A.D.3d 476 (1st Dep’t 2019) ........................................................................................2, 11

Public Serv. Mut. Ins. Co. v. Nova Cas. CO.,
177 A.D.3d 472 (1st Dep’t 2019) ..................................................................................2, 11, 12

Serio v. United States Fire Insurance Co.,
41 A.D.3d 459 (2d Dep’t 2007) .................................................................................................5

Matter of Shondel J. v. Mark D.,
7 N.Y.3d 320 (2005) ..................................................................................................................3

Taft v. Equitable Life Assur. Soc. Of U.S.,
173 A.D.2d 267 (1st Dep’t 1991) ..............................................................................................5

Temple Beth Sholom, Inc. v. Commerce & Indus. Ins.,
2018 NY Slip Op. 32158(U) (Sup. Ct., New York Cty. 2018) aff’d 173
A.D.3d 637 (1st Dep’t 2019) ...........................................................................................1, 6, 10

Tower Ins. Co. of N.Y. v. Leading Ins. Group Ins. Co., Ltd,
134 A.D.3d 510 (1st Dep’t 2015) ............................................................................................11

Town Plaza of Poughquag, LLC v. Hartford Ins. Co.,
175 F.Supp.3d 93 (S.D.N.Y. 2016) .........................................................................................13

Velasquez v. GAB Robins N. Am., Inc.,
17 Misc.3d 1134(A) (Sup. Ct. Queens Cty. 2007) aff’d 56 A.D.3d 662 (2d
Dep’t 2008) ................................................................................................................................5

Wesco Ins. Co. v. Travelers Prop. Cas. Co. of America,
188 A.D.3d 476 (1st Dep’t 2020) ............................................................................................11

Yoda, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA,
88 A.D.3d 506 (1st Dep’t 2011) ............................................................................................6, 9

ZKZ Assoc. LP v. CAN Ins. Co,
89 N.Y.2d 990 (1997) ..........................................................................................................2, 11

ZKZ Associates LP v. CNA Ins. Co.,
224 A.D.2d 174 (1st Dep’t 1996) aff’d 89 N.Y.2d 990 (1997) ...............................................11

iii

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INTRODUCTION

Zurich American Insurance Company (“Zurich”) submits this memorandum of law in

opposition to the cross-motion for summary judgment by Defendants Western Beef Retail, Inc.

and Western Beef Properties, Inc. (collectively, “Western Beef”) and in further support of its

motion for summary judgment against Western Beef.

PRELIMINARY STATEMENT

Western Beef paints itself as a modern-day David to Zurich’s Goliath. As a mere

supermarket operator, Western Beef argues it is exempt from the law -- it simply cannot be held

liable under the common law principle of equitable estoppel for mishandling the Garrett Action.

But whether Western Beef is a sophisticated corporation1 or a small-time grocer is immaterial to

whether the law applies to it.2 Under principles of equitable estoppel, Western Beef can and must

be held accountable.

Western Beef had every opportunity to issue a reservation of rights letter to Serota or to

bring its concerns about liability to Serota’s attention before discovery was completed, after the

failed mediation, after the two adjourned trial dates, or before the first day of trial. Instead, Western

Beef defended Serota until the day of trial, abandoned it based on a defense it knew of from the

outset, and did so in violation of New York’s rule prohibiting the withdrawal of counsel without a

declaration of no coverage. Under similar, though far less egregious, circumstances, this Court has

applied equitable estoppel to prohibit an insurer in Western Beef’s position from disclaiming

defense and indemnity. See Temple Beth Sholom, Inc. v. Commerce & Indus. Ins., 2018 NY Slip

1
Western Beef is no lowly supermarket. Western Beef has twenty locations across New York and Florida, it has its
own real estate and legal departments, a dedicated claim administrator, and the financial wherewithal to pay a
$450,000 self-insured retention for occurrence. See Affirmation of Gabriel Darwick in Support of Zurich’s Motion for
Summary Judgment (“Darwick Aff.”), Ex. 8, Lohay Deposition, pg. 15; Western Beef - Locations.
2
Similarly, Western Beef irrelevantly asserts that because it agreed in its lease to pay a percentage of the premium for
all policies Serota purchased (not simply the Zurich policy), it is somehow inequitable for Western Beef to be held
accountable for its misdeeds.
1

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Op. 32158(U) (Sup. Ct., New York Cty. 2018) aff’d 173 A.D.3d 637 (1st Dep’t 2019). It should

do the same here.

To avoid satisfying its obligation to provide additional insured coverage to Serota within

its $450,000 self-insured retention, Western Beef once more rejects the law. It asserts that because

the accident did not happen within the demised premises, the accident did not arise from Western

Beef’s use of the demised premises. “[T]he finding in the underlying personal injury action that

the accident did not occur in the demised premises is not dispositive of the coverage issues.”

Paramount Ins. Co. v. Federal Ins. Co., 174 A.D.3d 476, 477 (1st Dep’t 2019). Rather, as the

myriad decisions cited in Zurich’s opening memorandum state and which Western Beef mostly

ignores, an accident will arise out of the “use” of the leased premises where “the accident occurred

in the course of an activity incidental to the operation of the space and an in area of the premises

that was used for access in and out of the leased space covered under the policy.” Public Serv.

Mut. Ins. Co. v. Nova Cas. CO., 177 A.D.3d 472, 473 (1st Dep’t 2019). Accidents occurring on

the sidewalk outside the demised premises therefore trigger coverage. ZKZ Assoc. LP v. CAN Ins.

Co, 89 N.Y.2d 990, 991 (1997).

Next, Western Beef draws a distinction without a difference. It claims that Garrett was not

seeking to enter the Western Beef supermarket at the time of the accident; rather, he shifted from

that path to greet a security guard next to the Western Beef. Even if there was factual support for

this assertion, which there is not, it would not change the outcome. It is undisputed that Garrett

went to Western Beef’s store to buy ice and he was traversing the sidewalk adjacent to the Western

Beef because he intended to enter the store. His presence on the sidewalk was therefore incidental

to the operation of the Western Beef and the sidewalk was being used for access to the store. Thus,

the accident arose out of Western Beef’s “use” of the demised premises.

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In summary, the Court should grant summary judgment to Zurich on two separate grounds:

(1) equitable estoppel; and (2) additional insured coverage. Summary judgment on either ground

requires Western Beef to reimburse Zurich the defense and indemnity costs it incurred, plus

interest at 9% per annum running from the date of payment.

ARGUMENT

I. WESTERN BEEF IS EQUITABLY ESTOPPED FROM DISCLAIMING A DUTY
TO DEFEND AND INDEMNIFY SEROTA

A. Equitable Estoppel Applies To Western Beef’s Misconduct In The Same
Fashion It Applies Any Wrongdoer

Western Beef argues it is exempt from equitable estoppel rules because it is not an

insurance company and did not have a contractual obligation to issue a disclaimer. See WB Memo

of Law, pg. 11. Western Beef supports these positions with no law, no rationale, and no language

from the First Specialty Policy. Equitable estoppel applies to any wrongdoer and in particular

Western Beef, who agreed to properly administer the claim within its self-insured retention and

initially defend Serota.

“The purpose of equitable estoppel is to preclude a person from asserting a right after

having led another to form the reasonable belief that the right would not be asserted, and loss or

prejudice to the other would result if the right were asserted.” Matter of Shondel J. v. Mark D., 7

N.Y.3d 320, 326 (2005). Equitable estoppel has been applied in various contexts beyond insurer-

insured disputes. See, e.g., General Stencils, Inc. v. Chiappa, 18 N.Y.2d 125 (1996) (applying

equitable estoppel to preclude use of a statute of limitations defense); Kamco Supply Corp. v. On

the Right Track, LLC, 149 A.D.3d 275 (2d Dep’t 2017) (applying equitable estoppel to preclude

a party from invoking the benefit of a no-oral waiver provision in a contract); Jean Maby H. v.

Joseph H., 246 A.D.2d 282, 284 (2d Dep’t 1998) (applying equitable estoppel to challenges

involving paternity).
3

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For insurers that assumed a defense of an insured without a reservation of rights, New York

courts apply a particular framework to analyze prejudice. Applying that framework to Western

Beef is more than fitting from an equitable perspective and based on the terms of the First Specialty

Policy. Western Beef was self-insured for covered losses up to $450,000. Via its self-insured

retention (“SIR”) endorsement, Western Beef agreed to “pay all damages and ‘defense costs’

arising out of each ‘occurrence’…until you have paid a total of ‘self-insured retention’ amounts

and ‘defense costs’…” See Darwick Aff., Exhibit 2, First Specialty Policy, FS000143.

Western Beef also agreed to adjust claims with the SIR with the help of an experienced

claims administrator. Under “Authorized Claims Administrator”, Western Beef agreed to

employ an administrator to adjust claims within the SIR and that “You (Western Beef) and the

‘administrator’ will comply with all applicable statutes, fair claim practice regulations, and

licensing requirements…” Id. at FS000145. Western Beef retained Broadspire to satisfy this

obligation. See Darwick Aff., Exhibit 8, Lohay Deposition, pg. 28.

But instead of utilizing Broadspire’s expertise, Western Beef excluded Broadspire from

the claim handling process and created the very situation that led to this litigation. Id. at pgs. 29-

30. In adjusting the claim on its own, Western Beef made a decision that insurers commonly make

– whether to defend an additional insured or contractual indemnitee. Thereafter, Western Beef

indisputably controlled Serota’s defense without a reservation of rights from inception, through

discovery, through a failed mediation, through two adjournments of trial, and until the first day of

trial. Throughout, Western Beef knew of the defense it would ultimately raise to providing

indemnity – that Serota, not Western Beef, was liable for the sidewalk defect.

Because it was contractually obligated to adjust and pay the claim, Western Beef took on

the role that its insurer would otherwise have been obligated to take. Under these circumstances,

applying the same equitable estoppel framework to Western Beef that is used evaluate whether an
4

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insurance company should be equitably estopped from disclaiming coverage is more than

appropriate. Meanwhile, Western Beef suggests no other framework, just an exemption from

liability.

Next, Western Beef argues that equitable estoppel cannot be used to create coverage where

it “never issued a policy of insurance.” See WB Memo of Law, pg. 12. Western Beef misses the

point, perhaps deliberately. Pursuant to its SIR endorsement, Western Beef agreed to pay a covered

loss up to $450,000. To argue as it has that it did not issue the policy is technically correct while

substantively wrong and unsupported by the cases Western Beef relies on.

For example, in Velasquez v. GAB Robins N. Am., Inc., 17 Misc.3d 1134(A) (Sup. Ct.

Queens Cty. 2007) aff’d 56 A.D.3d 662 (2d Dep’t 2008), the court declined to apply equitable

estoppel to force a third-party administrator, GAB Robins North American (“GAB”), to satisfy an

unsatisfied judgment, based on its misrepresentations relating to the coverage offered by Reliance

Insurance Company. In reaching this conclusion, the court distinguished Serio v. United States

Fire Insurance Co., 41 A.D.3d 459 (2d Dep’t 2007), a case in which the court equitably estopped

a non-insurer who stepped into the shoes of an insurance company from belatedly disclaiming

coverage. The Velasquez court reasoned that unlike the non-insurer in Serio, the insured had no

right to coverage against GAB because GAB did not step into the shoes of the insurance company

or was not functioning similar to the insurer. Id. at *8-9.

Velasquez may be apropos if Zurich’s equitable estoppel claim was against Broadspire,

Western Beef’s third-party administrator. But instead, Zurich is pursuing the claim against the

entity that stepped into the insurer’s role, just like in Serio. 3

3
Taft v. Equitable Life Assur. Soc. Of U.S., 173 A.D.2d 267 (1st Dep’t 1991) is also inapposite. In Taft, the decedent’s
representative sought to apply equitable estoppel to force a life insurance policy to cover the decedent’s death
notwithstanding that the policy had never been issued and no premium had been paid before the decedent’s death.
5

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Western Beef’s third argument, made at different points throughout its papers, is that it

cannot be equitably estopped from disclaiming defense and indemnity to Serota because Zurich

never “tendered or otherwise made any insurance claim for Serota as an additional insured under

the First Specialty policy.” See WB Memo of Law, pg. 12. Once more, Western Beef supports its

position with no applicable law or intelligible rationale.

Whether Zurich tendered to Western Beef is irrelevant to equitable estoppel. The question

is simply whether Serota and Zurich were prejudiced by Western Beef’s failure to issue a

reservation of rights letter advising Serota or Zurich of any limitations on Serota’s defense and

indemnity in the Garrett Action, after Western Beef volunteered to defend Serota and controlled

Serota’s defense until the first day of trial. See Temple Beth Sholom, 173 A.D.3d 637; Liberty Ins.

Underwriters, Inc. v. Arch Ins. Co., 61 A.D.3d 482, 482 (1st Dep’t 2009). Of course, Serota and

Zurich were prejudiced.

Western Beef chose to defend Serota without issuing a reservation of rights. Western Beef

defended Serota for the next eighteen months. Western Beef determined the litigation strategy,

participated in a failed mediation, adjourned the trial date twice, made a settlement offer at trial of

$20,000 – below the amount rejected at mediation – in order to secure a third adjournment of the

trial, and then on the first day of trial it abandoned Serota based on a defense it knew of from the

outset. Under similar, though less egregious circumstances, courts have regularly held that the

insured in Serota’s position was prejudiced. See, e.g., Temple Beth Sholom, 173 A.D.3d 637;

Yoda, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 88 A.D.3d 506, 508 (1st Dep’t

2011); Liberty, 61 A.D.3d at 482; American Transit Ins. Co. v. Mendon Leasing Corp., 241 A.D.2d

436, 437 (1st Dep’t 1997).

Western Beef’s failure to tender argument is not only a side show, the argument mixes

apples and oranges. By claiming that Zurich and Serota “had an independent duty to notify First
6

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Specialty (or Western Beef) that it was asserting a claim for coverage for Serota as an additional

insured,” See WB Memo at pg. 13, Western Beef is attempting to incorporate late notice law into

the equitable estoppel analysis when they are entirely distinct concepts. Continental Cas. Ins. Co.

v. Employer’s Ins. Co. of Wausau, 60 A.D.3d, 128, 134, 136-137 (1st Dep’t 2008) (“CNA”)

illustrates this point.

Western Beef has not argued that Serota or Zurich breached the notice condition in the

First Specialty Policy. This is for good reason. Western Beef could not seriously argue that Zurich

and Serota breached the notice condition by failing to tender to Western Beef after Western Beef

had already agreed to defend Serota without a reservation of rights. As First Specialty’s claim

handler sensibly explained, “I don’t think a tender letter was necessary” because “[t]hey (Serota)

were being defended.” See Affirmation of Gabriel Darwick in Opposition (“Darwick Aff. Opp.”),

Exhibit 34, Gallup Deposition, pgs. 90, 107. The purpose of the notice condition – and thus a

tender – is to give the insurer/self-insured prompt notice to enable it to investigate and curb fraud.

See Brandon v. Nationwide Mut. Ins. Co., 97 N.Y.2d 491, 496 (2002). Western Beef does not, and

cannot, assert that Zurich’s failure to tender a suit Western Beef was already defending prevented

it from fulfilling these policy goals.4

In summary, the doctrine of equitable estoppel applies to Western Beef, a self-insured who

was financially responsible for the first $450,000 of any covered loss, who contractually agreed to

adjust the claim, who in adjusting the claim agreed to assume Serota’s defense without any

reservation of rights, and who egregiously mishandled Serota’s defense.

4
At points, Western Beef also seeks to fault Serota and Zurich for assuming that Western Beef had agreed to indemnify
Serota. While irrelevant to the analysis of the equitable estoppel claim, Western Beef’s discussion is factually
misleading. Western Beef asserts “Zurich’s claims examiner has admitted” it was a “mistake” to assume that Western
Beef agreed to indemnify Serota. See WB Memo of Law, pg. 8. Mr. Gibson, the Zurich claim handler, testified that
given what transpired, i.e., Western Beef abandoning Serota at trial, he was mistaken to assume that Western Beef
had so agreed. See Darwick Aff., Exhibit 33, Gibson Deposition, pg. 130.
7

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B. Western Beef’s Disclaimer on the First Day of Trial is Prejudicial

Instead of addressing the myriad decisions on pages 14-15 of Zurich’s opening

memorandum establishing that a disclaimer on the first day of trial is prejudicial as a matter of law

or the testimony of Mr. Cassidy or Mr. Brown providing factual support for Zurich’s prejudice

claim, Western Beef buries its head in the sand and offers unsupported, scattershot arguments to

claim that issues of fact exist as to whether Serota and Zurich were prejudiced by its handling of

the defense.

First, Western Beef claims that Serota has not suffered any damages due to Western Beef’s

actions because Zurich paid the judgment. Then Western Beef argues that Zurich can have “no

independent claim of equitable estoppel against Western Beef when it had a preexisting contractual

obligation to defend and indemnity Serota in the Garrett lawsuit.” See WB Memo of Law, pg. 14.

The logical conclusion of Western Beef’s argument is that equitable estoppel is limited to claims

between insurers and insureds.

The First Department “reject[ed] the argument that this doctrine (equitable estoppel) should

be limited to coverage disputes between insurers and insureds, and not applied to coverage

allocation disputes between insurers.” Liberty, 61 A.D.3d 482 (1st Dep’t 2009). In so ruling, the

Liberty court rejected the notion that equitable estoppel applies only where the insured suffers an

out-of-pocket loss. Since this has never been a requirement for equitable estoppel, courts have

repeatedly allowed the insurer that indemnified its insured to pursue the wrongdoer. See Merchants

Mut. Ins. Group v. Travelers Ins. Co., 24 A.D.3d 1179 (4th Dep’t 2005); Indemnity Ins. Co. of N.

Am. v. Charter Oaks Ins. Co., 235 A.D.2d 521 (2d Dep’t 1997); Fireman’s Fund Ins. Co. v. Zurich

Am. Ins. Co., 37 A.D.3d 521 (2d Dep’t 2007); Boston Old Colony Ins. Co. v. Lumbermens Mut.

Cas. Co., 889 F.2d 1245 (2d Cir. 1989).

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Next, Western Beef contradictorily argues that it is both premature to decide whether any

of its misconduct prior to trial would have changed the outcome while simultaneously asserting

that because Serota was held liable, there can be no prejudice. Western Beef’s first argument

ignores the applicable standard. Prejudice exists at a time that the “character and defense of the

lawsuit c[an] no longer be altered.” Yoda, 88 A.D.3d 506, 508 (1st Dep’t 2011). Under this

standard, Zurich is not required to use hindsight to forecast what it would have done differently.

Although Zurich is not obligated to establish in hindsight whether Serota was prejudiced,

Zurich provided testimony from Mr. Brown, the attorney that defended Western Beef and Serota,

and from Mr. Cassidy, doing just that. See generally Darwick Aff., Exhibit 6, Brown Deposition,

pgs. 98-99, 103-104; Exhibit 30, Cassidy Deposition, pgs. 89-90; 103-104. Western Beef fails to

even mention, let alone counter, their testimony.

Western Beef’s assertion that because Serota was held liable, neither Serota nor Zurich

could not have been prejudiced, rests on the unsound premise that the outcome of the Garrett

Action – of any litigation – is and was pre-ordained. Under this view, neither the skill of the

litigator, the strategies taken, the facts developed, the settlement opportunities passed by, or jury

or judge, matter. Western Beef’s view of the litigation process is plainly wrong, as the greenest

attorney could attest. Indeed, this case illustrates that there are many points in a litigation where

the outcome can be affected.

For example, Western Beef could have settled the Garrett Action at the mediation that it

did not invite Serota and Zurich to attend instead of standing firm on a $25,000 offer. That is to

say, Western Beef could have negotiated in good faith. It did not. Western Beef could have

attempted to settle the Garrett Action just before trial when it was facing a “big liability case” (see

Darwick Aff., Exhibit 8, Lohay Depsition, pg. 50) instead of decreasing the offer to $20,000 so

that it could obtain an adjournment in order to abandon Serota. Or Western Beef could have given

Serota 9

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a chance to mitigate its damages, an opportunity to pursue the Town of Hempstead, or the right to

pursue and develop a contractual indemnity claim against Western Beef, by telling Serota of its

concerns over liability. Western Beef did none of those things.

Western Beef’s behavior from the start to the finish of the Garrett Action is a textbook

example of how not to handle a claim. Rather than getting a free pass, as it claims it should, because

it is not an insurance company, Western Beef should be held to the same standard of any insurer

adjusting a claim. That is, in fact, precisely what Western Beef agreed to by accepting a policy

with a $450,000 SIR and which imposed on Western Beef not only the obligation to adjust claims

within the retention, but to do so in compliance with “all applicable statutes, fair claim practice

regulations, and licensing requirements” and with an administrator that will have “sufficient staff

and claim experience to handle the claims you receive…” See Darwick Aff., Exhibit 2, First

Specialty Policy, FS000142-47.

Under the facts of this case, the Court should hold that Western Beef prejudiced Zurich

and Serota by abandoning Serota on the first day of trial and should order Western Beef to

reimburse Zurich for its defense and indemnity costs, plus interest. See Temple Beth Sholom, 173

A.D.3d 637 (1st Dep’t 2019).

II. WESTERN BEEF HAD A DUTY TO DEFEND AND INDEMNIFY SEROTA AS AN
ADDITIONAL INSURED UP TO ITS $450,000 SIR

Western Beef’s primary argument against providing additional insured coverage to Serota

up to its $450,000 SIR is similar to its argument against equitable estoppel: it rejects the law.

Western Beef argues that “additional insured coverage was only available to Serota for the Garrett

lawsuit if the underlying incident occurred in the Demised Premises and arose out of Western

Beef’s ownership, maintenance or use of the demised premises.” See WB Memo of Law, pg. 14

(emphasis in original).

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The First Department has repeatedly rejected the premise that an accident must occur “in

the Demised Premises” for it to arise out of the use of the demised premises. See Wesco Ins. Co.

v. Travelers Prop. Cas. Co. of America, 188 A.D.3d 476 (1st Dep’t 2020); Paramount Insurance

Company, et. al. v. Federal Insurance Company, 174 A.D.3d 476 (1st Dep’t 2019); Public Service

Mutual Insurance Company v. Nova Casualty Company, 177 A.D.3d 472 (1st Dep’t 2019); Tower

Ins. Co. of N.Y. v. Leading Ins. Group Ins. Co., Ltd, 134 A.D.3d 510 (1st Dep’t 2015); 1515

Broadway Fee Owner, LLC v. Seneca Ins. Co., Inc., 90 A.D.3d 436 (1st Dep’t 2011); Jenet Mgt.

Corp. v. Pacific Ins. Co., 55 A.D.3d 313, 313 (1st Dep’t 2008); New York Convention Center

Operating Corp. v. Morris Cerullo World Evangelism, Inc., 269 A.D.2d 275 (1s Dep’t 2000); ZKZ

Associates LP v. CNA Ins. Co., 224 A.D.2d 174, 176 (1st Dep’t 1996) aff’d 89 N.Y.2d 990 (1997).

Treating these myriad decisions as the exception as opposed to the rule, Western Beef

attempts to factually distinguish a few of them. For example, Western Beef argues that Wesco is

distinguishable because the lease extended the tenant’s maintenance obligations to

“appurtenances.” Id. at 477. So did Western Beef’s lease. See Darwick Aff., Exhibit 1, Lease, pg.

FS01103, §4. Putting that aside, the Wesco court did not rely on this language to hold that

additional insured coverage was owed to the landlord. It held that, “Waldman is covered as an

additional insured by the Travelers policy in connection with the underlying action because the

action arose from the ‘use’ of the leased premises, i.e., plaintiff's use of the sidewalk as a means

of egress from the bank branch building.” 188 A.D.3d at 477.

Western Beef attempts to distinguish New York Convention on similar irrelevant grounds.

It asserts that the additional insured endorsement there differed because it extended coverage to

operations “necessary or incidental to those premises.” See WB Memo of Law at pg. 20. But as

Public Service, Leading, and ZKZ and their progeny demonstrate, the extension is redundant,

because “use” incorporates “necessary and incidental.” See ZKZ 89 N.Y.2d. at 991; Public
11

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Service, 177 A.D.3d at 473. Nor is it material that the tenant licensed for use the entry into the

building, since unlike Western Beef, it was not the ground floor tenant, and thus had to lease a

right of passage to enter its space. Western Beef, in contrast, was plainly given access to the

sidewalk as a means of egress and ingress to the store. Indeed, it was told not to obstruct the

sidewalk and was also delegated a host of sidewalk maintenance obligations. See Darwick Aff.,

Exhibit 1, Lease, pgs. FS001103, FS001111.

1515 Broadway aptly illustrates the error in Western Beef’s position. 90 A.D.3d 436.

There, the landlord and managing agent brought a declaratory judgment action against their

tenant’s insurer, seeking a determination that the tenant’s insurer was obligated to provide them

with defense and indemnity in an underlying personal injury action. In the personal injury case,

the claimant was injured on a staircase outside of the leased premises. Id. at 436-437. The

additional insured endorsement provided coverage for claims that arose out of the “use” of the

leased premises. Id. at 437. The court held: “The accident occurred in the course of an activity

necessarily incident to the operation of the space leased by the employer. Furthermore, the accident

happened in a part of the premises that was used for access in and out of the leased space when the

freight elevator was not in service.” Id. The court reasoned that “[t]his result is consistent with the

lease, which required the employer to procure insurance against any liabilities ‘on or about the

demised premises or any appurtenances thereto.’” Ibid.

Just like the tenant’s lease in 1515 Broadway, Western Beef’s lease required it to procure

insurance naming Serota as an additional insured, including for injury to person occurring on “in

or about the Demised Premises as well as the sidewalk adjacent thereof.” SMF ¶ 2. And just like

the claimant in 1515 Broadway, Garrett was walking on an area incidental and necessary to

accessing and exiting the leased premises. See Darwick Aff. Opp., Exhibit 35, Garrett Deposition,

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pgs. 18-22. Requiring Western Beef to provide Serota with additional insured coverage for

Garrett’s accident is “consistent with the lease.” 1515 Broadway, 90 A.D.3d at 436.5

In an equally futile attempt to factually distinguish this case from the unfailing line of First

Department cases requiring a tenant’s insurer to provide additional insured coverage to the

landlord, Western Beef draws a distinction without a difference. Western Beef asserts that Garrett

was not injured while walking into the Western Beef store, but when he departed from that path to

greet a security guard near the store’s entrance. See Western Beef’s SMF, ¶ 11. Western Beef’s

position is untethered from the facts and the law.

First, Garrett did not go to the Western Beef store to say hello to a friend. See Darwick Aff.

Opp., Exhibit 35, Garrett Deposition, pgs. 12-14. As he testified, he drove approximately seven miles from

Freeport, New York to Roosevelt, New York and then walked approximately 50-60 yards from

the parking lot to the sidewalk in order to purchase ice. Id. In fact, after he allegedly tripped, he

still entered the Western Beef, walked to the ice machines and got the ice, further demonstrating

his intent to shop at Western Beef. Id. at 45.

Further, the record does not support Western Beef’s assertion that Garrett veered from his

path to greet his friend. Garrett could not recall whether he even took one step toward his friend

when he fell. See WB Exhibit A, Desmond Garrett EBT Excerpts, pg. 118. Regardless, this fact is

immaterial. Even if his intention was to say hello to a friend when he injured himself, Garrett’s

use of the sidewalk was necessary and incidental to entering the store and but for his initial

intention to enter the store, he never would have been injured. Therefore, he was “using” the

property.

5
In disputing Serota’s status as an additional insured, Western Beef relies on two cases from outside the First
Department decided under different fact patterns: See Town Plaza of Poughquag, LLC v. Hartford Ins. Co., 175
F.Supp.3d 93, 97 (S.D.N.Y. 2016); Christ the King Regional High School v. Zurich Ins. Co. of Am., 91 A.D.3d 806
(2d Dep’t 2012).
13

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In summary, the facts of this case place it squarely within the myriad of First Department

decisions requiring the tenant’s insurer to defend and indemnify the landlord as an additional

insured. As a result of its SIR, Western Beef bears that obligation, not First Specialty. Accordingly,

the Court should declare that Western Beef was required to defend and indemnify Serota in the

Garrett Action and is required to reimburse Zurich for the costs it incurred defending and

indemnifying Serota in the Garrett Action.

CONCLUSION

For the reasons stated above, Zurich respectfully requests that this Court award it summary

judgment declaring that Western Beef had the duty to defend and indemnify Serota in the

Underlying Action and ordering Western Beef to reimburse Zurich $349,244.88 plus interest at a

rate of 9% per annum accruing from the date of payment.

Dated: New York, New York
July 1, 2021

COUGHLIN MIDLIGE & GARLAND LLP

By: /s/ Gabriel E. Darwick
Gabriel E. Darwick, Esq.
Ross Toback, Esq.
Wall Street Plaza, 28th Floor
88 Pine Street
New York, New York 10005
(212) 483-0105
gdarwick@cmg.law
rtoback@cmg.law
Attorneys for Plaintiff
Zurich American Insurance Company

Case Info

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Debra A James Track Judge’s New Case

Case No.

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Document Filed Date

July 01, 2021

Case Filing Date

May 11, 2018

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Parties

DARWICK, GABRIEL E Attorney for the Plaintiff
DRISCOLL, ROSEANN VICTORIA Attorney for the Defendant
First Specialty Insurance Corporation Defendant
GENOVESI, ANTHONY J Attorney for the Defendants
HUNT, LINDSEY ERIN Attorney for the Plaintiff
KELTON, JUSTIN TYLER Attorney for the Defendant
KELTON, JUSTIN TYLER Attorney for the Defendants
KRETZ, WALTER A. Attorney for the Defendant
KRETZ, WALTER A. Attorney for the Defendants
NOLAN, PATRICK COLM Attorney for the Defendant
WEINSTOCK, GREGG D. Attorney for the Defendant
Western Beef Properties, Inc. Defendant
Western Beef Retail, Inc. Defendant
Zurich American Insurance Company Plaintiff
ROBERT BROWN Attorney
LINDSEY LAFOND Attorneys for Plaintiffs
MARJORIE MCATEER Attorney
E. BROWN Attorney
JOHN BARKER Attorney
Ross Toback Attorneys for Plaintiffs
ADAM FLEISCHER Attorneys for Defendants
MICHAEL PASSE Attorney
HENRY FLEISCHER Attorney
MICHAEL DESIMONE Attorney
DAVID WEINSTOCK Attorney
HARRY KATZ Attorneys for Plaintiffs
Thomas DeSimone Attorneys for Defendants
JULIE LEVINE Attorneys for Defendants
MICHAEL CASSIDY Attorneys for Defendants
BRIAN LENT Attorney
MICHAEL HOLOHAN Attorney

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Motion-Secondary: Zurich American Insurance Company v. First Specialty Insurance Corporation, Western Beef Retail, Inc., Western Beef Properties, Inc.

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