Motion-Secondary: Swan Usa, Inc. Dba Sik Gaek Ii, Swan Usa, Inc., Sik Gaek Ii, Chul Ho Park, Jin Young Chung, Kelly Liang v. Wesco Insurance Company

On June 29, 2018 a Motion-Secondary was filed involving a dispute between Chul Ho Park, Jin Young Chung, Kelly Liang, Sik Gaek Ii, Swan Usa, Inc., Swan Usa, Inc. Dba Sik Gaek Ii, and Wesco Insurance Company, for Comm-Contract in the District Court of Queens County.

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS
x
SWAN U.S.A., INC., DBA SIK GAEK II, SWAN USA, :

INC., SIK GAEK II, CHUL HO PARK, JIN YOUNG :
CHUNG and KELLY LIANG, : Index No.: 710105/18

Plaintiffs, :
:
-against- :

WESCO INSURANCE COMPANY, :
:
Defendant. :

_________________ ___________.------ ---------------- -------X

MEMORANDUM OF LAW

KENNEDYS CMK LLP
Max W. Gershweir
Attorneys for Defendant

570 Lexington Ave. - 8th Floor

New York, New York 10022
646-625-4000

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TABLE OF CONTENTS
Page

TABLE OF AUTHORITIES. ........ ii

PRELIMINARY STATEMENT 1

FACTUAL BACKGROUND...................... . .............................. 2

A. The Wesco Policy .. 2

B. The Incident ....... ...... 3

C. Notice and Wesco s Disclaimer ........... . 3

D. The Underlying Action 4

E. Notice of Underlying Action and Wesco's Disclaimer . .... 4

F. The Judgment Action .· 5
Declaratory

ARGUMENT ....... 6

I. Legal Standard . . .. .. 6

II. The Assault And Battery Exclusion Acts As A Completer Bat To Coverage
.................. ..................... .............7

Plaintiffs'
III. Bad Faith Claims Fail As A Matter of Law 10

CONCLUSION ......... ... 12

.
1

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Table of Authorities

Alvarez v. Prospect Hospital,
68 N.Y.2d 320, 508 N.Y.S.2d 923 (1986) 6

Amato v. Nat'l Specialty Ins. Co.,
134 A.D.3d 966 (2d Dep't 2015) ···················· ---------
9

Andre v. Pomeroy,
35 N.Y.2d 361, 362 N.Y.S.2d 131 (1974) ·················
6

Dudley's Restaurant, Inc. v. United Nat'l Ins. Co.,
247 A.D.2d 425 (2d Dep't 1998) . 8

Gordian v. Consolidated Edison Co. of N.Y., Inc.,
60 A.D.3d 600, 876 N.Y.S.2d 39 (1st Dep't 2009) 6

Hugo Boss Fashions, Inc. v. Fed. Ins. Co.,
252 F.3d 608 (2d Cir. 2001) ...... ...... 11
...........................

Marina Grand, Inc. v. Wesco Ins. Co. of N.Y.,
63 A.D.3d 1012 (2d Dep't 2009) ....................... 8

Mark McNichol Enters., Inc. v. First Fin. Ins. Co.,
284 A.D.2d 964 (4th Dep't 2001) .. .. ..........
8

Mount Vernon Fire Insurance Co. v. Creative Housing, Ltd.,
88 N.Y.2d 347 (1996) ... ............... --.8

Parler v. N. Sea. Ins. Co.,
129 A.D.3d 926 (2d Dep't 2015) ········

QBE Ins. Corp. v. Jinx-Proof Inc.,
22 N.Y.3d 1105 (2014)

Ramlochan v. Scottsdale Ins. Co.,
2015 NY Slip Op 3083o(U) 10-11

Royal Indem. Co. v. Salomon Smith Barney, Inc.,
308 A.D.2d 349 (1st Dep't. 2003) ··-···· o

Sommer v. Fed. Signal Corp.,
79 N.Y.2d 540, 583 N.Y.S.2d 957, 593 N.E.2d 1365 (1992) __... 6

State Farm Fire & Cas. Co. v. Ricci,
96 A.D.3d 1571, 947 N.Y.S.2d 265 (4th Dep't 2012) ....... . 11

U.S. Underwriters Ins. Co. v. Val-Blue Corp.,
85 N.Y.2d 821 (1994) ....._
__ . .. .... .. 8

United Nat. Ins. Co. v. Waterfront New York Realty Corp.,
994 F.2d 105 (2d Cir· 1993) -----· 7

Winegrad v. New York University Medical Center,
64 N.Y.2d. 851, 487 N.Y.S.2d 316 (1985) ············· 6

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Zuckerman v. City of New York,
49 N.Y.2d 557, 427 N.Y.S.2d (1980) 6

CPLR 3212 ...........
1, 2

General Obligations Law § 11-101 ........... ................................ . 4,5

111

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PRELIMINARY STATEMENT

Defendant Wesco Insurance Company ("Wesco") submits this memorandum of

law in support of its motion for an order pursuant to CPLR 3212 granting summary

judgment against plaintiffs Swan U.S.A., Inc., dba Sik Gaek II, Swan USA Inc., Sik

Gaek II,Chul Ho Park, and Jin Young Chung (collectively, "Plaintiffs"), declaring it

has no duty to defend or iiidemñify Plaintiffs in the action captioned Hwayoung Lee

v. Swan U.S.A., Inc. d/b/a Sik Gaek H, et al.,pending in the Supreme Court of the

State of New York, Queens County, under Index No.: 703218/2018 (the "Underlying

Action").

In the Underlying Action, Hwayoung Lee seeks damages for personal injuries

she allegedly sustained after being assâülted and battered by another patron on the

evening of December 24-25, 2015, at Sik Gaek, a restaurant allegedly owned and

controlled by Plaintiffs, Swan USA Inc., ("Swan"), Chul Ho Park ("Park") and Jin

Young Chung ("Chung"). Lee alleges Plaintiffs are liable for her injuries because of

negligence in failing to prevent the alleged assault, failing to properly hire or supervise

employees, and for improper service of alcoholic beverages to the alleged assailant in

violation of liquor-liability laws.

In this insurance-coverage action, Plaintiffs seek coverage from Wesco-Swan's

geileral liability insurer on the date of loss-in connection with the Underlying Action.

Wesco seeks accelerated relief under CPLR 3212 to confirm it has no duty under the

insurance policy to defend or indemnify Plaintiffs in the Underlying Action. Wesco

seeks summary judgmerit based on the policy's Assault and Battery Exclusion

endorsement, which applies to bodily injury arising out of an assâült committed by

the failure to suppress or prevent such assault. Under well-
any person, including any

settled law, exclusions using such language bar coverage of all elaims against an

insured that arise out of an assault, including those for negligent hiring, supervision,

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and liquor liability. As discussed more fully below, all of the allegations in the

Underlying Action fall entirely within the policy's Assault and Battery Exclusion,

thereby entitling Wesco to a declaration that it has no duty to defend or indemnify

Plaintiffs in connection with the Underlying Action.

FACTUAL BACKGROUND

A. The Wesco Policy

Plaintiffs filed this action to obtain a declaration as to coverage concernmg a

commercial package policy Wesco issued to Swan USA Inc. dba SIK Gaek II under

policy number WPP12159olor, with effective dates of January 7, 2015 to January 7,

2016, and containing coverage parts for commercial property, commercial general

and liquor (the "Wesco Policy").1
liability, liability

As is relevant, the Wesco Policy covers "those sums that the insured becomes

injury'
legally obligeted to pay as damages beeâüse of 'bodily . . . to which this

applies" "occurrêñce,"
insurañce caused by an which is defined in pertinent part as an

"accident."2 The Wesco also includes an endorsement entitled "Assault and
Policy

Exclusion,"
Battery which applies to general liability and liquor liability coverage, and

excludes coverage of bodily injury "arising from, due to or caused by":

1) Assault and/or Battery committed by any insured, any
employee of any insured, any patron or customer of the

insured, or any other person; or

2) The failure to suppress or prevent any Assault and/or Battery
or any act or oniissiõñ in connection with any Assault and/or

Battery; or

3) The negligent hiring, supervision or training of any employee
or agent of the insured with respect to the events described in

(1) and (2) above.3

1 Ligotti Exhibit 1.
Aff.,
2 Id. General 00 of 12 o7,at ¶ 1.a. and p.
atCommercial LiabilityCoverage Form, CG § I, b., 1, and § 5,1 13
(pgs.33, 46).
3 Id.at Assaultand Battery Exclusion form, CG9 o5 05 o6 (pg. 89).

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B. The Incident

This coverage action arises out of an underlying claim by Hwayoung Lee

("Lee"). Lee alleges she was a patron of Swan's restaurant on the evening of December

24, 2015, when a verbal dispute occurred between herself and another patron, Kelly

Liang ("Liang"). Lee aUeges that Liang assaulted and battered her by, among other

things, intentionally throwing glass cups, bottles, and chairs at her, which allegedly

resulted in injuries.4

C. Notice and Wesco's Disclairner

Wesco, through its claims administrator, AmTrust North America, Inc.

("AmTrust"), was first notified of the incident and claim against Swan on October 3,

2016, when itreceived an ACORD General Liability Notice of Occurrence/Claim form

that attached a letter from Lee's counsel.5 The letter notified Swan that Lee retained

representation in connection with an attack that occurred because another patron was

served alcohol while intoxicated at Sik Gaek.6
visually

After AmTrust completed its review of the claim, it disclaimed coverage on

Wesco's behalf letter dated October 24, 2016.7 AmTrust notified Swan
by Specifically,

injury"
that because Lee's claim involves "bodily arising from assault and battery, the

Wesco Policy's Assault and Exclusion acts as a complete bar to coverage.8
Battery

Moreover, the October 24, 2016 disclaimer letter was also sent to Lee's counsel to

provide notice that no coverage exists under the Wesco Policy regarding her claim

against Swan.9

4 Gershweir Aff,Ex. A at ¶¶18-19, 26-27,60-68.
5 Ligotti
Aff. ¶ 5; October3,2016 notice,id.at Ex.2.
6 [d,
7 fd,at¶ 6;October 24, 2016 disclaimer letter,id.
atEx. 3.
8 fd

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D. The Underlying Action

Lee sued Swan, Park, Chung, and Liang to recover damages for her alleged

injuries resulting from the assault by filing a Summons and Verified Complaint on

March 2, 2018, and an Amended Summons and Verified Complaint was filed on or

about 2018.10 The amended complaint alleges and areliable
July 9, Swan, Park, Chung

based on their alleged negligent failure to prevent Liang's alleged assault against Lee,

to properly hire or supervise employees, and their improper furnishing of alcoholic

beverages to Liang, despite her visible intoxication, in violation of Alcohol Beverage

Control Law and General Obligations Law 11-101.11
§ 65 §

E. Notice of Underlying Action and Wesco's Disclaimer

On March 8, 2018, AmTrust received a letter from the Kimm Law Firm

a of the Summons and Complaint in the action.12 The
enclosing copy underlying

March 8, 2018 notice to AmTrust requested immediate defense and coverage in

connection with the complaint in the Underlying Action. However, there is no

indiention in the letter as to who the Kimm Law Firm represents or whether
exactly

the request for coverage was made on behalf of all defendants in the Underlying

Action.

Regardless, AmTrust conducted an investigation into the allegations made by

Lee in the Action.13 Thereafter, on March 28, 2018, AmTrust reiterated its
Underlying

prior coverage position in a disclaimer letter sent to Swan, Park, Chung, and the law

firm Lee in the Action. 14 The March 2018 disclaimer
representing Underlying

reiterated that no coverage exists under the Wesco Policy in connection with Lee's

claim because, among others, the Assault and Battery Exclusion acts as a complete bar

20 Gershweir AffEx. A.
1¹Id.at 11 27-59.
12 Ligotti
Aff. March 2018 id.at Ex.4.
17; 8, notice,
13 Ligotti
Aff.¶ 7.
'4 Id.
at March 2018 diselemer id.at Ex. 5.
¶ 8; 28, letter,

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to coverage. Further, AmTrust denied coverage for any punitive damages alleged in

the Underlying Action, as such damages are uninsurable under New York law.

F. The Declaratory Judgment Action

On July 17, 2018, AmTrust received notice of a declaratory judgment action

filed in New York Supreme Court, Queens County under Index No. 710105/2018 and

captioned Sw an U.S.A., Inc. DBA Sik Gaek II,et al. v. Wesco Insurance Company (the

"DJ Action").15

The DJ Action alleges that Wesco's denial in the underlying action constitutes

a bad-faith failure to provide coverage under the Wesco Policy and a breach of

Plaintiffs'
contract. bad-faith allegations claim that Wesco's denial was issued without

a factual or legal basis to refuse coverage, and palpably contrary to the public policy of

New York. Plaintiffs seek a declaration that Wesco must defend and indemnify them

in the Action.16 Wesco appeared in the DJ Action itsAnswer on
Underlying by serving

2018.17
July 31,

15Gershweir Ex.
Aff., B.
16Id.at ¶¶ 14-19,20-22.
17Gershweir Aff.,Ex. C.

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ARGUMENT

I. Legal Standard

judgment is designed to expedite all civil cases from
"Summary by eliminating

law."
the trial calendar those claims which can be properly resolved as a matter of

Andre v. Pomeroy, 35 N.Y.2d 361, 364, 362 N.Y.S.2d 131, 133 (1974). Such motions

should be granted where the movant is entitled to judgment as a matter of law. See

e.g., Sommer v. Fed. Signal Corp., 79 N.Y.2d 540, 554-55, 583 N.Y.S.2d 957, 963, 593

N.E.2d 1365, 1371 (1992); Winegrad v. New York University Medical Center, 64

N.Y.2d. 851, 853, 487 N.Y.S.2d 316, 317 (1985); Zuckerman v. City of New York, 49

N.Y.2d 557, 427 N.Y.S.2d 595 (1980).

Once a prima facie showing of entitlement to judgment as a matter of law has

been made on such a motion, the burden shifts to the party opposing the motion to

produce evidentiary proof in admissible form sufficient to establish the existence of

material issues of fact, which require a trial of the action. See Alvarez v. Prospect

68 N.Y.2d 508 N.Y.S.2d (1986). a non-
Hospital, 320, 324, 923, 925 However,

semblance"
movant's efforts to create a "shadowy of an issue of fact must be rejected.

See, e.g., Gordian v. Consolidated Edison Co. of N.Y., Inc., 60 A.D.3d 600, 601, 876

(1stDep't S.J. Capelin Assoc. v. Globe Mfg. N.Y.2d
N.Y.S.2d39 2009), citing Corp., 34

338, 341, 357 N.Y.S.2d 478, 313 N.E.2d 776 (1974).

The issue before this Court is straightforward and simple. All of the claims

alleged against Plaintiffs in the Underlying Action unequivocally arise from, are due

to, or are caused by the alleged assault and battery by Liang in December 2015. As

such, Wesco has established is prima facie entitlement to summary judgment based

on the application of its policy's Assault and Battery Exclusion, and Plaintiffs cannot

raise any issues of material fact preventing judgment in Wesco's favor. Accordingly,

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and for the reasons disenssed in more detail below, Wesco respectfully requests that

this Court enter judgment in its favor and dismiss the complaint with prejudice.

II. The Assault And Battery Exclusion Acts As A Cornplete Bar To
Coverage

As noted above, the Wesco Policy excludes coverage for bodily injury claims

arising from, due to or caused by: 1) Assault and/or Battery committed by ...any patron

or customer of the insured, or any other person; or 2) The failure to suppress or

prevent any Assault and/or Battery or any act or omission in connection with any

Assault and/or Battery; or 3) The negligent hiring, supervision or training of any

employee or agent of the insured with respect to the events described in (1) and (2)

above.18 the exclusion not removes coverage for injuries due
Thus, only arising from,

to, or eãüsed by an alleged assault and/or battery, but also those injuries that would

for"
not have occurred "but an assault and/or battery, regardless of whether other

theories of liability are asserted against an insured.

In this case, Lee alleges that Liang assaulted and battered her after Liang

threw cups and bottles at her with the intent to cause contact.19 Because
intentionally

of said assault and battery, Lee alleges that she sustained serious and severe injuries.

The Underlying Action, therefore, clearly alleges injuries arising from, due to or caused

by an assault and/or battery, as those terms are generally interpreted. See United Nat.

Ins. Co. v. Waterfront New York Realty Corp., 994 F.2d 105, 108 (2d Cir. 1993)

"assault" "battery"
(holding that the interpretation of the terms and are the common

manings of those terms which "subsume all forms of tortious menacing and

touching"
unwanted even if the offense also entails other or additional elements).

Consequently, because the Underlying Action specifically alleges injuries arising from,

'8 Exclusion
LigottiAff.,Ex. 1 at Assault
and Battery form, CG9 o5 05 o6
19Gershweir Ex.
Aff., A at ¶¶60-68.

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due to or caused by a patron's (i.e.,Liang) assault and/or battery, no coverage exists

pursuant to paragraph (A)(1) of the Wesco Policy's Assault and Battery Exclusion.

As itrelates to Lee's claims based on negligence and violations of liquor liability

laws, New York law is clear that assault and battery exclusions, such as this one,

preclude coverage for such alternate theories of liability, where the alleged injury

would not have occurred but for the assault or battery. In the seminal case of Mount

Vernon Fire Insurance Co. v. Creative Housing, Ltd., 88 N.Y.2d 347 (1996), the

plaintiff-insurer sued to confirm ithad no duty to cover its insured apartment-building

owner in an underlying negligent-security action brought by a woman who had been

assaulted in the building, based on an assault and battery exclusion in the policy. The

Battery."
exclusion applied to "any claim . .. based on Assault and The Court found

that "when a third party perpetrates an âssault, the basis of the victim's claim for

assault."
negligent failure to maintain safe premises against the insured is Id. at 351.

on"
It thus determined that an exclusion that applies to injury "based or "arising out

of" act"
an assault is triggered where the "operative causing the injury is an assault and

for"
thus where no claim would exist "but the assault, notwithstanding the theory of

liability asserted against the insured. Id. at 350-52; see U.S. Underwriters Ins. Co. v.

Val-Blue Corp., 85 N.Y.2d 821 (1994).

Other cases addressing such exclusions similarly hold the insurer owes no

coverage in negligent supervision or hiring cases where the operative act directly

causing the injury is an assault or battery. See, e.g., Parler v. N. Sea. Ins. Co., 129

A.D.3d 926 (2d Dep't 2015); Marina Grand, Inc. v. Wesco Ins. Co. of N.Y., 63 A.D.3d

1012 (2d Dep't 2009); Mark McNichol Enters., Inc. v. First Fin. Ins. Co., 284 A.D.2d

964 (4th Dep't 2001); Dudley's Restaurant, Inc. v. United Nat1 Ins. Co., 247 A.D.2d

425 (2d Dep't 1998).

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Here, all of the relevant allegations in the Underlying Action seek to hold

Plaintiffs liable for Lee's injuries because of their alleged: a) failure to prevent the

altercation that led to the assault/battery; b) acts or omissions in serving alcohol that

resulted in the assault; or c) failure to supervise and/or train employees to prevent the

alleged assâült at the premises. As a result, the Assault and Battery Exclusion removes

coverage not just for the direct claims of bodily injury arising from assault and/or

Plaintiffs'
battery, but also Lee's claims arising from failure to prevent the alleged

assault/battery, any act or omission in connection with an assault/battery, or any

negligent hiring or supervision with respect to an assault/battery.

Moreover, because the Assault and Battery Exclusion removes coverage for

injuries arising from any act or omission in connection with an assault or battery,

claims based on liquor liability laws are not covered under the Wesco Policy. NewYork

law makes clear that no coverage exists under assault and battery exclusions-such as

the exclusioñ in the Wesco Policy-with respect to liability for violations of New York's

Dram Shop Act, where such violations arise out of an alleged assault or battery. See,

e.g.,Amato v. Nat7 Specialty Ins. Co., 134 A.D.3d 966, 969 (2d Dep't 2015) (holding

that claims asserted by underlying plaintiff, including violations of Dram Shop Act,

arise out of the assault and/or battery, and fallwithin the policy's assault and battery

exclusion); QBE Ins. Corp. v. Jinx-Proof Inc., 22 N.Y.3d 1105, 1107 (2014) (affirming

lower court decision that assault and battery exclusioñ precluded coverage for

underlying claims of negligeñce and violations of Dram Shop Act).

Put simply, allof Lee's negligeñce and liquor-liability causes of action arise out

of the same operative act; Liang's assault and battery against Lee at Sik Gaek in

for"
Deceiñber 2015. In other words, "but Liang's assault and/or battery against Lee,

there would be no eaüses of action for negligence or violations of the Dram Shop Act

against Plaintiffs. Accordingly, the allegations in the Underlying Action fall entirely

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within the unambiguous provisions of the Assault and Battery Exclusion; and Wesco

is entitled to a judgment declaring it has no duty to defend or indemnify Plaintiffs in

the Underlying Action.

Plaintiffs'
IH. Bad Faith Claims Fail As A Matter of Iaw

Plaintiffs'
vague allegations as to bad faith must be dismissed as matter of law

because, as noted above, Wesco has a good-faith basis to disclaim coverage based on

Plaintiffs'
the Assault and Battery Exclusion. claim that Wesco's actions in connection

with its coverage determination were willful, malicious, wanton, and palpably contrary

to public policy of the State of New York is unsupported both by the facts and by the

law in New York pertaining to an insurer's good faith basis to deny coverage pursuant

to an assault and battery exclusion.

Plaintiffs'
Not only do allegations lack any merit, they are simply a retread of

their breach-of-contract claim. For this reason alone, Wesco is entitled to dismissal as

Plaintiffs'
a matter of law of bad-faith claims.See Royal Indem. Co. v. Salomon Smith

308 A.D.2d 350 (18tDep't. ("[a]llegations that an insurer had
Barney, Inc., 349, 2003)

no good faith basis for denying coverage are redundant to a cause of action for breach

of contract based on the denial of coverage, and do not give rise to an independent tort

cause of action, regardless of the insertion of tort language into the pleading")

Plaintiffs'
Nevertheless, bad-faith claims failas a matter of law for the simple

reason that Wesco's decision to deny defense and indemnification in the Underlying

Action was made in good faith, on the grounds that, among others, no coverage exists

because of the Wesco Policy's Assault and Battery Exclusion. Therefore, Plaintiffs

cannot raise an issue of fact to defeat summary judgment, and Wesco is entitled to

dismissal of the bad-faith claims. See Ramlochan v. Scottsdale Ins. Co., 2015 NY Slip

Op 3083o(U), 1 6 (Queens Sup. Ct. 2015), affd, 150 A.D.3d 1166 (2d Dep't 2017)

(insurer owed no coverage and the insured failed to raise a genuine issue of fact

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concerning aHeged bad faith disclaimer of coverage); see also State Farm Fire & Cas.

Co. v. 96 A.D-3d N.Y.S.2d 268 (4thDep't ("in order to
Ricci, 1571, 1572, 947 265, 2012)

establish a prima facie case of bad fai

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Motion-Secondary: Swan Usa, Inc. Dba Sik Gaek Ii, Swan Usa, Inc., Sik Gaek Ii, Chul Ho Park, Jin Young Chung, Kelly Liang v. Wesco Insurance Company

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