28 N.Y.3d 678 (2017)
An insurance policy’s contractor’s tools exclusion is enforceable, even if it removes coverage for items considered “temporary works” under the policy, as long as the exclusion doesn’t eliminate all coverage under the temporary works provision.
Summary
The case involved a dispute over builder’s risk insurance coverage for damage to a tower crane caused by Superstorm Sandy. The New York Court of Appeals addressed whether the crane, considered a “temporary work,” was covered under the policy’s insuring agreement and if the policy’s contractor’s tools exclusion negated that coverage. The Court held that while the crane was initially covered as a “temporary work,” the contractor’s tools exclusion applied, denying coverage. The Court found the exclusion enforceable because it did not render the temporary works coverage illusory. The decision emphasizes the importance of analyzing specific policy language, especially exclusions, and their impact on the scope of coverage.
Facts
Extell West 57th Street LLC was constructing a skyscraper. Lend Lease (US) Construction LMB Inc. was the construction manager, who contracted with Pinnacle Industries II, LLC for structural concrete work, including the supply and installation of two tower cranes. One crane was installed on the 20th floor, designed to be removed after construction. On October 29, 2012, Superstorm Sandy caused the crane boom to collapse. Extell had a builder’s risk insurance policy. The insurers denied coverage, leading to a lawsuit by Extell and Lend Lease.
Procedural History
The trial court denied summary judgment, finding a factual issue on whether the contractor’s tools exclusion defeated coverage. The Appellate Division modified, granting summary judgment for the insurers. The Court of Appeals affirmed the Appellate Division’s decision, determining that the crane was a “temporary work” but the exclusion applied. The Court determined there was a factual issue as to the valuation of the crane as part of the “total project value”, a requirement for coverage under the temporary works provision, but it did not affect the ultimate outcome based on the contractor’s tools exclusion.
Issue(s)
1. Whether the crane was a “temporary work” covered under the policy’s insuring agreement.
2. Whether the contractor’s tools exclusion applied to the crane.
3. Whether the contractor’s tools exclusion rendered the temporary works coverage illusory and thus unenforceable.
Holding
1. Yes, the crane qualified as a “temporary work” structure under the policy.
2. Yes, the contractor’s tools exclusion applied to the crane.
3. No, the contractor’s tools exclusion did not render the temporary works coverage illusory.
Court’s Reasoning
The court began by analyzing the policy language. It determined the crane was a “temporary” structure because it was only in place during construction and designed to be removed. The court focused on the plain meaning of the policy language and the definition of “machinery” to conclude that the crane was a tool or equipment under the exclusion. The court also found that the contractor’s tools exclusion did not defeat all temporary works coverage, as other items would still be covered. The court relied on the principle that “an insurance policy is not illusory if it provides coverage for some acts [subject to] a potentially wide exclusion”.
Practical Implications
This case highlights the importance of carefully examining all policy provisions, particularly exclusions, in builder’s risk insurance. It clarifies that a contractor’s tools exclusion can apply even if it removes coverage for items otherwise considered temporary works. The decision underscores that exclusions are valid if they don’t eliminate all coverage provided by a policy. This ruling should inform how similar cases are litigated, helping to avoid the pitfall of assuming that a broadly-worded exclusion is automatically unenforceable. Legal practitioners should draft insurance policies with clear definitions and carefully consider how exclusions will interact with the main coverage provisions. Later cases will likely cite this for its clear delineation of the enforceability of exclusions and what constitutes an illusory contract in an insurance context.