16‐3225‐cv(L) Uvino v. Harleysville Worchester Ins. Co.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 19th day of September, two thousand seventeen.

PRESENT: RALPH K. WINTER, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

JOSEPH UVINO, WENDY UVINO, Plaintiffs‐Appellants‐Cross‐Appellees,

v. 16‐3225‐cv(L) 16‐3356‐cv(XAP) HARLEYSVILLE WORCESTER INSURANCE COMPANY, DBA Nationwide Mutual Insurance Company, HARLEYSVILLE INSURANCE COMPANY, DBA Nationwide Mutual Insurance Company, Defendants‐Third‐Party‐Plaintiffs‐ Appellees‐Cross‐Appellants,

J. BARROWS, INC., Third‐Party‐Defendant.

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x FOR PLAINTIFFS‐APPELLANTS‐ WILLIAM F. DAHILL (Mara R. Lieber, on the CROSS‐APPELLEES: brief), Wollmuth Maher & Deutsch LLP, New York, New York.

FOR DEFENDANTS‐THIRD‐PARTY‐ LANCE J. KALIK (Margriet A. Schaberg, on the PLAINTIFFS‐APPELLEES‐CROSS‐ brief), Riker Danzig Scherer Hyland & Perretti APPELLANTS: LLP, Morristown, New Jersey.

Appeal and cross appeal from the United States District Court for the

Southern District of New York (Buchwald, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED

and the cross‐appeal is DISMISSED as moot.

Plaintiffs‐appellants‐cross‐appellees Joseph and Wendy Uvino (the

ʺUvinosʺ) appeal an August 22, 2016 judgment of the district court, entered pursuant to

an August 18, 2016 memorandum and order granting summary judgment in favor of

defendant‐third‐party‐plaintiff‐appellee‐cross‐appellant Harleysville Worcester

Insurance Company (ʺHarleysvilleʺ) on grounds that the Uvinos could not show that

any portion of a damages award that they secured against J. Barrows, Inc. (ʺJBIʺ),

Harleysvilleʹs insured, was covered by a general commercial liability insurance policy

that Harleysville issued to JBI (the ʺPolicyʺ).1 We assume the partiesʹ familiarity with

the underlying facts, procedural history, and issues on appeal.

1 Harleysville cross‐appeals, arguing in the alternative that the district court erred in holding that some of the damages alleged by the Uvinos could be, in theory, covered by the Policy. In light of our disposition below, we dismiss the cross‐appeal as moot.

‐ 2 ‐ BACKGROUND

In November 2005, the Uvinos hired JBI as a construction manager to

oversee the building of their home in East Hampton, New York. The Construction

Management Agreement (ʺCMAʺ) governing their relationship provided that JBI would

coordinate with the Uvinos, inter alia, to develop the scope, budget, and schedule for the

project, maintain the construction schedule, procure permits, inspections, insurance

certificates from subcontractors, and necessary approvals, and ʺprovide Project

Administration and Management Services in consultation withʺ the Uvinos. App. 318.

The CMA further provided, however, that ʺ[i]t is understood that [JBI] is the agent for

the [Uvinos] who [are] the General Contractor for the Project,ʺ App. 320, and that the

Uvinos retained the right to ʺenter into contracts individually with each trade contractor

and material supplier,ʺ App. 318.

The project did not go smoothly and the Uvinos eventually fired JBI. In

December 2007, JBI sued the Uvinos in state court (the ʺUnderlying Actionʺ) to collect

unpaid fees under the CMA and the Uvinos counter‐claimed, alleging that JBI breached

the CMA and negligently damaged the East Hampton property by performing certain

work outside the scope of the CMA without authorization, for example, by adjusting

the houseʹs roof to accommodate a poorly designed architectural feature (which caused

additional damage to the house due to leaking) and interfering with the work of

subcontractors tasked with wall framing and exterior siding (which required

‐ 3 ‐ remediation). In 2009, the lawsuit was removed to the United States District Court for

the Eastern District of New York in connection with the Uvinosʹ filing for bankruptcy

protection. Harleysville agreed to provide JBI with a defense of the Underlying Action

under a reservation of rights.

Before trial, Harleysville moved to intervene in the Underlying Action,

seeking the submission of ʺspecial interrogatories to the jury to allocate between those

damages related to the repair and replacement of [JBIʹs] faulty work,ʺ which

Harleysville contended were not covered by the Policy, ʺversus damages to other

property,ʺ which could be covered. S. App. at 5‐6 (quoting Harleysvilleʹs motion). In

response, JBI, through independent counsel, opposed Harleysvilleʹs motion to

intervene, and cross‐moved on conflict of interest grounds to disqualify the counsel

provided it by Harleysville. The Uvinos took no position on either motion. JBIʹs motion

was granted and Harleysvilleʹs motion was denied, although Harleysville reserved its

right to contest coverage in a later proceeding.

A jury trial commenced in March 2012. The Uvinos presented numerous

documents purporting to show that they sustained over $1.1 million in damages on

account of JBIʹs conduct, comprised of $410,400.74 for improper change orders,

$434,027.25 for consequential damages, and $336,840 in compensatory damages. Those

amounts were further broken down in exhibits submitted to the jury. On March 16,

2012, the jury awarded the Uvinos $317,840 in general damages and $83,788 in

‐ 4 ‐ consequential damages against JBI, which verdict was reduced to a judgment on April

17, 2013.

The Uvinos commenced this action on June 11, 2013, seeking declaratory

relief that the general and consequential damages awarded by the jury in the

Underlying Action (plus the prejudgment interest awarded in the judgment) were

covered by the Policy. On June 6, 2014, the Uvinos moved for summary judgment and

Harleysville cross‐moved for summary judgment on July 8, 2014.

On March 4, 2015, the district court granted partial summary judgment in

favor of the Uvinos on the issue ʺwhether any of the claims submitted to the jury in the

[Underlying Action] may fall underʺ the Policy. Uvino v. Harlesville Worcester Ins. Co.,

No. 13 Civ. 4004,

, at *1 n.1 (S.D.N.Y. Mar. 4, 2015). The district court

held that the Policy is a general commercial liability insurance policy and that such

policies do not cover a contractorʹs defective work. Rather, ʺcoverage exists only where

the contractorʹs defective work causes harm to others or othersʹ workʺ or other property.

Id. at *5. Furthermore, the district court reasoned that JBIʹs ʺwork,ʺ as that term is

defined in the Policy, was that work contemplated by the CMA. Id. at *6. Accordingly,

the district court concluded that, insofar as the Uvinos sought damages in the

Underlying Action attributable to the work that JBI performed ultra vires to the CMA,

for example, the unauthorized roof work, such damages were arguably covered under

the Policy. Id. at *7.

‐ 5 ‐ Nonetheless, the district court subsequently granted summary judgment

in favor of Harleysville because the Uvinos had ʺsimply not presented . . . an intelligible

method of separating those damages awarded to them by the jury that the Harleysville

policy covers and those that it does not.ʺ S. App. 31‐32. This appeal and cross‐appeal

followed.

DISCUSSION

We review de novo the district courtʹs summary judgment ruling,

ʺconstruing the evidence in the light most favorable to the non‐moving party and

drawing all reasonable inferences in [its] favor.ʺ Mihalik v. Credit Agricole Cheuvreux N.

Am., Inc.,

(2d Cir. 2013). A movant is entitled to summary judgment if

ʺthere is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.ʺ Fed. R. Civ. P. 56(a). ʺʹBecause interpretation of an

insurance agreement is a question of law, we review the district courtʹs construction of

the [Policy] de novo.ʹʺ U.S. Fid. & Guar. Co. v. Fendi Adele S.R.L.,

(2d

Cir. 2016) (quoting VAM Check Cashing Corp. v. Fed. Ins. Co.,

(2d Cir.

2012)). Here, the Policy is governed by New York law.2

New York courts interpret insurance policies according to principles of

contract law, giving policy language its ʺplain and ordinary meaningʺ and construing

ambiguities in favor of the insured. Selective Ins. Co. of Am. v. Cty. of Rensselaer, 26

2 The parties agree that New York law governs the construction and interpretation of the Policy.

‐ 6 ‐ N.Y.3d 649, 655 (2016). Under New York law, the insured bears the burden both of

establishing coverage under a policy and identifying covered damages in a jury verdict.

See Jakobson Shipyard, Inc. v. Aetna Cas. & Sur. Co.,

(2d Cir. 1992);

Bogardus v. U.S. Fidelity & Guar. Co.,

(4th Depʹt 1945).

On appeal, the Uvinos do not challenge the district courtʹs construction of

the Policyʹs coverage provisions or exclusions. Instead, they principally argue that the

district court erred in placing the burden on them to prove what portion of the jury

verdict in the Underlying Action represented covered damages. The Uvinos assert that

Harleysville failed to discharge its duty to advise JBI of its interest, as the insured, in

utilizing special interrogatories in the Underlying Action to allocate between covered

and non‐covered damages. Harleysvilleʹs failure in this regard, the Uvinos argue,

shifted the burden to it to prove that none of the damages awarded in the Underlying

Action were covered by the Policy.

We are not persuaded. The Uvinos cite no case applying New York law in

which an insurer incurred a burden to disprove coverage by virtue of its failure to

advise its insured of the insuredʹs interest in utilizing special interrogatories to allocate

between covered and non‐covered damages. To the extent the Uvinos have cited cases

applying the substantive law of other states wherein the burden was so shifted to the

insurer to disprove coverage, see, e.g., Duke v. Hoch,

, 983‐84 (5th Cir. 1972)

(applying Florida law); Buckley v. Orem,

, 1042‐43 (Idaho 1986) (applying

‐ 7 ‐ Idaho law), the reasoning of these decisions does not apply here because (1)

Harleysville made clear in its motion to intervene in the Underlying Action that it

believed most, if not all, of the damages claimed by the Uvinos were not covered by the

Policy; (2) JBI, with the assistance of independent counsel, objected to the use of special

interrogatories to allocate damages, which objection was sustained; (3) the Uvinos took

no position on Harleysvilleʹs motion to intervene; (4) Harleysville reserved its right in

the Underlying Action to contest coverage in a subsequent proceeding; and (5) the

Uvinos had ample opportunity to present evidence distinguishing between covered and

non‐covered damages, both in the Underlying Action and in opposing Harleysvilleʹs

motion for summary judgment in the district court. Therefore, the Uvinos and JBI were

fully aware of the allocation issue, and there was no reason to shift the burden from the

Uvinos to show which portions of the damages award in the Underlying Policy were

covered by the Policy. See Bogardus,

.

The Uvinos failed to meet their burden below and, on appeal, have offered

us no reason to think they could do so in a subsequent allocation trial. As noted, in the

Underlying Action, the Uvinos asked the jury to award them over $1.1 million in

damages from JBI and presented numerous documents purporting to show how they

arrived at that figure. Yet, the jury awarded just $317,840 in general damages and

$83,788 in consequential damages. As the district court observed, these amounts do not

correspond with any of the figures that the Uvinos submitted into evidence, the Uvinos

‐ 8 ‐ have not suggested an alternative method of allocating the verdict, and their theory of

allocating damages rests on ʺpure speculation and conjecture.ʺ S. App. 30.

Accordingly, we conclude that Harleysville was entitled to summary judgment because

the Uvinos have failed to adduce evidence from which a reasonable factfinder could

conclude which, if any, of the damages awarded by the jury in the Underlying Action

were covered by the Policy.

We have reviewed the Uvinosʹ remaining arguments and conclude they

are without merit. Accordingly, the district courtʹs judgment is AFFIRMED and the

cross‐appeal is DISMISSED as moot.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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