The December 2021 First Department decision in Nouveau Elevator Indus. v. New York Marine & General Ins. Co. is pushing some buttons in the elevator industry, given the significant implications it may have on the adequacy of policy limits for elevator service companies operating in New York state.
The Court held in Nouveau that monthly elevator maintenance work performed under an ongoing service agreement is considered “completed operations” for purposes of applying policy limits. Specifically, the Court found that the per location policy limits are not implicated here, and instead held that the products-completed operations aggregate limit applies to completed work, which expressly includes “that part of the work done at a job site [that] has been put to its intended use.”
Facts of the Case
Nouveau provides elevator maintenance and service in the greater New York city region. Its work is done in multiple buildings and locations throughout the city. Nouveau purchased six commercial general liability (CGL) policies from New York Marine for consecutive one-year periods. Each of the CGL policies provides a liability limit of $1 million, with an aggregate limit of $2 million, per accident or occurrence.
During the terms of the policies, twelve separate personal injury lawsuits were filed against Nouveau alleging negligence from ten different service locations. New York Marine denied coverage, arguing that the $2 million aggregate limit applies collectively to all of the lawsuits and that Nouveau is not afforded a separate $2 million per-location limit. This denial meant that, practically speaking, Nouveau only had $2 million total liability coverage for all twelve claims.
At issue was whether the monthly elevator maintenance work under a service agreement constitutes ongoing operations, to which the policy’s per project $2 million aggregate limits would apply, or whether each service visit was deemed complete upon the technician leaving the property and the elevator being “put to its intended use”, resulting in application of the Products/Completed Operations Hazard General Aggregate limits.
The trial court (decision can be found here) decided summary judgment motions in favor of Nouveau. The trial court deemed the policy’s use of the term “project” as being ambiguous and any ambiguities in an insurance policy are to be construed against the insurer. The trial court applied the $2 million dedicated per project limit to each of the ten projects, determining that the claims against Nouveau arose out of its ongoing operations, based largely upon the ongoing maintenance work that Nouveau performed pursuant to its service contracts for each of the locations at issue.
New York Marine appealed the decision to the Supreme Court of New York, Appellate Division, First Department.
First Department Asks…(Are your Limits) Going Down?
In a one paragraph analysis, the First Department reversed the trial court’s decision, holding that “completed work” is defined to include “that part of the work done at a job site [that] has been put to its intended use.” The court reasoned that because the elevators that were allegedly serviced negligently had been “put to their intended use” after being serviced, the work was completed under the plain language of the policies and the products-completed operations aggregate limits apply. The First Department merely cited the 2018 federal district court decision of United States Underwriters Ins. Co. v Image By J & K, LLC for justification, but without explanation. The First Department’s holding means that the total limit available for all twelve plaintiffs is limited to the $2 million Products Completed Operations Aggregate.
On the Up and Up
This case should prompt elevator maintenance contractors who operate in New York state to review their current CGL policies to confirm whether limits are applied on a per project basis, and if so, whether they extend to both ongoing and completed operations. If not, further consideration should be given as to whether the available limits are sufficient for the elevator contractor’s scope of operations and client locations. Based on Nouveau, any claims asserted in connection with an elevator that has been serviced and put back to its intended use, constitute “completed operations” for which per project limits are likely unavailable.
If a CGL policy for an elevator service or maintenance company contains a Designated Per Project or Location General Aggregate limit for “ongoing operations” alone, the “per project” limit likely will not apply to completed operations. If an elevator service company faces claims by multiple claimants at different sites, the Products-Completed Operations Aggregate limit would apply to all claims, regardless of location, and would likely be insufficient to cover the associated liability.
The attorneys at Saxe Doernberger & Vita, P.C. are happy to discuss the Nouveau decision and any related questions or concerns you may have regarding insurance coverage. For more information contact Richard W. Brown at RBrown@sdvlaw.com or Sarah J. Markham at SMarkham@sdvlaw.com.