Defendant Unite Here ("Unite"), moves for leave to reargue my May 10, 2010 denial of its motion for summary judgment and that portion of the Memorandum Decision and Order ("Decision") which held that Plaintiff Ace American Insurance Company ("Ace") was not obligated to pay defense costs or to indemnify Unite, and upon reargument grant Unite's motion for the payment of defense costs. Unite also moves for leave to renew these motions by considering the [*2]Briefs (Opening Brief and Reply Brief), which were filed in the underlying California action, (Sutter Health v Unite Here, Superior Court, California, Placer County, Docket No. S CV 17938)("Sutter action"). Moreover, by Affirmation in Further Support of this Motion, a copy of the decision of California Court of Appeals, dated July 21, 2010, reversing the jury's verdict in its entirety, has been submitted to this Court. In connection with this Motion is a further letter from Unite, dated January 4, 2011, stating that on November 10, 2010, the California Supreme Court denied review, that on or about December 17, 2010, the plaintiff in the California action moved to withdraw its request for certiorari in the United States Supreme Court, and that the "case will be scheduled for retrial".

A motion for leave to renew requires "new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination." C.P.L.R. § 2221(e)(2). In support of the motion for leave to renew, Unite now submits this new appellate history of the California litigation, subsequent to what I relied upon in determining that Unite was collaterally estopped from relitigating the issue of intent. Clearly, the motion for leave to renew must be granted.

Having granted the motion for leave to renew, the issue is whether upon renewal, Unite is entitled to the relief it originally sought (No.004), and the corollary question of whether Ace is entitle to the relief it originally sought (#003).

Unite contends that there is now no longer a basis for my conclusion that the jury's verdict should be given preclusive effect with regard to the "intentional act" provision of the Exclusion provision of the policy. I agree.By its unqualified reversal, now final, the California Court of Appeal "places the parties in the trial court in the same position as if the cause had never been tried, with the exception that the opinion of the court on appeal must be followed so far as applicable". (Central Sav. Bank of Oakland v. Lake, 257 P. 521, 523 [1027]); see also Saller v. Crown Cork & Seal Co., Inc., 115 Cal. Rptr. 3d 151, 165 {Court of Appeal. 2010). It is evident therefore that my Decision must be, and is, vacated to the extent of its reliance upon collateral estoppel. .

I earlier concluded that the occurrence, i.e., the act of publishing the Postcard, is "within the coverage of the policy" (Decision., p.9), a conclusion unaffected by this renewal motion. Therefore, Unite now argues that summary judgment should be awarded in its favor, "at least to the extent of awarding UNITE its Sutter defense costs - while leaving the dispute over indemnification to be resolved at trial" (M.O.L. In Supp. Of Mot., p.6). Or to put it another way, it remains to be determined whether the union's action in sending the Postcard was intended to cause harm to Sutter. It is their position that such result is required since "[u]nder New York law, an insurer's duty to defend arises whenever the allegations within the four corners of the underlying complaint potentially give rise to a covered claim", which I have already determined (M.O.L. In Further Supp. Of Mot., p. 9 [citation omitted]). In opposition, Ace contends that "coverage is not available for conduct intended to cause harm" (M.O.L. in Opp., p.l 8).

While both parties agree at issue is the applicability of "The Intentional Acts Exclusion", [*3]they disagree whether I can conclude, as a matter of law, that the Unite's conduct fits within this exclusion. Ace contends that based upon the underlying complaint, which "sets forth detailed factual allegations that Unite deliberately and intentionally set out to inflict economic harm upon Sutter...and the lack of any allegations to the contrary [that I] am compelled that its claims are excluded." (M.O.L. in Opp., p. 12). This does not provide a basis for me to conclude that the exclusion applies. Rather, it is a factual question which remains to be determined following discovery and trial.

Since I cannot conclude as a matter of law that the "intentional acts" exclusion applies, ACE has a duty to defend Unite in the Sutter action. The duty to defend is a broad one, and "is measured against the possibility of a recovery even though it may not ultimately be bound to pay...." (Frontier Insulation Contr. v. Merchants Mut. Ins. Co., 91 NY2d 169, 178 [1997]). Here since Unite has provided evidence of an insurance policy executed by ACE, its right to a defense under the Policy, and ACE's default thereunder (see 79th Realty Co. v X.L.O. Concrete Corp., 247 AD2d 256, 257 [1st Dept 1998]), it is entitled to a declaration that ACE has a duty to defend.The duty to indemnify, however, "is determined by the actual basis for the insured's liability to a third party".Thus, the duty to indemnify, if any, must await the "ultimate determination of the insurer's liability". (Frontier, supra)

On the issue of Unite's entitlement to attorneys' fees, " an insurer's duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer's declaratory judgment action' [citation omitted]"(Barkan v New York Schools Ins. Reciprocal, 65 AD3d 1061, 1065 [2d Dept 2009]). An insured that is " cast in a defensive posture by the legal steps an insurer takes in an effort to free itself of its policy obligations,' and who prevails on the merits, may recover attorneys' fees incurred in defending against an insurer's action" (U.S. Underwriters Ins. Co. v City Club Hotel, 3 NY3d 592, 597 [2004]). Given that the expenses incurred by Unite in defending against ACE's declaratory judgment, and in light of the fact that those expenses arose as a direct consequence of ACE's unsuccessful attempt to free itself of its policy obligations, Unite is entitled to recover those expenses from the insurer. In other words, Unite's recovery of attorneys' fees is incidental to the insurer's contractual duty to defend.

Therefore, upon renewal I deny motion sequence number 003, in which Ace seeks summary judgment, and I grant, in part and deny in part, motion sequence number 004, in which United seeks summary judgment. (This conclusion renders moot the prong of this motion which seeks leave to reargue).

Accordingly, it is

ORDERED that the prong of this motion seeking leave to reargue is DENIED; and it is further

ORDERED that the prong of this motion seeking leave to renew is GRANTED, and that upon renewal it is further ordered that

ORDERED that the motion for summary judgment by plaintiff Ace American Insurance Company (#003) is denied; and it is further

ORDERED that Unite Here's motion for summary judgment on the first counterclaim (#004) is granted in part and denied in part, insofar as it is [*4]

ADJUDGED AND DECLARED that plaintiff Ace American Insurance Company is obligated to defend defendant Unite Here in the Underlying Action Sutter Health v Unite Here, Superior Court, California, Placer County, Docket No. S CV 17938; and it is further

ADJUDGED AND DECLARED that Unite Here is entitled to its attorneys' fees and costs in defending this action; and it is further

ORDERED that the remainder of this action—that is, the second cause of action of the complaint and Unite Here's first counterclaim to the extent that it concerns indemnification, as well as Unite Here's second and third counterclaims—shall be severed and shall continue; and it is further

ORDERED that the issue of the calculation of attorneys' fees due and owing to Unite Here is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further

ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet,^[FN1] upon the Special Referee Clerk in the Motion Support Office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R); and it is further

ORDERED that a conference will be held on this action in Part 60 on Friday, March 18, 2011 at 12:00 noon.

Dated January 31, 2011

ENTER

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J.S.C.