The motion by defendant for an order pursuant to C.P.L.R. §3211(a)(7), dismissing plaintiffs' complaint, is denied.

This matter involves a declaratory judgment action brought by an excess insurer against a primary insurer. The complaint alleges that the primary insurer breached its duty of good faith and fair dealing by, inter alia, refusing to implead a potentially responsible third party into the underlying actions, specifically, the party that designed and supplied the materials for the shoring platform that collapsed.

The underlying cause of action involved a scaffolding collapse that occurred on January 14, 2008 at the Trump SoHo Tower project at 246 Spring Street in New York County. As a result of the scaffolding collapse, several workers sustained injuries including Dwight Wainwright, Christopher Borelli, Michael Verni, Thomas Dougherty, Francisco Palizzotto, [*2]Mario Carlucci and Daniel Trocchia. One individual employed by DiFama Concrete Inc., Yuriy Vanchytska, died in the accident. Lawsuits were commenced on behalf of said individuals in Supreme Court, Bronx County.

Defendant asserts that it issued a commercial general liability policy to named insured, Bayrock. A copy of said policy is annexed to the moving papers. Defendant also submits an affidavit from its Claims Director, Douglas Millner. The effective dates of the policy were from November 1, 2006 to April 1, 2009 and it had a "per occurrence" coverage limit of $2,000,000. The policy was issued to provide the property owner, Bayrock, along with multiple other insureds named on the policy, liability coverage with respect to construction operations taking place at the Trump SoHo Tower project.

Defendant contends that pursuant to the terms of the policy, it agreed to defend and indemnify the property ownership entities, Bayrock, Sapir and Trump, the general contractor, Bovis, and the involved contractor, DiFama. Defendant further asserts that it negotiated and reached settlement agreements with three of the underlying claimants: Christopher Borelli, Michael Verni and Mario Carlucci. The combined total settlement for the three claims is $1,244,573, which is well within the policy limits and leaves approximately $755,000 available in primary coverage under the policy. In its reply papers, defendant's counsel corrects the aforesaid amounts due to an inadvertent scrivener's error, to reflect that defendant actually agreed to pay out $525,000 in settlement of three of the claims and also paid out $230,477.29 in indemnity to a church located next door to the subject premises that sustained damage due to falling debris, for a total of $755,477.29. Therefore, $1,244,522.71 is available in primary coverage under defendant's policy.

Defendant moves to dismiss plaintiffs' complaint for failure to state a cause of action on the ground that plaintiff has not paid any money in defense or settlement of any of the underlying personal injury/wrongful death actions under the excess insurance policy and, as such, plaintiffs have incurred no actual damages to date. In order to establish a breach of fiduciary duty, a plaintiff must prove the existence of a fiduciary relationship, misconduct by the defendant and damages that were directly caused by defendant's misconduct. Since plaintiffs cannot establish the existence of damages cause by any alleged misconduct or "bad faith" conduct on the part of the defendant, then plaintiffs have no sustainable cause of action against defendant.

Defendant further argues that plaintiffs' complaint improperly seeks injunctive relief against defendant insofar as plaintiffs ask the court to compel defendant to permit plaintiffs to appoint their own defense counsel to represent Bayrock, Sapir, Bovis and Trump in the underlying actions or to compel defendant to appoint new and separate counsel to represent each of those parties. Plaintiffs also seek to compel defendant to direct assigned defense counsel to provide plaintiffs with all records of its insureds including all litigation files and reports. Defendant contends that this element of plaintiffs' complaint is akin to an application for an injunction which is not to be granted unless a clear right to the relief demanded is established. Thus, plaintiffs are required to prove that they will suffer irreparable injury if the injunction is [*3]not granted. However, in the case at bar, any notion of irreparable injury to plaintiffs is purely speculative as to date, plaintiffs have not sustained an injury or damages due to the fact the defendant's primary policy has yet to be exhausted.

Finally, defendant argues that plaintiffs' cause of action for declaratory relief on the ground of purported bad faith conduct is without merit because plaintiffs have not asserted any claims against their insured or made any allegations of misconduct that would potentially void the excess policy. Plaintiffs never disclaimed coverage to their insureds under the excess policy and plaintiffs cannot escape their obligations to their insureds by virtue of the instant dispute with another insurance provider. As such, the complaint should be dismissed.

Plaintiffs oppose the motion and argue that an allegation of present damages is not required in order to state a viable cause of action for a declaratory judgment. Moreover, privity of contract is not required for an excess carrier to assert a breach of duty of good faith and fair dealing against a primary insurer. Plaintiffs contend that the complaint alleges a legally cognizable claim for declaratory judgment based upon a breach of the duty of good faith and fair dealing. Plaintiffs cite to case law and argue that the purpose of a declaratory action is to enable a party whose rights, privileges and powers are endangered, threatened or placed in uncertainty, to invoke the court's assistance in obtaining a declaration of the party's rights before the party subjects him/herself to damages or loss. In the case at bar, plaintiffs assert that they have the express right under the excess policy to participate in the defense of the underlying claims that have the potential to impact the excess coverage.

Plaintiffs assert that defendant should implead Patent construction Systems, a Division of Harsco Corporation (hereinafter "Patent")as a party potentially liable for the platform collapse which resulted in the underlying claims but defendant has failed to do so. Defendant's refusal to implead Patent deprives plaintiffs of their right to participate in the defense and directly impacts the excess policy by eliminating an avenue to allocate the potential exposure to other responsible parties.

Plaintiffs contend that the reason defendant has failed to implead Patent is that if Patent is impleaded, it is likely that Patent will then assert a third-party claim against DiFama for both contractual and common law indemnity and common law contribution. The common law indemnity and contribution claims would implicate the unlimited coverage afforded to DiFama under defendant's Employer's Liability policy. By refusing to sue Patent then, defendant would insulate its separate Employer's Liability policy from unlimited exposure while directly increasing the exposure to its insureds and plaintiffs' excess policy. Plaintiffs argue that by placing its own interests ahead of the interests of its insureds and plaintiffs, defendant has breached the duty of good faith and fair dealing it owes to both its insureds and to plaintiffs. Plaintiffs cite to case law (Hartford Accident and Indem. Co. v. Michigan Mutual Ins. Co., 61 NY2d 569 (1984)) which holds that a primary insurer owes fiduciary duties directly to an excess insurer. Therefore, an excess insurer may maintain a direct action against a primary insurer for bad faith. [*4]

In addition, plaintiffs argue that they need not allege present damages to state a cause of action for a declaratory judgment. However, a declaratory judgment to ascertain the rights and obligations of the parties prior to the imposition of damages is the type of action authorized by C.P.L.R. §3001. The fact that the action at issue in Hartford was brought after the excess carrier therein had settled the underlying claim and, thus, had already been damaged by the refusal to implead a responsible third party, does not preclude plaintiffs' right to seek a declaration to prevent the same damages here. Moreover, plaintiffs refer to case law which holds that a claim for equitable subrogation may be maintained by an excess carrier before it has paid any judgment under its policy.

In the case at bar, plaintiffs assert that eight separate actions have been filed by workers alleging that they were injured in the collapse of the concrete shoring platform, including one claim for wrongful death. At present, plaintiffs in the remaining underlying actions have made settlement demands totaling $40,250,000. The latest settlement demands by plaintiffs in the underlying actions far exceed the liability limits of both defendant's policy as well as plaintiffs' excess policy. Accordingly, the facts herein present an actual controversy ripe for adjudication by this court by way of a declaratory judgment and the complaint should not be dismissed.

C.P.L.R. §3211(a)(7) states that a party may move to dismiss one or more causes of action against it on the ground that the pleading fails to state a cause of action. It is well established that on a motion to dismiss pursuant to C.P.L.R. §3211, the court is to, "...accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit any cognizable legal theory." Leon v. Martinez, 84 NY2d 83 (1994). The complaint should be liberally construed in favor of the plaintiff. Robinson v. Robinson, 303 AD2d 234, 235 (1st Dept. 2003). Moreover, on a motion to dismiss for failure to state a cause of action, it is not the function of the court to evaluate the merits of a case. Carbillano v. Ross, 108 AD2d 776 (2nd Dept. 1985).

C.P.L.R. §3001, states, in pertinent part, "The supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed." In, New York Public Interest Research Group, Inc. v. Carey, 42 NY2d 527 (1977), the Court of Appeals stated, "...when a party contemplates taking certain action a genuine dispute may arise before any breach or violation has occurred and before there is any need or right to resort to coercive measures. In such a case all that may be required to insure compliance with the law is for the courts to declare the rights and obligations of the parties so that they may act accordingly. That is the theory of the declaratory judgment action authorized by CPLR 3001..." Id. at 530.

In the case at bar, defendant moves to dismiss plaintiffs' complaint on the ground that it fails to state a cause of action for declaratory judgment. It is not the function of this court on a motion to dismiss to evaluate the merits of the declaratory judgment action. This court must simply determine whether a cause of action was sufficiently stated. Accepting the facts as alleged in the complaint to be true and according the plaintiffs the benefit of every possible [*5]favorable inference, this court finds that plaintiffs have sufficiently stated a cause of action cognizable at law.

Accordingly, defendant's motion to dismiss is denied.

This constitutes the decision and order of the court.

Dated: June 10, 2011

J.S.C.