        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

122
CA 13-00513
PRESENT: SCUDDER, P.J., FAHEY, PERADOTTO, LINDLEY, AND SCONIERS, JJ.


DRYDEN MUTUAL INSURANCE COMPANY,
PLAINTIFF-RESPONDENT,

                    V                             MEMORANDUM AND ORDER

STANLEY GOESSL, ET AL., DEFENDANTS,
AP DAINO & PLUMBING, INC. AND THE MAIN STREET
AMERICA GROUP, DEFENDANTS-APPELLANTS.


KENNEY SHELTON LIPTAK NOWAK LLP, BUFFALO (JESSE J. COOKE OF COUNSEL),
FOR DEFENDANTS-APPELLANTS.

KNYCH & WHRITENOUR, LLC, SYRACUSE (PETER W. KNYCH OF COUNSEL), FOR
PLAINTIFF-RESPONDENT.


     Appeal from a judgment (denominated order and judgment) of the
Supreme Court, Oswego County (James W. McCarthy, J.), entered October
29, 2012 in a declaratory judgment action. The judgment, among other
things, declared that plaintiff has no duty to defend or indemnify
defendant Stanley Goessl.

     It is hereby ORDERED that the judgment so appealed from is
reversed on the law without costs and judgment is granted as follows:

          It is ADJUDGED AND DECLARED that plaintiff is obligated
     to defend and indemnify defendant Stanley Goessl in the
     underlying action, and that plaintiff is obligated to
     reimburse defendant Stanley Goessl for the reasonable
     attorneys’ fees and expenses he incurred in defending the
     underlying action, and

          It is further ADJUDGED AND DECLARED that defendant The
     Main Street America Group is not obligated to defend or
     indemnify defendant Stanley Goessl in the underlying action.

     Memorandum: Plaintiff, Dryden Mutual Insurance Company,
commenced this action seeking a declaration that it is not obligated
to defend or indemnify defendant Stanley Goessl in the underlying tort
action pursuant to a business general liability insurance policy
(hereafter, Dryden policy) that it issued to Goessl, who was doing
business as S&K Plumbing. The underlying action arose from a fire at
a residence that occurred while Goessl was engaged in plumbing work
there. Plaintiff disclaimed coverage on the grounds that, inter alia,
Goessl was an employee of defendant AP Daino & Plumbing, Inc. (AP
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                                                         CA 13-00513

Daino) and was acting within the scope of his employment at the time
of the fire. AP Daino was insured by defendant The Main Street
America Group (MSA) under a “contractors policy” (MSA policy). MSA
disclaimed coverage on the ground that Goessl was not an employee of
AP Daino at the time of the fire and therefore was not an “insured”
within the meaning of the MSA policy. After a bench trial, Supreme
Court issued a judgment declaring that plaintiff had no duty to defend
or indemnify Goessl in the underlying action and that MSA had a duty
to “defend and potentially indemnify” Goessl in that action. In
addition, the court ordered MSA to reimburse plaintiff and Goessl for
costs they had incurred relative to Goessl’s defense in the underlying
action. We conclude that the court erred, and instead conclude, inter
alia, that plaintiff must indemnify Goessl in the underlying action
while MSA has no such duty.

     It is well settled that, “[o]n appeal from a judgment following a
bench trial, this Court may independently consider the probative
weight of the evidence and the inferences that may be drawn therefrom,
and grant the judgment that we deem the facts warrant” (Blakesley v
State of New York, 289 AD2d 979, 979, lv denied 98 NY2d 605; see
Crane-Hogan Structural Sys., Inc. v State of New York, 88 AD3d 1258,
1260). “In determining a dispute over insurance coverage, we first
look to the language of the policy” (Consolidated Edison Co. of N.Y. v
Allstate Ins. Co., 98 NY2d 208, 221; see Fieldston Prop. Owners Assn.,
Inc. v Hermitage Ins. Co., Inc., 16 NY3d 257, 264). “As with any
contract, unambiguous provisions of an insurance contract must be
given their plain and ordinary meaning . . . , and the interpretation
of such provisions is a question of law for the court” (White v
Continental Cas. Co., 9 NY3d 264, 267). “If the plain language of the
policy is determinative, we cannot rewrite the agreement by
disregarding that language” (Fieldston Prop. Owners Assn., Inc., 16
NY3d at 264; see White, 9 NY3d at 267). “Unless otherwise defined by
the policy, words and phrases are to be understood in their plain,
ordinary, and popularly understood sense, rather than in a forced or
technical sense” (Hartford Ins. Co. of Midwest v Halt, 223 AD2d 204,
212, lv denied 89 NY2d 813; see Rocon Mfg. v Ferraro, 199 AD2d 999,
999). Thus, “[t]he meaning of the language used in the policy must be
found in the common sense and common speech of the average person”
(Stainless, Inc. v Employers Fire Ins. Co., 69 AD2d 27, 32-33, affd 49
NY2d 924; see Canfield v Peerless Ins. Co., 262 AD2d 934, 934, lv
denied 94 NY2d 757).

     Here, we conclude that the Dryden policy unambiguously provides
coverage for Goessl in the underlying action. The Dryden policy
states that, “if the named insured is an individual, both the
individual and his/her spouse are insureds but only with respect to
the conduct of a business of which he/she is the sole proprietor.”
“Business” is broadly defined in the Dryden policy as “a trade,
profession, or other occupation, including farming, all whether full
or part time.” The record in this case establishes that Goessl was
the sole proprietor of S&K Plumbing and that, at the time of the fire,
he was engaged in the conduct of his “trade, profession, or other
occupation” as a plumbing subcontractor for AP Daino. Because the
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                                                         CA 13-00513

injury in the underlying action allegedly arose out of the conduct of
Goessl’s plumbing business, plaintiff is obligated to defend and
indemnify him in the underlying action (see Cataract Sports &
Entertainment Group, LLC v Essex Ins. Co., 59 AD3d 1083, 1084).

     We reach the contrary conclusion with respect to the MSA policy.
That policy provides that AP Daino’s “employees” are insureds for acts
committed “within the scope of their employment by [AP Daino] or while
performing duties related to the conduct of [its] business.” The term
“employee” is not defined in the MSA policy, and should therefore be
given its plain or ordinary meaning (see Curry v Atlantic Mut. Ins.
Co., 283 AD2d 937, 938, lv denied 96 NY2d 721). Where, as here, the
dispute involves a business insurance policy, “[a]n important
guidepost when interpreting [such] a . . . policy is to examine the
reasonable expectation and purpose of the ordinary business [person]
when making an ordinary business contract” (Baughman v Merchants Mut.
Ins. Co., 87 NY2d 589, 593 [internal quotation marks omitted]; see
Moshiko, Inc. v Sieger & Smith, 137 AD2d 170, 176, affd 72 NY2d 945).
Here, the record establishes that AP Daino and Goessl intentionally
structured their business relationship as a long-term subcontracting
arrangement rather than an employment relationship. AP Daino did not
provide Goessl with health insurance or other employee benefits, and
did not withhold taxes or pay social security or unemployment taxes on
his behalf. Goessl determined his own hourly rate, submitted invoices
to AP Daino on behalf of S&K Plumbing, and received a Form 1099-MISC,
for miscellaneous income, as opposed to a W-2 wage statement. At AP
Daino’s request, Goessl obtained his own liability coverage, which is
further evidence that neither party considered Goessl to be an
“employee” under the MSA policy.

     Although it is undisputed that Goessl was an insured under AP
Daino’s workers’ compensation policy, the record indicates that the
workers’ compensation carrier required AP Daino to include uninsured
subcontractors on its policy, and Goessl was listed as an uninsured
subcontractor, not as an employee, on the policy. AP Daino initially
asked Goessl to obtain his own workers’ compensation policy, but
Goessl was advised by his insurance carrier that he did not need such
coverage because he was an independent contractor. Further, we
conclude that the fact that AP Daino’s owner, a master plumber, signed
Goessl’s journeyman’s card as his “employer” and paid the required fee
is insufficient to render Goessl an “employee” under the MSA policy.
Goessl testified without contradiction that a master plumber is
permitted to sign for a subcontractor or independent contractor.

     Inasmuch as the record establishes that AP Daino and Goessl
intentionally entered into a business arrangement whereby Goessl was
an independent contractor rather than an employee, we conclude, upon
our independent review of the record (see generally Blakesley, 289
AD2d at 979), that neither AP Daino nor Goessl expected that Goessl
would be considered an “employee” under the MSA policy (see generally
Baughman, 87 NY2d at 594). We thus conclude that Goessl is not
insured under the MSA policy and, therefore, that MSA has no duty to
defend or indemnify him in the underlying action (see generally Farm
Family Cas. Ins. Co. v Nason, 89 AD3d 1401, 1402).
                                 -4-                           122
                                                         CA 13-00513

     All concur except SCONIERS, J., who dissents and votes to affirm
in the following Memorandum: I respectfully dissent because I
conclude that Supreme Court properly determined, after conducting a
nonjury trial, that defendant Stanley Goessl was an employee of
defendant AP Daino & Plumbing, Inc. (AP Daino) and that defendant The
Main Street America Group, which insured AP Daino, is obligated to
“defend and potentially indemnify” Goessl in the underlying tort
action arising from a fire at the residence of a customer of AP Daino.
While it is a closer question, I also conclude that the court properly
declared that plaintiff is not obligated to defend and indemnify
Goessl, whom plaintiff insured as the sole proprietor of S&K Plumbing,
in the underlying action.

     It is well settled that, “[o]n an appeal from a judgment rendered
after a nonjury trial, our scope of review is as broad as that of the
trial court (see Matter of Capizola v Vantage Intl., 2 AD3d 843, 844
[2003]). Upon such a review, the record should be ‘viewed in the
light most favorable to sustain the judgment’ (Farace v State of New
York, 266 AD2d 870, 871 [1999]; see Parone v Rivers, 84 AD2d 686
[1981]), and this Court should evaluate ‘the weight of the evidence
presented and grant judgment warranted by the record, giving due
deference to the trial court’s determinations regarding witness
credibility, so long as those findings could have been reached upon a
fair interpretation of the evidence’ (New York Tel. Co. v Harrison &
Burrowes Bridge Contrs., 3 AD3d 606, 608 [2004] [internal quotation
marks and citations omitted]). ‘[T]he decision of the fact-finding
court should not be disturbed upon appeal unless it is obvious that
the court’s conclusions could not be reached under any fair
interpretation of the evidence, especially when the findings of fact
rest in large measure on considerations relating to the credibility of
witnesses’ (Thoreson v Penthouse Intl., 80 NY2d 490, 495 [1992]
[internal quotation marks omitted], rearg denied 81 NY2d 835 [1993])”
(Matter of City of Syracuse Indus. Dev. Agency [Alterm, Inc.], 20 AD3d
168, 170).

     In my view, the court properly considered and gave appropriate
weight to the evidence in determining that Goessl was an employee of
AP Daino. Specifically, on the day of the fire, Goessl went to AP
Daino’s Central Square office, picked up a van, and drove his crew of
AP Daino employees to the designated work site; Goessl previously was
employed by AP Daino before being approached about working for AP
Daino as an “independent contractor”; Goessl was paid on an hourly
basis; Goessl performed the same type of work as other AP Daino
employees; Goessl introduced himself to customers as “Stan from AP
Daino”; and, in all respects, AP Daino directed the work, told Goessl
where to go, and told him what to do. Also, Goessl worked 40 hours
per week as a plumber for AP Daino and used AP Daino tools for that
work. Notably, the underlying loss occurred in 2009 and, in 2010,
Labor Law § 861-c was enacted and Workers’ Compensation Law § 2 was
amended precisely because “unscrupulous employers [were] intentionally
reporting employees as independent contractors to state and federal
authorities or workers’ compensation carriers in record numbers” (NY
Bill Jacket, 2010 S.B. 5847, ch 418). Moreover, Goessl’s designation
as an independent contractor by AP Daino for income tax reporting
                                 -5-                           122
                                                         CA 13-00513

purposes was improper (see Betty Wang, IRS Cracking Down on
‘Independent Contractors’,
http://blogs.findlaw.com/free_enterprise/2013/07/irs-cracking-down-on-
independent-contractors.html, July 31, 2013 [accessed Apr. 23, 2014];
see also Robert W. Wood, IRS Inspector Urges Crackdown On Mislabeling
‘Independent Contractors’,
http://www.forbes.com/sites/robertwood/2013/07/30/irs-
inspector-urges-crackdown-on-mislabeling-independent-contractors/,
July 30, 2013 [accessed Apr. 23, 2014]). As a result, I respectfully
submit that the majority’s rejection of the court’s factual finding
that Goessl was an employee of AP Daino is not only contrary to the
well-settled standard that we apply when reviewing nonjury verdicts,
but it is also contrary to the overwhelming evidence presented at
trial and the strong public policy that militates against the improper
and unscrupulous classification of employees as independent
contractors.

     With respect to the insurance policy that plaintiff issued to
Goessl, I conclude that the language of that policy is not ambiguous
and that Goessl was not “conduct[ing] . . . a business of which he[ ]
is the sole proprietor” when he was working as an employee of AP Daino
(emphasis added). Notably, plaintiff insured Goessl as the sole
proprietor of a plumbing business with no employees, and Goessl
undoubtedly reported his business revenue, which would be used for
underwriting purposes, only insofar as such revenue included payments
for work performed for AP Daino, as well as the payments for the small
amount of work he performed for his own customers. At trial, Goessl
described working on crews with one, two or possibly more AP Daino
employees under circumstances where he sometimes supervised an
apprentice plumber and where he, based on his experience, was the de
facto foreman when working with other AP Daino employees. If the
majority’s analysis is correct, Goessl would be potentially liable not
only for his own negligence, but also for the negligence of AP Daino
employees working on the same crew, thereby creating greater liability
exposure for plaintiff than plaintiff knowingly contracted for. While
I see no merit to plaintiff’s position that it had a right to disclaim
coverage based on Goessl’s willful misrepresentation, I conclude that
plaintiff had a right to disclaim coverage because it expressly
insured a one-person plumbing business, not a plumber who was employed
by a much larger plumbing business.




Entered:   May 9, 2014                          Frances E. Cafarell
                                                Clerk of the Court
