Insurer’s Denial ≠ Breach of Procurement Duty; Ambiguous Releases Won’t Bar Third‑Party Indemnity: Grala v. Structural Preservation Systems, LLC (2d Dep’t 2025)

Introduction

This commentary analyzes the Appellate Division, Second Department’s Decision & Order in Grala v. Structural Preservation Systems, LLC, 2025 NY Slip Op 05941 (Oct. 29, 2025). The case arises from a construction-site injury at premises owned or controlled by the New York City Housing Authority (NYCHA). The injured worker, Pawel Grala, employed by Apex Development, Inc. (Apex), allegedly slipped on fluids leaking from a forklift owned by Structural Preservation Systems, LLC (Structural). Grala and his wife sued Structural and NYCHA for common-law negligence and violations of Labor Law §§ 200, 240(1), and 241(6). That action was consolidated with a separate personal injury action against NYCHA.

Structural, in turn, impleaded Apex and Grala’s coworker, Maciej Witczak (collectively, the third-party defendants), seeking: (i) contractual indemnification from Apex, (ii) common-law indemnification from Apex and Witczak, and (iii) damages against Apex for breach of contract for failure to procure insurance. Apex counterclaimed against Structural for common-law indemnification, breach of contract (including breach of the implied covenant of good faith and fair dealing), and equitable estoppel.

The Supreme Court, Queens County (Ventura, J.), denied the third-party defendants’ motion for summary judgment on the third-party complaint and on Apex’s counterclaims, and granted Structural and NYCHA’s cross-motion for summary judgment dismissing Apex’s counterclaims. The Second Department largely affirmed, but modified in one critical respect: it dismissed Structural’s claim against Apex for failure to procure insurance. The opinion clarifies two recurrent risk-transfer issues in New York construction litigation:

• Securing the requisite additional insured coverage satisfies a contractor’s duty to procure insurance; a later declination by the insurers does not constitute a breach of the procurement obligation.
• General releases will not bar third-party indemnity claims where there is a triable issue of fact about whether the parties intended to release claims arising from the very accident/litigation at issue.

Summary of the Opinion

• General Release: The court held that a general release between Apex and Structural did not warrant summary judgment dismissing Structural’s third-party claims. Although the release purported to cover “unknown claims,” Structural raised a triable issue of fact whether the parties intended to include claims related to this consolidated action.
• Common-Law Indemnification (Employer Immunity/Grave Injury): The court upheld the denial of summary judgment to Apex and Witczak on Structural’s common-law indemnification claims. The moving parties did not make a prima facie showing that Grala did not sustain a “grave injury” within the meaning of Workers’ Compensation Law § 11, nor did they establish Witczak’s exemption from suit.
• Contractual Indemnification: The court sustained Structural’s contractual indemnification claim at the pleading/motion stage; given the express contract language, the third-party defendants did not establish, prima facie, that Apex had no contractual obligation to indemnify Structural.
• Failure to Procure Insurance: The court modified, granting Apex summary judgment dismissing Structural’s failure-to-procure claim. Apex showed it procured the required insurance; insurers’ declinations of coverage do not equal a breach of the procurement obligation.
• Apex’s Counterclaims: The court affirmed dismissal of Apex’s counterclaims for common-law indemnification, breach of contract (and implied covenant), and equitable estoppel. Structural and NYCHA established that Structural was not actively at fault and did not breach contractual duties or engage in conduct warranting estoppel; Apex failed to raise triable issues.

Analysis

Precedents Cited and Their Influence

• Releases construed narrowly to intent:
  • Grove Realty Enters., Inc. v Budde Agency, Inc., 232 AD3d 708, 710: A release is a contract interpreted under ordinary contract principles.
  • Outdoors Clothing Corp. v Schneider, 153 AD3d 717, 718: Reinforces contract-law construction.
  • Spears v Spears Fence, Inc., 60 AD3d 752, 753; Burnside 711, LLC v Amerada Hess Corp., 175 AD3d 557, 559: Releases cannot be read to cover matters the parties did not intend to resolve.
  • Wei Qiang Huang v Llerana-Salazar, 222 AD3d 1033, 1034; Lopez v 121 St. Nicholas Ave. H.D.F.C., 28 AD3d 429, 430: Existence of a triable fact on intent defeats summary judgment based on a release.
• Workers’ Compensation Law § 11: Employer contribution/indemnity bar absent “grave injury”:
  • Velazquez-Guadalupe v Ideal Bldrs. & Constr. Servs., Inc., 216 AD3d 63, 71–73; Persaud v Bovis Lend Lease, Inc., 93 AD3d 831, 832: The employer is shielded unless the employee sustained a statutorily defined “grave injury.”
  • Workers’ Compensation Law § 11(1): Defines “grave injury,” including “permanent and total loss of use” of specified limbs.
  • Raquet v Braun, 90 NY2d 177, 182: Common-law indemnity principles; relevance to whether a party is exempt and to the allocation of ultimate responsibility to the actively negligent actor.
• Contractual indemnification—text controls:
  • Venza v Catholic Charities of the Diocese of Rockville Ctr., 235 AD3d 804, 807; Zapotosky v Ascape Landscape & Constr. Corp., 221 AD3d 1055, 1056: The right to contractual indemnity turns on the specific contract language.
  • Garcia v Fed LI, LLC, 239 AD3d 942, 946; Crutch v 421 Kent Dev., LLC, 192 AD3d 982, 983: A movant seeking dismissal must show, prima facie, the absence of any contractual obligation to indemnify.
• Failure to procure insurance vs. coverage disputes:
  • Meadowbrook Pointe Dev. Corp. v F & G Concrete & Brick Indus., Inc., 214 AD3d 965, 969; Rogers v Peter Scalamandre & Sons, Inc., 231 AD3d 1174, 1180: Summary judgment dismissing failure-to-procure is proper where the movant proves it obtained the required insurance.
  • Sicilia v City of New York, 127 AD3d 628, 629; Perez v Morse Diesel Intl., Inc., 10 AD3d 497, 498: An insurer’s denial of coverage is not, by itself, proof that the procuring party breached its duty to procure.
• Counterclaims—common-law indemnity, contract, estoppel:
  • Castillo v Port Auth. of N.Y. & N.J., 159 AD3d 792, 795–96: Common-law indemnity requires that the party from whom indemnity is sought be actually at fault, and the party seeking indemnity be vicariously liable without fault.
  • Rayham v Multiplan, Inc., 153 AD3d 865, 867–68; Citibank [South Dakota], N.A. v Abraham, 138 AD3d 1053, 1055–56: Failure to show breach of contract or breach of the implied covenant defeats summary judgment.
  • Brelsford v USAA, 289 AD2d 847, 849; Michaels v Travelers Indem. Co., 257 AD2d 828, 829–30: Elements of equitable estoppel; no estoppel absent a false representation or concealment of material fact and reasonable reliance.

Legal Reasoning

The Second Department’s reasoning applies familiar summary judgment principles: a movant bears the initial burden to establish entitlement to judgment as a matter of law. If that prima facie showing is not made, the motion must be denied regardless of the adequacy of the opposition. Within that framework, the court addressed each risk-transfer claim.

• General Release:

  Apex relied on a “valid general release” in which Structural “agreed to release and give up any claims it had against Apex, including unknown claims.” That showing shifted the burden. However, Structural countered with evidence creating a triable issue of fact as to whether the parties “knew and intended to include in the release claims related to this consolidated action.” Because releases are construed in light of intent and cannot be stretched to matters the parties did not mean to resolve, summary judgment was inappropriate. This keeps alive Structural’s third-party claims notwithstanding broad release language.

• Common-Law Indemnification from Apex and Witczak (Workers’ Compensation Law § 11; Co-worker Exposure):

  Apex invoked employer immunity under Workers’ Compensation Law § 11, which bars third-party contribution/indemnity claims against an employer unless the employee sustained a statutory “grave injury.” The movants failed to make a prima facie showing that Grala did not suffer a grave injury—a threshold they had to clear to obtain dismissal. The court also found they did not establish, prima facie, that Witczak (the co-worker) was “exempt from suit.” Citing Raquet v Braun, the panel signaled that common-law indemnity remains potentially available against the party actually responsible, and the record did not conclusively foreclose Witczak’s exposure at this stage. The result: Structural’s common-law indemnity claims against Apex and Witczak survive for now.

• Contractual Indemnification from Apex:

  The court reiterated that “the right to contractual indemnification depends upon the specific language of the contract.” To win dismissal, Apex had to demonstrate, prima facie, that its contract imposed no indemnity obligation as a matter of law. It did not. Given the “express language in the contract,” the panel held that Apex failed to make that prima facie showing. Thus, Structural’s contractual indemnity claim proceeds, subject to proof and any limitations (e.g., anti-indemnity statutes) that may arise later.

• Breach of Contract—Failure to Procure Insurance:

  This is the key modification. The Second Department held that Apex established, prima facie, that it “procured the requisite insurance,” entitling it to summary judgment dismissing Structural’s failure-to-procure claim. Critically, “the insurers’ declination of coverage is not a basis for a finding that Apex breached its obligation to procure insurance” (citing Sicilia and Perez). That is, the duty to procure is satisfied by obtaining the policy and additional insured status required by contract, not by guaranteeing a defense/indemnity decision from the insurer in a particular case. Structural failed to raise a triable issue in opposition.

• Apex’s Counterclaims (Common-Law Indemnity; Breach; Implied Covenant; Estoppel):

  On Apex’s counterclaims, the court reached two determinations: (i) the third-party defendants (as movants) were not entitled to summary judgment in their favor because they did not make the necessary prima facie showings; and (ii) Structural and NYCHA, on their cross-motion, did make a prima facie showing entitling them to dismissal of those counterclaims.

  • Common-Law Indemnity Counterclaim: Apex could not show that Structural was “actively at fault in bringing about Grala’s injuries” or that Apex’s putative liability would be purely vicarious. Structural and NYCHA further established that Structural “could not be found liable by operation of law” and was not actively at fault, defeating the indemnity theory under Castillo.
  • Breach of Contract/Implied Covenant: Apex failed to demonstrate a breach. The court emphasized that “Structural did pursue coverage from Apex’s insurers” and “the contract did not preclude Structural from seeking indemnification from Apex.” Absent a contractual bar and given Structural’s pursuit of coverage, there was no breach of contract or of the implied covenant of good faith and fair dealing.
  • Equitable Estoppel: Apex’s estoppel theory failed because Structural’s conduct did not amount to a “false representation or concealment of material facts.” Structural sought coverage from Apex’s insurers and only pursued Apex directly after coverage was denied—conduct inconsistent with estoppel.

Impact

• Insurance Procurement Duties Clarified:

  The opinion reinforces a critical boundary: a subcontractor’s contractual duty to procure additional insured coverage is a procurement obligation, not a guaranty of insurer performance. If the subcontractor actually secures the required coverage (typically proven by policy endorsements naming the upstream party as an additional insured), the duty is satisfied even if the insurer later declines coverage for reasons independent of the procurement process. This will curb failure-to-procure claims where the true dispute lies with the insurer’s coverage position.

• Sharper Drafting and Proof Practices:

  Upstream parties should ensure their contracts specify the type, scope, and priority of additional insured coverage, and should collect and retain the actual additional insured endorsements—not just certificates of insurance. Downstream parties should likewise retain the endorsements and policy pages to prove procurement on summary judgment. Both sides should anticipate that coverage denials will be litigated against insurers, not reframed as procurement breaches against contracting counterparties.

• Releases in Ongoing Project Litigation:

  The court’s treatment of the general release is a cautionary tale: broad, boilerplate releases will not necessarily extinguish indemnity-related claims arising out of a known accident or pending litigation unless the intent to do so is clear. Parties settling discrete disputes during or after a project should expressly identify whether the release covers (or excludes) accident-related claims, third-party practice, and risk-transfer rights tied to the incident.

• Workers’ Compensation § 11 Motions:

  Employers seeking to dismiss third-party indemnity claims on § 11 grounds must carry the initial burden to demonstrate the absence of a “grave injury,” often via admissible medical evidence. Absent a robust prima facie showing, the claim survives. This decision underscores that point.

• Co-worker Exposure:

  While an injured employee’s direct action against a co-employee is generally restricted, the court declined to hold, as a matter of law at this stage, that a co-worker is categorically exempt from common-law indemnity exposure in the third-party posture. The viability of such claims remains fact-driven.

• Strategic Posture on Estoppel and Good Faith:

  The decision indicates a sensible pathway for upstream contractors: pursue coverage under the downstream party’s policies first; if coverage is denied, then pursue contractual indemnity against the downstream party. Following that sequence helps defeat estoppel claims and claims of bad faith.

Complex Concepts Simplified

• Summary Judgment—Prima Facie Showing:

  The moving party must first present evidence establishing entitlement to judgment as a matter of law. If it fails, the court denies the motion without reaching the opponent’s evidence.

• General Release:

  A release is a contract by which one party gives up claims against another. Even broad releases are interpreted by what the parties intended to cover. If ambiguity exists about whether a release covers a particular dispute, a trial may be required.

• Common-Law vs. Contractual Indemnification:

  Common-law indemnity shifts loss from a party that is only vicariously liable (without fault) to the party actually at fault. Contractual indemnity arises from express agreement; its scope depends on the contract’s text and is subject to statutory limits.

• Workers’ Compensation Law § 11—“Grave Injury”:

  An employer is generally immune from third-party indemnity and contribution claims for employee injuries unless the employee sustained a “grave injury.” The statute lists specific categories (e.g., death; permanent and total loss of use of an arm, leg, hand, or foot). If not present, claims against the employer are barred.

• Duty to Procure Insurance vs. Duty to Provide Coverage:

  The contractual duty to procure insurance requires purchasing specified coverage (often naming the upstream party as an additional insured). It does not guarantee that an insurer will accept coverage in a particular lawsuit. An insurer’s denial may be wrong or correct, but it is not proof the procuring party breached its procurement duty if the required policy and endorsements were in place.

• Implied Covenant of Good Faith and Fair Dealing:

  Every contract includes a promise that neither party will unfairly frustrate the other’s right to the contract’s benefits. It does not create new duties beyond the contract’s express terms.

• Equitable Estoppel:

  Estoppel prevents a party from taking a position contrary to its prior conduct if that conduct amounted to a misrepresentation or concealment of material facts on which the other reasonably relied to its detriment.

Conclusion

Grala v. Structural Preservation Systems, LLC makes two practical points for New York construction risk transfer. First, a subcontractor’s duty to procure additional insured coverage is satisfied by obtaining the contractually required insurance; insurer declinations do not convert coverage disputes into procurement breaches. Second, general releases will not automatically extinguish third-party practice arising from an accident unless the parties’ intent to do so is clear and can be established as a matter of law.

The decision also preserves common-law indemnification claims against the employer and a co-worker at the summary judgment stage where the movants fail to negate “grave injury” or otherwise establish exemption from suit, and it rejects counterclaims premised on Structural’s alleged bad faith or estoppel, given Structural’s orderly pursuit of coverage and indemnity. For practitioners, the opinion underscores the importance of precise drafting (indemnity and release clauses), robust documentation (actual policy endorsements), and disciplined litigation sequencing (pursue insurer coverage first, then contractual indemnity if necessary). As modified and affirmed, the order positions the case for further proceedings on indemnity and liability issues while definitively removing the failure-to-procure claim from the field.