Savino, Gorfinkel, and Misiti Obtain Summary Judgment for Insurer, Defeating Alleged Additional Insured’s Estoppel Claim

February 5, 2016 | Insurance Coverage

William Savino, Paul Gorfinkel, and Frank Misiti obtained summary judgment on behalf of an insurer in an action by a party claiming to be an additional insured. The ruling is an important victory for insurers because it rejects an alleged additional insured’s attempt to expansively apply the estoppel doctrine.

In Temple Beth Shalom Foundation, Inc. v. T.G. Nickel & Assocs., No. 11335-11 (N.Y. Sup. Ct., Nassau Cty.), a religious organization (“Temple”) retained a contractor to remove lead and asbestos from its premises.  An employee of a subcontractor sustained injuries during the project and sued the Temple. The Temple looked to the contractor and the contractor’s insurer (“Insurer”) for defense and indemnity.

The Insurer accepted the defense under a reservation of rights. The Insurer then tendered defense to the subcontractor’s insurer, who ultimately accepted the defense.  In the interim, the Temple sued the Insurer, seeking a declaration that the Insurer was obligated to defend and indemnify it in the underlying suit.

The contractor later demonstrated that the accident did not arise out of its work. The Insurer moved for summary judgment on the basis that the Temple was not an additional insured. In opposing the motion, the Temple argued that because the Insurer had controlled the defense, it was now estopped from denying coverage.

The court disagreed. It observed that the Insurer had tendered the defense to the subcontractor’s insurer, who in turn defended the Temple, along with the Temple’s own insurer.  Furthermore, the court recognized that an insurer may be relieved of the duty to defend once it demonstrates that there is no possible factual or legal basis upon which it might be obligated to indemnify its insured.  When the Temple tendered the claim to the Insurer, there remained a question as to whether the accident was a covered event.  Having properly reserved its rights, the Insurer was permitted to later deny coverage once that issue was resolved.

As the Temple was unable to show that it lost all meaningful opportunity to control its defense, the Insurer was not estopped from disclaiming any duty to defend or indemnify the Temple. The court granted the Insurer’s motion for summary judgment in full.

 

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