Misiti & Gorfinkel Obtain Affirmance in Appellate Division

April 12, 2017 | Insurance Coverage

Frank Misiti and Paul Gorfinkel obtained an affirmance in the Appellate Division, Fourth Department of a declaratory judgment in Time Cap Development Corp. v. Colony Insurance Company, et al., v. Cincinnati Insurance Company, that an insurer was “wholly excess” to the insurance issued to a mutual insured for an underlying personal injury action.  The Fourth Department also reversed the lower court’s determination that the issue of indemnification was premature and determined that the subcontractor’s insurer, Colony Insurance Company (“Colony”), was responsible to indemnify Time Cap Development Corp. (“Time Cap”), Colony’s and Cincinnati Insurance Company’s (“Cincinnati”) mutual insured.

The underlying action alleged that an individual suffered injuries when he fell from a ladder while working on a construction project in a building in Chittenango, New York.  The underlying plaintiff was an employee of Parish Iron Works (“Parish”), a subcontractor on the construction project.  The mutual insured, Time Cap, was the general contractor of the construction project.

The underlying lawsuit was tendered to Time Cap’s general liability insurer, Cincinnati, and the general liability insurer of Parish, Colony.  Cincinnati accepted the defense of Time Cap for the underlying lawsuit, but Parish’s insurer disclaimed any obligation to defend or indemnify Time Cap based on an employee exclusion contained in its general liability policy.

The lower court determined that the disclaimer letter issued by Parish’s insurer was untimely as a matter of law and that Time Cap was an additional insured under the insurance contract issued by Colony.  The lower court also determined that the requirements of New York Insurance Law §3420(d) of a timely disclaimer did not apply between insurers, but that the lower court still must examine the terms of the respective insurance contracts to determine priority of coverage.  After an examination of the respective insurance contracts, the lower court determined that the plain language of the insurance contract issued to Time Cap was “wholly excess” to the insurance provided to Time Cap, as an additional insured, that was issued to Time Cap’s subcontractor Parish.

As a result, the lower court granted the cross-motion declaring that Colony, Parish’s insurer, has a primary duty to defend Time Cap as an additional insured, without contribution from Cincinnati.  Colony then sought re-argument in the lower court, which was denied.  Cincinnati cross-moved for summary judgment requesting a declaration that Colony had the sole obligation to indemnify Time Cap in the underlying action.  The lower court denied the motion on the grounds that it was premature.

The Appellate Division affirmed the lower court’s decision regarding the duty to defend stating that insurance contracts must be interpreted according to their plain meaning.  The Appellate Division held that the plain meaning of the insurance contracts at issue provided that Colony, the subcontractor’s insurer, is the primary insurer of Time Cap, while Cincinnati, the general contractor’s insurer, is an excess insurer.  The Appellate Division also noted that even if Colony’s disclaimer of coverage, under New York Insurance Law §3420(d), was ineffective between insurers, the court saw no basis for altering the plain meaning of the insurance contracts.

Additionally, the Appellate Division reversed the lower court’s denial of Cincinnati’s motion seeking indemnification for any settlement or judgment in the underlying action.  The Appellate Division noted that Cincinnati met its burden on a motion for summary judgment by submitting evidence in admissible form, namely deposition transcripts from the underlying action, showing that the injury arose out of an act or omission on the part of Parish.  The Appellate Division stated that the testimony showed that the injury to the underlying plaintiff was caused by the acts of omission of someone acting on Parish’s behalf – – the injured plaintiff – – a Parish employee.  The Appellate Division found the subcontractor’s insurer solely responsible for any indemnification obligation.

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