New York Insurance Coverage Law Update

Court Holds That Contractor’s Insurer Must Defend Owner As Additional Insured In Personal Injury Action Filed By Subcontractor’s Employee

A premises owner hired a contractor to perform an oil-to-gas boiler conversion, and the contractor subcontracted the work.  The subcontractor’s employee was injured while working on the project and sued the owner.  The owner sought additional insured coverage under the contractor’s policy with Harleysville which covered the owner as an additional insured for liability for bodily injury “caused, in whole or in part, by” the contractor’s “acts or omissions” or those acting on its behalf.  The United States District Court for the Southern District of New York held that Harleysville must defend the owner as an additional insured.  The court reasoned that the claimant’s allegations, coupled with those in the owner’s third-party complaint against the contractor, suggested a reasonable possibility that the con-tractor’s acts or omissions “may have been a proximate cause” of the claimant’s injury, “which is all that is necessary to trigger the duty to defend”.  Although the court determined that the Harleysville policy contained an excess “other insurance” clause, the court held that it was “cancelled out” by the excess “other insurance” clause in the owner’s policy making them both primary.  In addition, because the owner’s policy contained a $100,000 self-insured retention which is not “other insurance”, the court concluded that Harleysville was obligated to pay the first $100,000 of the owner’s defense costs.  [United States Specialty Ins. Co. v. Harleysville Worcester Ins. Co., 2021 U.S. Dist. LEXIS 167928 (S.D.N.Y. Sept 3, 2021).]

Court Grants Summary Judgment To Insurer On Claim for Payment Of Adjusted Premium

American Empire Surplus Lines Insurance Company sued its insured for payment of a premium that was subject to an adjustment if a later audit revealed that the insured’s actual gross receipts exceeded the initial estimate. American Empire initiated an audit which determined that the insured owed an additional $500,516 in premium. The United States District Court for the Eastern District of New York granted summary judgment to American Empire based upon the insurance policy, an audit statement, and an affidavit from an insurance company representative as to the additional amount owed. The court ruled that an agreement between the insured and a third-party as to the payment of the premium was irrelevant.  The court also found that the insured’s argument that the audit was defective was contradicted by the insured’s own accountant who verified the accuracy of the audit. The court concluded that the insured owed American Empire the unpaid premium plus interest.  [American Empire Surplus Lines Ins. Co. v. B&B Iron Works Corp., 18-cv-6384 (WFK)(ST), 2021 U.S. Dist. LEXIS 185770 (E.D.N.Y. Sept. 28, 2021).]

Court Grants Default Judgment To Insurer Where Insured Failed To Comply With Policy Conditions

Mt. Hawley Insurance Company filed a declaratory judgment action against its insureds, seeking a declaration that it had no duty to defend or to indemnify the insureds in an underlying personal injury action filed by a worker for a contractor hired for a roofing job at the insureds’ premises.  Mt Hawley alleged that the insureds breached certain conditions of the policy including by failing to obtain a sufficient certificate of insurance from the contractor, written indemnity agreement from the contractor, written agreement requiring the contractor to procure additional insured coverage for the insureds, and defense and indemnification from the contractor’s general liability insurer.  The insureds failed to appear or respond to Mt. Hawley’s motion for a default judgment.  After determining that the court had appropriate jurisdiction to preside over the case, the United States District Court for the Southern District of New York found that the factual allegations “plainly do not bring the case within the coverage of the policy” and granted Mt. Hawley’s motion for a default judgment.  The court concluded that Mt. Hawley was relieved of its duty to defend and to indemnify the insureds in the underlying action and that they must reimburse Mt. Hawley for the defense costs it had already paid in connection with the underlying action. [Mt. Hawley Ins. Co. v. Pioneer Creek B LLC, 2021 U.S. Dist. LEXIS 184501 (S.D.N.Y. Sep. 27, 2021).]