New York Insurance Coverage Law Update

Court Holds That Insurer Was Not Volunteer And May Seek Subrogation From Other Insurer But That Other Insurer’s Policy Is Excess

Walter Breitenbach, who was insured by Adirondack Insurance, struck a pedestrian with his automobile while driving within the scope of his employment with the Town of Riverhead, which was insured by ACE Insurance.  The pedestrian and his wife sued Breitenbach and Riverhead, and   Adirondack denied coverage to Riverhead.  At mediation, ACE agreed to pay $1 million on behalf of Riverhead under its primary policy, and Adirondack agreed to pay $750,000 on behalf of Breitenbach – $500,00 under a primary policy and $250,000 under an umbrella/excess policy.  In a Post-Mediation Agreement, the parties to the litigation released each other. In turn, ACE filed a declaratory judgment action against Adirondack, seeking to recover ACE’s settlement payment on behalf of Riverhead under Breitenbach’s umbrella/excess policy, which covered Riverhead as an additional insured.  The Supreme Court, New York County, rejected Adirondack’s argument that ACE acted as a volunteer in settling the underlying action and, therefore, could not seek subrogation from Adirondack, reasoning that subrogation is a viable theory where an insurer makes payments on its policy after the other insurer denies coverage.  The court also rejected Adirondack’s argument that ACE waived its right to recovery in the Post-Mediation Agreement and ensuing settlement releases, stressing that neither ACE nor Adirondack were signatories.  However, the court ultimately concluded that ACE could not recover from Adirondack because ACE’s primary policy issued to Riverhead was primary to Adirondack’s umbrella/excess policy that covered Riverhead as an additional insured.  Although the ACE primary policy had a clause providing it was excess to other insurance, the court found that it did not “manifest a clear intent” to be excess to a true umbrella/excess policy.  [ACE Am. Ins. Co. v. Adirondack Ins. Exchange, 2023 N.Y. Misc. LEXIS 253 (Sup. Ct., N.Y. Cnty Jan. 4, 2023).]

Court Finds That Construction Manager’s Insurer Must Defend City Because Of Its Potential Vicarious Liability

The City of New York contracted with TDX Construction for construction management services at Coney Island Hospital where a worker was injured by a falling object.  The worker sued the City alleging that the City owned and operated the hospital, hired contractors for the construction work, and was negligent and violated the Labor Law.  The City sought coverage under TDX’s policy issued by Travelers, which provided additional insured coverage to the City for injury “caused by acts or omissions” of TDX or its subcontractor in the performance of TDX’s contacted-for work with the City, but not for the City’s “independent acts or omissions.”  The Supreme Court, New York County, held that Travelers had a duty to defend because the City’s alleged liability for Labor Law violations for which the City could be vicariously liable “provide[s] a scenario” triggering potential coverage and the duty to defend.  [City of New York v. Travelers Indem. Co., 2023 N.Y. Misc. Lexis 107 (Sup. Ct., N.Y. Cnty Jan. 3, 2023.]

Court Finds Questions Of Fact As To Application Of Exclusion For Renovation

Pablo Brito sued Mario Tejada for injuries sustained at premises owned by Tejada, and Tejada tendered to his insurer, Union Mutual Fire Insurance Company.  The in-surer hired an investigator who obtained a signed statement from Tejada reflecting that Tejada was “engaged in renovations” and that he engaged Brito to help.  Union Mutual disclaimed coverage based upon two exclusions that were triggered by bodily injury arising out of “construction, renovation or repair”, provided a gratuitous defense to Tejada, filed a declaratory judgment action seeking a declaration of no coverage, and moved for summary judgment.  In opposition, Tejada filed a declaration stating that he was engaged in cleaning up and removing debris at his premises on the date of the accident, not renovations.  The United States District Court for the Southern District of New York denied the insurer’s motion for summary judgment based upon questions of fact, reasoning that the “sham affidavit” doctrine did not apply under the circumstances.  The court found that a reasonable factfinder could find that the earlier statement was mis-recorded by the investigator or signed by Tejada because of his imperfect facility with English.  The court also rejected Union Mutual’s argument that the declaration should be rejected as inconsistent with Tejada’s answer, finding enough “flexibility and ambiguity” in the answer.  [Union Mut. Fire Ins. Co. v. Tejada, 2023 U.S. Dist. LEXIS 3794 (S.D.N.Y. Jan. 9, 2023).]