The Travelers Indemnity Company of America v. Accredited Surety and Casualty…

Background

This insurance-coverage dispute arose from a February 19, 2020 workplace injury at 1274 Fifth Avenue in New York. Milton Alfredo Barrera Orellana was struck by a falling brick or cinderblock while working for Touchstone Contracting, Inc. Touchstone was a subcontractor of H&L Ironworks Corp., which had subcontracted with Reidy Contracting Group in connection with a renovation project. The accident reports stated that the block had been placed by employees of L.C.D. Elevator Repair Inc. to secure a tarp.

Travelers insured Reidy. Accredited Surety and Casualty Company, Inc. (ASCC) insured H&L, and Great American Insurance Company (GAIC) insured LCD. The underlying state-court personal-injury action named, among others, 5541-1274 Fifth Avenue Manhattan LLC (the Owner or Fifth), Reidy, H&L, and LCD as defendants. Travelers undertook the defense of Reidy and Fifth and sought additional-insured coverage from ASCC and GAIC. Both insurers declined to defend.

Travelers moved for partial summary judgment on the insurers’ defense obligations, priority of coverage, and reimbursement of defense expenses. ASCC and GAIC each cross-moved for summary judgment seeking declarations that they had no duty to defend or indemnify the relevant parties. GAIC also asserted a counterclaim against Travelers and a crossclaim against ASCC.

Court’s analysis

Under New York law, an insurer’s duty to defend is broader than its duty to indemnify. The duty to defend can arise when the underlying allegations create a reasonable possibility that the insurer may eventually have to indemnify the insured. The court therefore considered whether the underlying allegations and permissible outside evidence created that possibility, rather than deciding the ultimate liability in the underlying injury case.

For ASCC, the court relied on the master subcontract agreement requiring H&L to name Reidy and Fifth as additional insureds. The ASCC policy covered additional insureds for liability caused, in whole or in part, by H&L’s acts or omissions or by those acting on H&L’s behalf. The underlying complaint alleged that H&L failed to provide a safe workplace and failed to provide proper safety devices. The court held that these allegations created a reasonable possibility that H&L’s acts or omissions were a proximate cause of the injury. ASCC could not avoid its defense duty by relying on accident reports and deposition testimony that might show LCD was solely responsible, because that evidence went to the merits of the underlying claims and did not establish to a legal certainty that LCD alone caused the accident.

For GAIC, the court held that the Elevator Contract required LCD to maintain liability insurance and to identify Fifth as an additional insured, even though the contract’s spaces for minimum coverage amounts were blank. The court treated the certificate of insurance that LCD provided to Fifth, and Fifth accepted without objection, as relevant evidence of the parties’ understanding that coverage would be maintained in the amounts listed on the certificate. The court rejected GAIC’s argument that the blank amounts made the insurance provision ineffective.

The court also held that the underlying complaint specifically alleged liability based on LCD’s negligent acts, and the accident reports indicated that LCD employees or agents placed the falling block. Those circumstances created a reasonable possibility that GAIC would eventually have to indemnify Fifth. GAIC therefore had a duty to defend Fifth.

Priority, reimbursement, and disposition

The court determined that ASCC’s coverage for Reidy was primary and Travelers’ coverage was excess. For Fifth, ASCC and GAIC shared primary coverage, while Travelers’ coverage was excess. Under the equal-sharing provisions in the ASCC and GAIC policies, ASCC and GAIC had to contribute equally to Fifth’s defense until the applicable limits of their policies were reached.

The court ordered ASCC to reimburse Travelers for all expenses Travelers paid to defend Reidy. It ordered ASCC and GAIC jointly to reimburse Travelers for all expenses Travelers paid or may become obligated to pay to defend Fifth, with those amounts apportioned equally between ASCC and GAIC. The court did not decide ultimate indemnification because liability in the underlying action had not yet been determined.

The court granted Travelers’ motion for partial summary judgment in its entirety. It denied ASCC’s and GAIC’s cross-motions for summary judgment in their entirety, without prejudice to litigation of indemnification issues at an appropriate time. It dismissed GAIC’s counterclaim against Travelers and crossclaim against ASCC. The court stayed this case pending resolution of the underlying action and directed the parties to submit status reports. Judge Laura Taylor Swain signed the order.