Fidelity and Guaranty Insurance Company v. Accredited Surety and Casualty…

Background

Fidelity sought a declaration concerning insurance coverage for Madison Restoration Corporation in a workplace-injury lawsuit brought by Jose Cajamarca. Madison had subcontracted facade-renovation work to Kings Group NY Corp. The subcontract required Kings Group to add Madison as an additional insured, defend and indemnify Madison for covered claims caused by Kings Group’s negligence, and make Kings Group’s coverage primary and non-contributory.

Fidelity insured Madison under a policy covering June 22, 2021, through June 22, 2022. Accredited insured Kings Group under a policy covering October 15, 2020, through October 15, 2021. The Accredited Policy covered Madison as an additional insured for bodily injury caused, in whole or in part, by Kings Group’s acts or omissions in performing ongoing operations. It also stated that Accredited’s coverage was primary and would not seek contribution from other insurance when the policy’s conditions were met. Fidelity’s policy stated that it was excess over other insurance available to Madison when Madison was an additional insured.

Cajamarca was injured on October 13, 2021, at the project site. He filed one lawsuit naming Kings Group and others, then filed a second lawsuit naming Madison and the building owner. The lawsuits were later consolidated. Cajamarca eventually discontinued, with prejudice, all claims against Kings Group, Madison, and the other contractor.

Fidelity demanded that Accredited defend and indemnify Madison. Accredited denied the demand. Fidelity then brought this action seeking declarations that Accredited had those obligations, that Accredited’s coverage was primary, that Fidelity’s coverage was excess, and that Fidelity could recover defense costs.

Court’s reasoning

The parties filed cross-motions for summary judgment, which asks whether the undisputed record entitles one side to judgment as a matter of law. Applying New York law, the court explained that an insurer’s duty to defend is broader than its duty to indemnify. The duty arises when the allegations in the underlying complaint suggest a reasonable possibility of coverage, even if outside facts indicate that the claim may ultimately lack merit.

The court reasoned that the first complaint alleged that Kings Group’s negligent control, construction, repair, rehabilitation, or alteration of the building proximately caused Cajamarca’s injuries. The second complaint made a similar claim against Madison based on the same incident. According to the court, those allegations supplied at least a possible factual or legal basis for concluding that the claims fell within the Accredited Policy’s coverage.

Accredited argued that a bill of particulars showed the injury occurred inside the building, while Kings Group’s subcontract work was limited to a sidewalk bridge outside the building. The court rejected that argument. It explained that facts outside the underlying pleadings could not defeat the duty to defend where the pleadings alleged a covered occurrence. The court stated that an insurer may have to defend even a meritless claim that it ultimately may not have to pay.

The court separately examined which policy was primary. It found no genuine dispute that Madison was a named insured under the Fidelity Policy and that Kings Group had agreed in writing to make its insurance primary. Based on the policy language, the court stated that Accredited’s coverage was primary and non-contributory and that Fidelity’s coverage was excess. It further stated that Fidelity was entitled to reimbursement of the costs and fees it incurred defending Madison.

Disposition and inconsistency

The opinion does not provide a consistent final disposition of the cross-motions. In the opening paragraph, it states that Fidelity’s motion for summary judgment was granted and Accredited’s motion was denied. The conclusion states the opposite: “Accredited’s motion for summary judgment is GRANTED and Fidelity’s cross-motion is DENIED.” The reasoning between those passages supports Fidelity’s requested coverage declarations and reimbursement, but the conclusion uses contrary motion outcomes. The court also directed the parties to file a proposed judgment, or separate proposed calculations concerning damages, interest, attorney’s fees, and costs, by February 6, 2025.