The Travelers Indemnity Company of America v. Southwest Marine and General…

Background

Travelers sued Southwest Marine seeking declarations about insurance coverage for TDX Construction Corporation in an underlying New York state-court injury lawsuit. Travelers sought a ruling that Southwest Marine had to defend TDX, that Southwest Marine’s coverage was primary, that Travelers’ coverage was excess, and that Southwest Marine had to reimburse Travelers for defense costs.

Southwest Marine issued Roma Scaffolding Inc. a commercial general-liability policy. The policy covered additional insureds for bodily injury caused in whole or in part by Roma’s acts, or by people acting for Roma, while performing ongoing operations for the additional insured. The policy also contained provisions addressing when its coverage would be primary and would not seek contribution from other insurance.

NYCHA’s contract with Roma required the contractor to name the construction-management firm as an additional insured. Roma provided a certificate of insurance listing TDX as an additional insured. Travelers separately insured TDX, and its policy stated that coverage would be excess when TDX was added as an additional insured under another policy.

A woman alleged that she was injured when she tripped and fell on exterior stairs at a NYCHA development. She sued NYCHA, Roma, TDX, Sharan Builders, Inc., and Neelam Construction Corporation. The underlying lawsuit had not determined liability when this order was issued. Travelers defended TDX and reported approximately $48,594.40 in defense costs as of its Rule 56.1 statement. Southwest Marine had accepted a demand to defend NYCHA but denied Travelers’ demand that it defend TDX.

Summary-judgment ruling on the duty to defend

The court applied New York law. Under that law, an insurer’s duty to defend is broad and exists whenever the underlying complaint suggests a reasonable possibility of coverage. The court rejected Southwest Marine’s argument that Roma was working only for NYCHA and not for TDX. Because TDX supervised Roma’s work as construction manager, the court found that Roma’s work for NYCHA was also work performed for TDX under the policy language.

The court also rejected Southwest Marine’s attempt to rely on deposition testimony and other evidence from the underlying case to contest coverage. The court said that evidence overlapped with facts at issue in the underlying lawsuit and therefore could not be used to decide the duty to defend. The underlying complaint alleged that Roma, among others, was negligent in installing the sidewalk shed and maintaining safe conditions. Those allegations created a possible basis for coverage.

The court therefore granted Travelers’ motion for summary judgment on whether Southwest Marine owed TDX a duty to defend.

Priority of coverage

Travelers also sought a declaration that Southwest Marine’s policy was primary and non-contributory and that Travelers’ policy was excess. The court declined to decide that issue. Determining priority required reviewing all relevant insurance policies, but the underlying complaint named other defendants whose policies, if any, were not before the court. The court also stated that coverage questions depending on the underlying lawsuit’s eventual liability findings were not ready for decision.

The court denied without prejudice Travelers’ motion for summary judgment concerning priority of coverage. The order’s conclusion likewise states that the priority declarations were denied without prejudice.

Indemnification

The court did not decide whether Southwest Marine would ultimately have to indemnify TDX—that is, pay for a judgment or settlement arising from the underlying lawsuit. Travelers had not moved for summary judgment on that issue, and the court stated that indemnification would not be ready for decision until the underlying lawsuit was resolved.

Reimbursement of defense costs

Because the court found that Southwest Marine’s duty to defend TDX had been triggered, it held that Travelers was entitled to reimbursement of costs incurred defending TDX. The court granted Travelers’ motion for summary judgment on costs. The parties were ordered to meet and confer and propose a briefing schedule for an inquest, or court process to determine the amount of damages, by April 14, 2025.

Proposed counterclaim

Southwest Marine sought permission to add a counterclaim for reimbursement of its costs defending NYCHA. Southwest Marine said it had not previously had access to the complete NYCHA/TDX contract. Travelers submitted documents showing that the contract had been produced and identified during discovery on October 16, 2023.

The court found Southwest Marine’s explanation not credible and concluded that the request was untimely. It denied Southwest Marine’s motion for leave to file the counterclaim.

Disposition

The court granted Travelers’ summary-judgment motion concerning Southwest Marine’s duty to defend TDX and reimbursement of costs. It denied without prejudice Travelers’ summary-judgment motion concerning priority of coverage. It denied Southwest Marine’s motion for leave to file a counterclaim and ordered the parties to discuss possible resolution of the action.