The Travelers Indemnity Company v. Underwriters at Lloyd's

Background

The dispute concerns insurance coverage for a personal-injury lawsuit pending in New York state court. Randolph Calosso alleges that he tripped and fell on a public sidewalk outside 2001A Jerome Avenue, a unit leased by Pawnit Jerome Corp. from 1995-2003 Jerome Avenue. Calosso sued both entities, alleging negligence in the ownership, operation, management, supervision, maintenance, and control of the leased premises.

Travelers issued a general-liability policy to Jerome Avenue and has been defending Jerome Avenue in the underlying action. Underwriters issued a general-liability policy to Pawnit. That policy included additional-insured coverage for a manager or lessor of premises, limited to liability arising from ownership, maintenance, or use of the specific part of the premises leased to Pawnit. The policy also excluded coverage for bodily injury arising from the additional insured’s sole negligence.

Travelers asked Underwriters to accept Jerome Avenue’s defense and indemnity. Underwriters rejected the request. The parties filed cross-motions for summary judgment, which asks whether the undisputed evidence requires judgment for one party as a matter of law.

Duty to Defend

The court applied New York law, under which an insurer’s duty to defend is broad. An insurer must defend when the allegations or facts known to it create a reasonable possibility of coverage. Doubts about coverage are resolved in favor of the insured.

The court held that Jerome Avenue qualified as an additional insured under Underwriters’ policy. New York precedent treats a sidewalk outside leased property as part of the premises by implication when it serves as a necessary access point. The court concluded that the sidewalk outside the leased premises was such a point of access, even though the lease did not expressly define the sidewalk as part of the premises and did not expressly assign Pawnit responsibility for structural sidewalk repairs.

The court rejected Underwriters’ arguments that the sidewalk was closer to another tenant’s premises, that a Pawnit customer might not need to cross the specific sidewalk slab, or that Calosso was merely passing by rather than entering the premises. Those facts did not eliminate the possibility that the sidewalk was connected to access to the leased premises.

The court also rejected Underwriters’ argument that the sole-negligence exclusion barred a defense. The underlying complaint alleged that both Pawnit and Jerome Avenue were negligent, including in maintenance and repairs. Because the allegations did not rule out a finding that Pawnit or another party contributed to the injury, the possibility remained that Jerome Avenue could be liable for something other than its sole negligence.

Duty to Indemnify

The court distinguished the duty to indemnify from the duty to defend. Indemnity depends on the actual basis for the insured’s liability, not merely on the allegations in the complaint. Because the underlying lawsuit had not yet determined who was negligent, the court could not decide whether the policy would require Underwriters to indemnify Jerome Avenue.

The court therefore denied the parties’ cross-motions for summary judgment on indemnification as premature, without prejudice to renewal after completion of the underlying action. The court noted that the trial could clarify whether the sole-negligence exclusion or other policy provisions applied.

Disposition

Travelers’ motion for summary judgment was granted in part and denied in part. Underwriters’ motion for summary judgment was denied in full. Underwriters has a duty to defend Jerome Avenue in the underlying action, but the court did not yet determine whether Underwriters has a duty to indemnify Jerome Avenue. The parties were ordered to confer and file a joint letter addressing next steps, including possible partial judgment and a possible stay while the underlying action proceeds.