Ohio Security Insurance Company v. Utica First Insurance Company

Background

Ohio Security Insurance Company brought this insurance-coverage action against Utica First Insurance Company and Travelers Indemnity Company. Ohio sought declarations that Utica and Travelers had duties to defend and indemnify Ohio’s insured, James Hunt Construction Co., Inc., in an ongoing New York state-court action, as well as reimbursement for defense costs already incurred.

The underlying state-court case arose after The Gap, Inc. alleged that water leaked from brass valves installed during HVAC work at an Old Navy store, causing damage on July 4 and November 7, 2020. Gap sued Hunt for negligence. Hunt then sued two subcontractors, D.M.V. Mechanical Inc. and D.D.S. Mechanical Plumbing & Heating Corp., alleging that they performed the HVAC work and were required to indemnify Hunt.

Ohio tendered Hunt’s defense and indemnity to DMV and its insurer, Utica, and to DDS and its insurer, Travelers. Both insurers disclaimed coverage. Utica also filed a cross-claim against Travelers concerning Travelers’ duty to defend and indemnify DMV. The parties filed competing motions for summary judgment, which asks whether there is any genuine dispute of material fact and whether a party is entitled to judgment under the law.

Utica’s coverage of Hunt

The court held that Utica had no duty to defend Hunt. The relevant Utica policy endorsement extended insured status to an organization that a written contract required to be named as an additional insured, but the contract had to become effective during the policy period and be executed before the relevant damage or injury.

The Utica policy period ran from June 11, 2020, through June 11, 2021. The Hunt-DMV contract was made on June 3, 2019, and work began that day; DMV’s subcontracting work was completed before June 11, 2020. The court interpreted “become effective during the policy period” to refer to when the contract took effect, not when a coverage obligation arose. Because the Hunt-DMV contract became effective before Utica’s policy period, Hunt was not an additional insured under the Utica policy.

The court rejected Ohio’s argument that the contract became effective when property damage triggered coverage. It stated that such an interpretation would eliminate one of the endorsement’s separate conditions. The court noted that any claim that DMV failed to obtain broader insurance belonged in Hunt’s state-court case against DMV, not in this coverage action.

Travelers’ duty to defend Hunt

The court held that Hunt was an additional insured under the Travelers policy and that Travelers had a duty to defend Hunt. The Travelers endorsement covered a person or organization that DDS agreed in a written contract to include as an additional insured.

The DDS-DMV contract required DDS to obtain insurance that would protect DMV, entities DMV was required to indemnify and hold harmless, the owner, and others DMV was required to name. The court interpreted the phrase “as will protect” to require insurance coverage for entities such as Hunt. It relied particularly on New York decisions interpreting similar language as requiring additional-insured coverage.

The court rejected Travelers’ argument that the contract had to expressly use the words “additional insured” to cover Hunt. It also rejected Travelers’ argument that Hunt was excluded because the contract’s schedule listing indemnified parties and additional insureds did not name anyone. The court concluded that the contract’s general coverage language controlled and that the empty list did not eliminate the coverage obligation.

Because Travelers’ only argument against a duty to defend Hunt was that Hunt was not an additional insured, the court granted Ohio’s and Utica’s motions on that issue and denied Travelers’ motion on that issue. The court also stated that Travelers’ policy applied as primary insurance, with Ohio’s policy applying in excess.

Travelers’ duty to indemnify Hunt

The court declined to decide Travelers’ duty to indemnify Hunt at this stage. A duty to indemnify is narrower than a duty to defend and depends on the facts established and the theory on which liability is ultimately imposed. Because the state-court action had not yet resulted in a finding of liability, the court considered the indemnity issue premature. It stated that the parties could return to the court if later developments made the issue ready for decision and the parties could not resolve it themselves.

Travelers’ duty to defend DMV and past defense costs

The court held that Travelers had a primary duty to defend DMV. Travelers had conceded that duty, and the court concluded that Utica was entitled to a declaration recognizing it.

Utica also sought reimbursement for fees and expenses it had incurred defending DMV in the state-court action. Travelers acknowledged that it might have some obligation to reimburse those costs but disputed the amount and requested an evidentiary proceeding if the parties could not resolve the issue. The court stated that Travelers did not appear to contest reimbursement in principle and that the parties should try to resolve the amount. The court would order an evidentiary proceeding if necessary.

Disposition

The court granted in part and denied in part Ohio’s motion for summary judgment, granted Utica’s motion for summary judgment, and granted in part and denied in part Travelers’ motion for summary judgment. The court stayed the case pending further order and required the parties to submit a joint update about the state-court action every 120 days, or sooner if relevant developments justified lifting the stay. The Clerk was directed to terminate Dockets 24, 29, and 34.