The Charter Oak Fire Insurance Company v. Zurich American Insurance Company

Background

Josue Bulnes was injured in December 2016 while working on an elevator project at an apartment building in Manhattan. Bulnes sued the building owner, ASB L3 72-76 Greene Street, LLC, in New York state court. He did not name Slade Industries, Inc., his employer and the contractor for the project, as a defendant. The underlying lawsuit remained ongoing.

Charter Oak insured ASB under a commercial general-liability policy. That policy stated that Charter Oak’s coverage was excess over other primary insurance available to ASB for liability arising from premises or operations for which ASB had been added as an additional insured.

Zurich insured Slade under a commercial general-liability policy. Zurich’s policy included ASB as an additional insured because Slade’s contract with ASB required Slade to obtain that coverage. The policy covered bodily injury caused, in whole or in part, by Slade’s acts or omissions, but it also stated that coverage for an additional insured required by contract could not be broader than the coverage Slade was required to provide under that contract.

Charter Oak notified Zurich of the underlying lawsuit and repeatedly demanded that Zurich defend ASB. Zurich disclaimed coverage and refused to defend. Charter Oak then moved for summary judgment under Federal Rule of Civil Procedure 56, which allows judgment when there is no genuine dispute over a fact important to the outcome.

Duty to Defend

The court applied New York law. Under that law, an insurer’s duty to defend is broad. The insurer must defend when the underlying complaint potentially alleges a covered claim or when the insurer knows facts creating a reasonable possibility that it may eventually have to indemnify the insured. The duty to defend can exist even if the insurer ultimately does not have to pay damages.

The court ruled that the Zurich policy incorporated the restrictions in the Slade-ASB contract. The contract required coverage for claims caused in whole or in part by Slade’s negligent acts or omissions. The court interpreted that language as covering lawsuits against ASB that were brought about by Slade’s negligence, even if Slade was not named as a defendant and the complaint did not specifically allege Slade’s negligence.

The court found a reasonable possibility that Slade’s conduct caused Bulnes’s injury. Bulnes was working for Slade on the elevator project, testified that equipment he was carrying could have leaked the oil on which he slipped, and testified that he did not place tarps on or clean up the oil. Based on the complaint and information known to Zurich, the court held that Zurich had a duty to defend ASB.

Which Policy Was Primary

The court then considered whether Zurich could share defense costs with Charter Oak or had to provide primary coverage. It compared the policies’ “other insurance” provisions, which determine how multiple insurance policies apply to the same risk.

The Zurich policy stated that its insurance was primary unless one of the exceptions in its excess-insurance provision applied. The court rejected Zurich’s argument that its coverage was not primary because the Slade-ASB contract did not expressly require primary, non-contributory insurance. The court concluded that the provision Zurich relied on limited Zurich’s ability to seek contribution from another primary insurer; it did not make primary coverage depend on a separate contractual requirement.

Because none of the listed exceptions applied, the court held that Zurich’s policy was primary. Under the Charter Oak policy, Charter Oak’s coverage was therefore excess. The court granted Charter Oak’s motion for summary judgment. The opinion addressed the duty to defend, but it did not address the separate indemnification issue.

Disposition

Charter Oak’s motion for summary judgment was granted. The clerk was directed to terminate Docket No. 26.