Houston Casualty Company v. Prosight Speciality Insurance Company

Background

The opinion’s caption identifies the defendant as Prosight Speciality Insurance Company. In the body, however, the court repeatedly identifies the defendant as New York Marine Insurance Company. The summary preserves that distinction rather than assuming the entities are the same.

The dispute arose from state-court litigation brought by Tyler Jadusingh and Sheila Jadusingh against New York University Hospitals Center (NYUHC) after Tyler Jadusingh was injured by an elevator on NYUHC-owned premises. Nouveau, the company that owned and operated the elevator, had agreed to indemnify NYUHC and obtain insurance for claims arising from elevator operations on NYUHC premises. Nouveau obtained that policy through New York Marine.

NYUHC brought a third-party action against Nouveau seeking contribution, indemnification, and a declaration that Nouveau had a duty to defend it. Nouveau denied that duty and asserted counterclaims. The state court later consolidated that action with another lawsuit brought by the Jadusinghs that added claims against Nouveau and another construction company.

Houston Casualty Company (HCC), which insured Jadusingh’s employer and provided NYUHC’s defense, filed this federal declaratory-judgment action in October 2018. HCC alleged that New York Marine had the primary duty to defend NYUHC and sought declarations that NYUHC was an additional insured and that New York Marine had duties to defend and indemnify NYUHC. HCC also sought reimbursement, including attorneys’ fees, for amounts it had paid to defend NYUHC.

The parties later reported a settlement in principle but could not agree whether New York Marine’s obligation to pay defense costs included attorneys’ fees. In its May 27, 2020 opinion, the court held that New York Marine’s duty to defend included attorneys’ fees HCC incurred in litigating and establishing that duty. New York Marine then moved for reconsideration. A motion for reconsideration asks the court to revisit an earlier ruling under a strict standard, generally requiring an overlooked controlling decision or evidence, an intervening change in controlling law, new evidence, clear error, or manifest injustice.

Arguments and analysis

New York Marine did not directly challenge the earlier conclusion that it had a duty to defend. Instead, it reframed the issue as whether it would have to pay legal fees and costs for NYUHC’s third-party action against Nouveau going forward.

The court explained that the federal case concerned fees incurred in establishing New York Marine’s duty to defend. HCC filed the case because New York Marine and Nouveau had denied that duty. The complaint sought reimbursement for amounts HCC had already paid to defend NYUHC; it did not expressly seek fees that might arise after the duty had been established or acknowledged.

The court reaffirmed its prior ruling concerning fees incurred to establish the duty to defend, including fees related to NYUHC’s third-party action against Nouveau. It found that New York Marine had identified no new facts or data the court had overlooked and had shown no manifest injustice requiring correction.

The court declined to decide whether New York Marine had to pay future fees arising from the third-party action. That issue was outside the pleadings and had not been clearly presented in the earlier briefing. The court also noted that the issue raised complicated questions under New York’s anti-subrogation doctrine. That doctrine generally limits an insurer’s ability to recover from its own insured for losses arising from a risk the insurer covered, but the court did not resolve how the doctrine applied to these future fees.

Ruling

Judge Paul A. Engelmayer denied New York Marine’s motion for reconsideration. New York Marine remained responsible for attorneys’ fees incurred by HCC and NYUHC in seeking to establish the duty to defend NYUHC. The court did not decide which party was responsible for attorneys’ fees incurred in the third-party action after the duty to defend was resolved.

The court stated that either party could file a new lawsuit seeking a declaration about the future-fee issue if the parties could not resolve it. The decision was without prejudice to either party’s right to bring that action. The court directed the clerk to terminate the motion at docket 45 and stated that the case remained closed.