Wesco Insurance Company v. Colony Insurance Company

Background

These consolidated actions concerned insurance coverage for an underlying New York state lawsuit brought by Carlos Alberto Gomez-Gomez, who alleged that he was injured while working on a construction project. SGN 443 Greenwich Street Owner LLC owned the warehouse, 443 Developer LLC was the general contractor, Collaborative Construction Management LLC was the construction manager, Rockaway Contracting Corp. was a subcontractor, JPB Fabrications Inc. was hired by Rockaway, and PTC Construction Corp. was hired by JPB. Gomez-Gomez sued SGN, 443 Developer, CCM, Rockaway, JPB, and others.

USSIC issued a policy covering SGN, 443 Developer, and CCM. Wesco issued a policy to Rockaway that provided additional-insured coverage to SGN, 443 Developer, and CCM under the construction subcontract. Colony issued a policy to JPB. The Rockaway-JPB subcontract required JPB to name Rockaway and 443 Developer as additional insureds, and the Colony policy provided additional-insured coverage when required by written contract.

The Colony policy also contained a contractor-conditions endorsement. It stated that, as a condition to coverage, the insured had to ensure that contractors maintained adequate insurance. Colony denied coverage on the ground that JPB’s contractor, PTC, did not have adequate insurance.

Motions and Legal Standard

USSIC moved for summary judgment—a ruling entered when there is no genuine dispute over a material fact and the moving party is entitled to judgment under the law—declaring that Wesco had to defend and indemnify SGN, 443 Developer, and CCM. Wesco opposed USSIC’s motion only in part, arguing that Colony also had a duty to defend 443 Developer and should share Wesco’s defense-cost obligation.

Wesco separately moved for summary judgment declaring that Rockaway and 443 Developer were additional insureds under the Colony policy and that Colony had duties to defend them. Colony opposed the motion, disputing the additional-insured status and arguing that the contractor-conditions endorsement allowed it to deny coverage. The parties agreed that New York law applied.

Court’s Analysis

The Court ruled that Wesco’s policy covered SGN, 443 Developer, and CCM as additional insureds. Wesco did not dispute that it had a duty to defend and indemnify those parties in the Gomez-Gomez action or that its duty was primary and non-contributory to USSIC’s duty. Because Wesco had notice of the accident and lawsuit, the Court held that Wesco had to reimburse the appropriate share of legal costs incurred in defending the action. The Court declined to rule that Wesco alone had to reimburse all defense costs relating to 443 Developer because Colony also had to share those costs.

The Court then held that Rockaway and 443 Developer were additional insureds under the Colony policy. The Rockaway-JPB subcontract required the “Contractor” and “Owner” to be named as additional insureds. Although SGN owned the construction site, the subcontract expressly defined “Owner” as 443 Developer. The Court found that this language unambiguously required JPB to include 443 Developer as an additional insured. The Court also accepted evidence authenticating the subcontract and rejected Colony’s argument that Wesco had not shown the document could be admitted.

The Court rejected Colony’s reliance on the contractor-conditions endorsement. The endorsement referred to a failure by “the insured,” while separately referring to claims against “any insured.” Applying New York law, the Court interpreted the language to mean that a breach by one insured could bar coverage for that insured but did not automatically bar coverage for separate additional insureds. The Court concluded that JPB’s alleged failure to ensure adequate insurance for PTC did not justify denying coverage to Rockaway and 443 Developer.

The Court also held that Colony had waived any additional grounds for denying coverage because it had disclaimed coverage only on the ground that JPB failed to satisfy the adequate-insurance condition. Colony’s argument that it had no duty to defend therefore failed. The Court further determined that Colony’s policy was solely primary for Rockaway and co-primary with Wesco for 443 Developer. Colony had not contested Wesco’s priority-of-coverage position, and the record supported it.

Disposition

The Court granted USSIC’s motion for summary judgment and granted Wesco’s motion for summary judgment. It held that Wesco had the stated duty to defend and indemnify SGN, 443 Developer, and CCM; that Rockaway and 443 Developer were additional insureds under the Colony policy; that Colony had a duty to defend Rockaway on a primary and non-contributory basis; and that Colony had a duty to defend 443 Developer on a co-primary basis with Wesco and contribute equally to the defense costs owed to USSIC. Judge Mary Kay Vyskocil directed the Clerk of Court to close both consolidated actions.