Penguin Air Conditioning Corp. v. Travelers Indemnity Company

Background

This case concerned whether Travelers Indemnity Company had to defend and indemnify Penguin Air Conditioning Corp. and three entities referred to collectively as the Owners in a New York state-court personal-injury lawsuit. The injured worker, Michael Dorset, was employed by Penava Mechanical Corp., which had been hired by Penguin Air to perform HVAC work at a renovation project. Penava’s insurance policy with Travelers named Penguin Air and other required entities as additional insureds, but only for liability caused by Penava’s work and not for their independent acts or omissions.

Dorset sued the Owners after allegedly being injured while using an unsafe passageway. The Owners and Structure Tone, Inc. later brought claims against Penguin Air, including negligence and contractual defense and indemnification. Those claims were discontinued without prejudice on July 26, 2017. The only remaining claims against Penguin Air were contribution and indemnification crossclaims brought by Penava and Total Safety Consulting, LLC. Penguin Air and Travelers each moved for summary judgment, asking the court to decide the coverage questions as a matter of law.

Duty to defend Penguin Air

The court held that Travelers had a duty to defend Penguin Air while the Owners’ and Structure Tone’s negligence claims were pending. Those claims could have imposed liability on Penguin Air for Penava’s conduct, which fell within the additional-insured coverage. Because a duty to defend one covered part of an action extends to the entire action, Travelers had to defend the entire underlying lawsuit during that period.

That duty began on January 16, 2015, when the First Third-Party Complaint was filed, and ended on July 26, 2017, when the claims that triggered the additional-insured coverage were discontinued. The remaining crossclaims sought to hold Penguin Air responsible for its own alleged conduct, rather than vicariously liable for Penava’s work. Travelers therefore had no duty to defend Penguin Air after July 26, 2017. Penguin Air was entitled to reimbursement for its reasonable defense costs during the covered period, plus interest.

Duty to defend the Owners

The court held that Travelers’ duty to defend the Owners was co-primary with Continental’s duty. In other words, the two insurers had shared primary obligations and were required to contribute equal amounts to defense costs until an applicable policy limit was reached or no loss remained.

The court rejected the argument that the Continental policy’s excess-coverage provision applied to the Owners. That provision used the term “you,” which the policy defined to refer to named insureds, not additional insureds. Because the Owners were additional insureds rather than named insureds, the provision did not make Continental’s coverage excess to Travelers’ coverage.

Duty to indemnify

A duty to indemnify is different from a duty to defend: it depends on the actual basis for liability, not merely on the allegations in the underlying complaint. The court held that Travelers had no duty to indemnify Penguin Air because no remaining claim against Penguin Air fell within the Travelers policy’s additional-insured coverage.

The court declined to decide whether Travelers had to indemnify the Owners. The Owners’ ultimate liability, the legal theory of liability, and the extent of any liability could not yet be determined. The cross-motions on indemnification of the Owners were therefore denied without prejudice to renewal after the underlying action ended.

Disposition

The court held that the parties’ cross-motions for summary judgment were granted in part and denied in part. It directed the parties to discuss the amount Travelers should pay Penguin Air for the covered defense period and to address whether partial judgment should be entered on the resolved claims.