Travelers Property Casualty Company of America v. Wesco Insurance Company

Background

Travelers sued Wesco seeking a declaratory judgment and monetary damages concerning insurance coverage for Broadway 52nd L.P. in two underlying personal-injury actions in New York Supreme Court. Broadway hired JT Magen & Co. as the general contractor for construction work. Travelers insured JT Magen under a commercial general liability policy. JT Magen hired Robert B. Samuels, Inc. as a subcontractor, and Wesco insured RBS.

The contracts required JT Magen and RBS to name Broadway as an additional insured on a primary and non-contributory basis. An employee of JT Magen, Onofrio Mazzurco, was allegedly injured while working at the construction site and sued Broadway and RBS. Travelers acknowledged its duty to defend and indemnify Broadway and demanded that Wesco also provide coverage. Wesco eventually acknowledged its duty to defend Broadway.

The insurers disagreed about how their policies should respond. Travelers argued that its policy made its coverage excess and non-contributory to Wesco’s coverage. Wesco argued that its policy and Travelers’ policy provided co-primary coverage and that defense costs should be allocated according to the policies’ limits.

Summary Judgment Standard

The court considered each summary-judgment motion separately. Summary judgment is appropriate when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The parties agreed on the relevant facts, so the dispute principally involved interpreting the insurance policies, which the court treated as a legal question.

Wesco’s Duty to Defend and Indemnify

Travelers sought summary judgment declaring that Wesco had a duty to defend and, if necessary, indemnify Broadway and that Wesco’s coverage was primary. Wesco did not dispute either point. The court therefore granted Travelers summary judgment on both issues, ruling that Wesco had a duty to defend and, if necessary, indemnify Broadway as an additional insured and that Wesco’s coverage was primary.

Whether the Policies Covered the Same Risk

Under New York law, when two policies cover the same risk at the same level, the priority between them is determined by comparing their other-insurance provisions. Wesco argued that Travelers’ reference to JT Magen’s ongoing operations meant that Travelers’ policy covered a different risk from Wesco’s policy, which covered bodily injury caused in whole or in part by RBS’s acts or omissions.

The court rejected that argument. It held that the term ongoing operations did not create a separate scope of coverage from JT Magen’s work. Instead, it focused on operations occurring before the contracted work was completed. The court concluded that both policies covered the same risk: work performed by JT Magen, either directly or through RBS.

Co-Primary Coverage

The court next compared the policies’ other-insurance provisions. Wesco’s policy stated that its insurance was primary and included provisions for equal-shares or limits-based contribution. Travelers’ policy contained an amendment stating that its coverage was excess when other insurance was available to an insured added under another policy. Travelers’ policy also contained a blanket additional-insured endorsement providing primary coverage when a written contract required primary and non-contributory insurance.

The court found a conflict between Travelers’ other-insurance amendment and its blanket additional-insured endorsement. Because the policy did not clearly establish which provision controlled, the policy was ambiguous. The court considered extrinsic evidence, meaning evidence outside the policy that could show the parties’ intent. The contract between Broadway and JT Magen required JT Magen to provide Broadway with primary and non-contributory additional-insured coverage. Together with Travelers’ blanket additional-insured endorsement, that contract showed an unambiguous intent to provide Broadway with primary coverage under the Travelers policy.

The court therefore ruled that Travelers and Wesco had co-primary duties to defend Broadway.

Allocation of Defense Costs

Wesco argued that the insurers should divide Broadway’s defense costs according to their policy limits—60 percent for Travelers and 40 percent for Wesco. Travelers argued that the insurers should share the costs equally if Travelers was found to have primary coverage.

Both policies provided that, when other insurance permitted contribution by equal shares, the insurer would use that method; otherwise, contribution would be based on policy limits. Travelers’ blanket additional-insured endorsement also required sharing according to the policy’s stated method when Travelers’ insurance was primary and other insurance was available.

The court interpreted these matching provisions as requiring equal sharing. It ruled that Travelers and Wesco must share equally in Broadway’s defense.

Disposition

The court granted in part and denied in part both parties’ motions for partial summary judgment. It ruled that Wesco had a duty to defend and, if necessary, indemnify Broadway; that Wesco’s coverage was primary; that Travelers and Wesco had co-primary duties to defend Broadway; and that they must share Broadway’s defense on an equal-shares basis. The court directed the Clerk of Court to close the open motions and ordered the parties to submit a proposed schedule for the next steps in the case.