Southwest Marine and General Insurance Company v. United Specialty Insurance…

Background

Southwest Marine and General Insurance Company and Hanjo Contractors, Inc. sued United Specialty Insurance Company concerning a liability-insurance policy issued to Manhattan Steel. The plaintiffs sought a declaration that the policy covered expenses incurred defending an underlying personal-injury action brought by Oscar Perez against Hanjo.

The policy covered Hanjo as an additional insured for liability for bodily injury caused, in whole or in part, by Manhattan Steel’s acts or omissions, or by the acts or omissions of people acting on Manhattan Steel’s behalf during ongoing operations. In the earlier ruling, the court denied the plaintiffs’ motion for summary judgment and entered judgment in favor of United Specialty because Perez’s complaint did not allege that Manhattan Steel caused the accident.

The plaintiffs then moved for reconsideration. They argued that the Perez complaint, Hanjo’s third-party complaint against Manhattan Steel, and Perez’s testimony created a reasonable possibility that Manhattan Steel’s conduct contributed to the injuries.

Reconsideration and coverage

The court stated that reconsideration is generally allowed only for an intervening change in controlling law, new evidence, or a need to correct clear error or prevent serious unfairness. The plaintiffs conceded that neither a change in law nor new evidence supported their motion. The court nevertheless considered the motion because it had failed to consider Hanjo’s third-party complaint in the underlying action.

That third-party complaint alleged that Manhattan Steel agreed to perform work at the job site, was performing that work when Perez was injured, and caused Perez’s injuries through negligence, wrongful conduct, or other culpable acts. Relying on the reasoning of a comparable case, the court held that these allegations created a reasonable possibility that Perez’s injuries fell within the United Specialty policy’s coverage. The court granted reconsideration on that issue. It did not reach the plaintiffs’ separate argument concerning Perez’s testimony.

Timeliness of the disclaimer

The plaintiffs had conceded that either the Action Over or Independent Contractor exclusion applied. They therefore could prevail on this issue only if United Specialty waived reliance on those exclusions by disclaiming coverage too late.

The court reaffirmed its earlier conclusion that the exclusions were apparent from the notice of claim and that United Specialty’s investigation into whether additional facts might trigger coverage did not justify the delay. Because United Specialty provided no valid explanation for a delay of 30 days, the court treated the delay as presumptively unreasonable. The court concluded that United Specialty was obligated to defend Hanjo as an additional insured.

Issue left undecided

United Specialty argued that New York Insurance Law § 3420(d) does not apply to claims between insurers. It acknowledged that an untimely disclaimer required it to defend Hanjo but argued that it did not have to reimburse Southwest Marine, Hanjo’s insurers, for past defense costs.

The court did not decide that reimbursement issue because it had not been presented during the original summary-judgment proceedings. The plaintiffs’ request for reimbursement of attorneys’ fees, costs, disbursements, other defense expenses, and interest therefore remained undecided at this stage. The court also stated that the case would be reopened after the Second Circuit lifted the stay on the appeal.

Disposition

The court granted the motion for reconsideration. The Clerk was directed to terminate that motion, and the court stated that it would issue an order reopening the case after the appellate stay was lifted.