Berkley Assurance Company v. MacDonald-Miller Facility Solutions

Background

Berkley Assurance Company and Liberty Mutual Fire Insurance Company and Liberty Insurance Corporation disputed their obligations to defend and reimburse costs relating to an underlying action against their mutual insured, MacDonald-Miller Facility Solutions Inc. Berkley issued a Professional Liability policy, while Liberty issued a Commercial General Liability policy. The parties agreed that the policies covered different losses: Liberty’s policy covered property damage, and Berkley’s policy covered professional-liability losses. The underlying action involved claims touching on both types of losses, but no claim that both policies covered concurrently.

Liberty initially and primarily defended MacDonald-Miller. Berkley later provided its own attorneys under a reservation of rights, and the insurers split the settlement equally. Berkley sought a declaration that it did not have to reimburse Liberty for defense costs. Liberty sought a declaration that Berkley had to reimburse Liberty and share those costs.

Summary-Judgment Standard

The court applied Rule 56’s summary-judgment standard, under which judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. Because the dispute concerned the meaning of insurance policies, the court applied New York contract law and enforced unambiguous policy language according to its plain meaning.

Other-Insurance Provisions

Berkley’s policy stated that it was excess over other valid and collectible insurance, unless the other policy was specifically written as excess over Berkley’s policy. It also stated: “When any other insurance has a duty to defend a Claim, we will have no duty to defend the Claim.” If no other insurer defended the claim, Berkley had the right, but not the duty, to defend.

Liberty’s policy generally stated that its insurance was primary, subject to specified exceptions. The policy also provided that when its insurance was excess, Liberty had no duty to defend if another insurer had a duty to defend; if no other insurer defended, Liberty would defend but could pursue the insured’s rights against other insurers.

The court rejected Liberty’s argument that an “other insurance” provision applies only when two policies cover the same loss. It held that New York law requires courts to examine the specific policy language rather than apply a categorical rule. Berkley’s provision referred to another insurer’s duty to defend a “Claim,” not to coverage of the same “loss.” Because Liberty’s duty to defend was broader than its duty to indemnify, Liberty’s duty to defend the entire underlying action triggered Berkley’s provision even though the policies did not concurrently cover the same loss.

The court also held that Berkley’s provision plainly narrowed Berkley’s defense obligation. Giving Liberty’s interpretation effect would make that language meaningless. Under the policies as written, Liberty had the primary obligation to defend the entire underlying action, including claims involving losses covered by Berkley. Berkley therefore had no obligation to contribute to the defense costs.

Waiver and Equitable Estoppel

Liberty argued that Berkley waived its “other insurance” defense by providing defense counsel, sharing some litigation costs, and splitting the settlement. The court rejected that argument. Berkley’s participation was limited and occurred under a clear reservation of rights that preserved the defense, which Berkley consistently asserted. The court also distinguished Berkley’s payment of settlement costs from its separate defense obligation.

Liberty alternatively argued that Berkley should be barred by equitable estoppel from asserting the defense. The court held that Liberty had not presented facts showing the required false representation or concealment, intent, lack of knowledge, reliance, or prejudicial change in position.

Disposition

The court granted Berkley’s motion for summary judgment and for a declaratory judgment. It denied Liberty’s motion for summary judgment and for a declaratory judgment. The Clerk was directed to close the motions and the case.