The Travelers Indemnity Company of Connecticut v. Selective Fire and Casualty…

Background

Segundo Guarnizo was injured on August 16, 2017, when he fell from a scaffold at a construction project at the Moxy Hotel. He filed a negligence lawsuit in New York state court against Paragon Restoration Corporation, Magnetic Builders Group LLC, 485 Seventh Avenue Associates LLC, and others. Build Logistics, Inc. was not named as a defendant, but Guarnizo alleged that he was working for Build when he was injured. Paragon later filed a third-party complaint against Build seeking indemnification for any recovery by Guarnizo.

Travelers insured Paragon and provided a defense to Paragon, Magnetic, and 485 Seventh Avenue. Selective insured Build. Travelers argued that Build’s subcontract required Build to name Paragon, the project owner, and other required parties as additional insureds under Build’s policy. The subcontract also stated that coverage for additional insureds would be primary and non-contributing. Selective denied Travelers’ tenders of the defense.

Motions and legal standard

Travelers moved for partial summary judgment seeking declarations that Selective owed a duty to defend, that Selective’s coverage was primary, and that Travelers’ coverage was excess. Travelers also sought reimbursement of defense costs it had paid. Selective cross-moved for summary judgment on all issues. The court did not decide Travelers’ separate claim concerning Selective’s duty to indemnify at this stage.

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 court applied New York law to interpret the insurance policies. Under New York law, an insurer’s duty to defend is broad: the duty generally arises when the allegations in the underlying complaint arguably fall within the policy’s coverage. The insurer avoids that duty only if it can establish that there is no possible factual or legal basis for eventual indemnification.

Duty to defend

The Selective policy covered a person or organization that Build had agreed in a written contract to add as an insured, but only for liability involving bodily injury caused by or arising from Build’s ongoing operations. The court found no genuine dispute that Paragon, 485 Seventh Avenue, and Magnetic satisfied the policy’s initial requirement for additional-insured status.

The underlying complaint alleged that Guarnizo was employed by Build and was injured while working at the project. The court held that this allegation created at least a possibility that his injury was caused by, or arose from, Build’s ongoing operations. Because an insurer generally must defend the entire action when any claim arguably involves covered events, the allegation was sufficient to trigger Selective’s duty to defend.

Selective relied on invoices and testimony suggesting that Build had completed its subcontract work before the accident. But Guarnizo testified that he was employed by Build when he was injured and that a Build foreman directed him to work on the scaffold without a safety harness. The court held that this conflicting evidence prevented a finding that there was no possibility of coverage. Selective therefore had a duty to defend the tort defendants and Build in the underlying lawsuit.

Primary and excess coverage

The Selective policy provided primary coverage for an additional insured when Build agreed in a written contract to provide primary or non-contributory insurance. The subcontract required primary and non-contributing coverage for additional insureds. Travelers’ policy, by contrast, stated that its coverage was excess when the insured was added as an additional insured under another policy.

Selective did not respond to Travelers’ argument about the priority of coverage. The court treated Selective’s silence as a concession and concluded that Selective’s policy was primary to Travelers’ coverage. Travelers’ coverage was therefore excess to Selective’s coverage for the underlying lawsuit.

Reimbursement and disposition

Because Selective had refused to defend, the court held that Travelers was entitled to reimbursement for post-tender defense costs it had incurred while defending the underlying lawsuit. Travelers identified $115,506.02 in fees and related costs through an affidavit, but the court noted that Travelers had supplied no supporting documentation and that the figure was likely outdated because the defense was continuing. The court stated that a separate proceeding to determine damages would be necessary unless the parties agreed on the amount.

The court granted Travelers’ motion for partial summary judgment and denied Selective’s cross-motion. It declared that Selective must defend the tort defendants, that Selective’s policy provides primary coverage, and that Travelers’ policy provides excess coverage. It also held that Travelers is entitled to reimbursement of post-tender defense costs. The court deferred the amount of reimbursement and did not decide the duty to indemnify at this stage.