Greater New York Mutual Insurance Company v. The Burlington Insurance Company

Background

In 2012, Luis Yaguachi, an employee of Lemi Restoration, Inc., fell from a height at a construction project owned by Park City 3 and 4 Apartments. Park City had contracted with Phoenix Building Restorer, Inc. and Phoenix Bridging Inc.; Lemi was a subcontractor for Bridging. Yaguachi sued Park City, Restorer, and Bridging in New York state court, alleging negligence and violations of New York Labor Law.

Park City’s insurer, Greater New York Mutual Insurance Company (GNY), sought a defense for Park City from Burlington Insurance Company, Restorer’s insurer, and Scottsdale Insurance Company, Bridging’s insurer. Scottsdale denied the request, stating that it had not received a valid executed agreement requiring Park City to be named as an additional insured.

The contract between Park City and Bridging, later located, required Bridging to add Park City as an additional insured. Scottsdale’s policy covered an organization for which Bridging was performing work when a written contract required that organization to be added as an additional insured. The policy provided that such additional-insured coverage was primary and noncontributory.

GNY filed this federal action seeking declarations that Burlington and Scottsdale had duties to defend Park City and that those duties were primary to GNY’s. GNY also asserted breach-of-contract and equitable-contribution claims, but its motion for partial summary judgment addressed only the duty to defend. Burlington did not oppose GNY’s motion. The parties agreed that, if both insurers had duties to defend Park City, their obligations would be equal and any reimbursement of GNY’s reasonable defense costs would be split equally between them.

Legal standard and analysis

The court applied New York law. Under that law, an insurer’s duty to defend is broader than its duty to indemnify and is triggered by the filing of a lawsuit. Courts compare the underlying complaint’s allegations with the insurance policy. If the allegations, read liberally, could fall within the policy, the insurer must defend. The duty also applies to an additional insured.

The court held that the contract required Bridging to include Park City as an additional insured, the Scottsdale policy covered organizations required by contract to be added as additional insureds, and the underlying complaint alleged facts within the policy’s coverage. Scottsdale therefore had and has a duty to defend Park City.

The court rejected Scottsdale’s argument that the earlier state-court dismissal of Park City’s contractual indemnification and insurance-procurement claims prevented the federal court from recognizing the contract. GNY was not a party to the state action, Scottsdale had not argued that GNY was legally connected to Park City for claim-preclusion purposes, and the federal duty-to-defend claim was different from Park City’s state-court claims. The state court also had not entered a final judgment in the underlying action.

The court also declined to refrain from deciding the duty-to-defend issue. It found that the decision would resolve uncertainty about Park City’s defense and would not interfere with the state court’s rulings on Park City’s other claims.

Scottsdale’s statute-of-limitations argument also failed. The court explained that a claim based on an insurer’s breach of the duty to defend does not accrue until the underlying litigation has ended and the insurer can no longer defend, even if it later chooses to do so. Because the underlying action remained ongoing, the limitations period had not expired.

Finally, the court rejected Scottsdale’s argument that its duty began only when it allegedly learned of the contract on April 13, 2022. Scottsdale offered no admissible evidence establishing that date. The court concluded that Scottsdale had actual knowledge of facts showing a reasonable possibility of coverage when it received GNY’s tender of the defense in 2013, so the duty was triggered at that time. The opinion refers to the tender date as November 26, 2013 in one passage and as November 13, 2013 in another.

Disposition

The court granted GNY’s February 2, 2023 motion for partial summary judgment. It granted Burlington’s February 22, 2023 cross-motion for summary judgment. It granted Scottsdale’s February 22, 2023 cross-motion insofar as Scottsdale sought a declaration that Scottsdale and Burlington had equal obligations to defend Park City, and otherwise denied Scottsdale’s cross-motion.