Liberty Mutual Fire Insurance Company v. Zurich American Insurance Company of…

Background

Liberty sued Zurich seeking a declaration that Zurich had to defend and indemnify BlueStream Professional Services, LLC, and a money judgment for Liberty’s defense costs. Liberty and Zurich insured BlueStream in connection with a New York construction project. BlueStream was an additional insured under a Zurich policy issued to Rightech, Inc., under a Technical Staffing Agreement. That agreement required Rightech to obtain liability insurance for certain bodily-injury claims against BlueStream and made Rightech’s insurance primary.

Jael Downes, an employee of Rightech, filed a personal-injury action in New York state court in June 2019. He later added BlueStream as a defendant. In October 2019, after that lawsuit had been filed, BlueStream and Rightech entered into an agreement under which BlueStream agreed to pay Rightech $100,000 and the parties exchanged broad releases. The agreement defined “BlueStream” and “RTI,” which included Rightech, to include their insurers. The release covered “any and all” claims, contracts, liabilities, obligations, and causes of action, including known and unknown claims, relating in any way to agreements between the companies and Rightech’s work and billing through October 16, 2019.

BlueStream later asked Rightech for indemnification in the personal-injury action, but Rightech denied the request based on the release. Liberty tendered BlueStream’s defense and indemnity to Zurich in September 2021. Zurich denied that it had either obligation, stating that the 2019 agreement had terminated the relevant contractual obligations and that BlueStream no longer qualified as an additional insured. The parties filed cross-motions for summary judgment, which asks whether the undisputed evidence entitles a party to judgment as a matter of law.

Choice of Law

The court applied New York law. It concluded that New York and Minnesota law did not materially differ on the relevant point: when a contract or release is unambiguous, courts determine its meaning from the document itself and do not use outside evidence to alter or explain it. The court also noted that both parties relied on New York law in their briefing.

The Release

Under New York law, the court first determines whether a contract is ambiguous—that is, whether a reasonably intelligent person could read it as having more than one meaning. The court found that Liberty did not argue, and could not persuasively argue, that the release was ambiguous. Its language expressly released Rightech from all claims, contracts, actions, liabilities, and obligations, whether known or unknown, that related to any agreement between Rightech and BlueStream. The agreement also expressly included the parties’ insurers within the defined groups covered by the release.

The court rejected Liberty’s argument that the agreement was intended only to resolve Rightech’s payment claims or issues connected to a separate wage-related class action. The agreement’s preamble referred to resolving Rightech’s payment claims, but the release itself contained no language limiting its scope to those claims. The court held that a specific description of the dispute being settled did not restrict the separate, broad release language.

The court also rejected Liberty’s argument that the agreement needed to mention the Technical Staffing Agreement or the Zurich policy specifically. Because the release expressly covered all claims and obligations relating to any agreement between BlueStream and Rightech, the court held that it included Rightech’s obligation to obtain additional-insured coverage for BlueStream and Liberty’s related claim against Zurich. The court stated that any different subjective intention by Liberty, or a unilateral mistake about the release’s effect, did not overcome the agreement’s clear terms.

Disposition

The court held that the October 2019 agreement released Zurich from any duty to defend or indemnify BlueStream in the underlying personal-injury action. Zurich’s motion for summary judgment was granted, and Liberty’s motion for partial summary judgment was denied. The Clerk was directed to enter judgment consistent with the opinion and close the case. The opinion notes that Liberty incorrectly sued Zurich as “Zurich American Insurance Company of Illinois”; the caption identifies the defendant as Zurich American Insurance Company.