LM Insurance Corporation v. James River Insurance Company

Background

LM Insurance Corporation sued James River Insurance Company and Arch Specialty Insurance Company concerning insurance coverage for costs arising from an underlying personal-injury lawsuit. The injury occurred during a construction project at 48 Wall Street in New York. Marbrouk Sayari, an employee of Star Heating and Cooling Corp., was injured when part of a ceiling fell on him. Sayari later sued 48 Wall, LLC, the project owner, and InsideSquad, Inc., the general contractor. InsideSquad brought DATO A/C Inc. into that lawsuit based on allegations that DATO directed, controlled, and supervised Star’s work.

LM Insurance had issued a commercial general liability policy to 48 Wall. James River had issued a policy to InsideSquad that listed 48 Wall as an additional insured. Arch had issued a policy to DATO that also listed 48 Wall as an additional insured under specified circumstances. The Arch policy included an endorsement excluding coverage for bodily injury to a worker arising from work performed by a subcontractor unless the subcontractor had required insurance and had agreed in writing to defend and indemnify DATO.

LM Insurance sought a declaration that James River and Arch were required to defend and indemnify 48 Wall on a primary rather than excess basis. It also sought reimbursement for amounts it incurred defending 48 Wall in the underlying lawsuit. Arch moved to dismiss LM Insurance’s claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to support a legally plausible claim.

Arguments and analysis

Arch argued that its policy provided no coverage because Star had not obtained the required insurance and had not agreed to indemnify DATO. LM Insurance argued that the complaint did not address whether those conditions had been satisfied, making the issue inappropriate for resolution on a motion to dismiss. LM Insurance also argued that the endorsement might not apply to 48 Wall as an additional insured rather than only to DATO as the named insured.

The court treated the Arch policy and its endorsement as part of the complaint because the complaint specifically referred to and quoted the policy. The court therefore could consider the endorsement’s actual terms. But it could not consider or accept as true Arch’s factual assertions about Star’s insurance or indemnification because those facts did not appear in the complaint. The court also declined to convert the motion into a request for summary judgment because the parties had not conducted discovery or submitted supporting materials establishing those facts.

Ruling

The court held that it could not determine as a matter of law that the Arch policy provided no coverage to 48 Wall. It therefore denied Arch’s motion to dismiss. The court also declined to address at that stage the parties’ arguments about how the endorsement should be interpreted for an additional insured, finding those arguments premature. Judge Edgardo Ramos directed the Clerk to terminate the motion and directed the parties to appear for a telephonic conference.