Insurance Company of Greater New York v. Kinsale Insurance Company

Background

Insurance Company of Greater New York (GNY) sued Kinsale Insurance Company in New York state court. GNY sought a declaration that Kinsale’s commercial general liability policy, issued to Nicko’s Construction, Inc., required Kinsale to defend GNY’s insured, Gracie Corporation, in a pending personal-injury lawsuit. Kinsale removed the case to the Southern District of New York based on diversity jurisdiction and moved to compel arbitration. GNY moved to remand, arguing that the amount in controversy did not exceed $75,000.

Motion to Remand

The court denied GNY’s motion to remand. Although GNY’s complaint did not identify the expected defense costs, the court could consider evidence outside the pleadings because the amount in controversy was not clear from the complaint and notice of removal.

Kinsale submitted a verified bill of particulars from the underlying lawsuit. That document showed that the plaintiff there sought at least $4.5 million for alleged injuries involving the spine, shoulder, and knee, along with lost future earnings, and had undergone at least two surgeries. The court concluded that defending the underlying lawsuit would likely require multiple experts and would almost certainly cost more than $75,000. Because the parties did not dispute that they were diverse, the court held that the amount-in-controversy requirement was satisfied and denied remand.

Motion to Compel Arbitration

The court granted Kinsale’s motion to compel arbitration. The Kinsale policy contained an arbitration clause covering “[a]ll disputes over coverage or any rights afforded under this Policy,” including disputes about whether a person or entity was an insured or additional insured. The court found that GNY’s request for a declaration that Gracie was an additional insured and entitled to coverage fell within that clause.

Although GNY was not a signatory to the policy, the court held that GNY was bound by the arbitration provision because it sought to enforce other provisions of the policy. The court rejected GNY’s argument that a service-of-suit provision conflicted with arbitration, explaining that the two provisions could operate together. The court also rejected GNY’s argument that Kinsale waived arbitration through delay or by denying coverage. Kinsale moved to compel arbitration shortly after removal, and an insurer may deny coverage and later invoke an arbitration clause when the insured contests that decision.

Disposition

Judge Jesse M. Furman denied GNY’s motion to remand and granted Kinsale’s motion to compel arbitration. The court stayed the action pending arbitration under the Federal Arbitration Act. It directed the Clerk to terminate the two motions and administratively close the case, without prejudice to either side moving by letter to reopen it within 30 days after the arbitration proceedings conclude.