Travelers Indemnity Insurance Company v. United States Fire Insurance Company

Background

Travelers Indemnity Company and Triumph Construction Corp. sought a declaration that United States Fire Insurance Company (U.S. Fire) was obligated under a business auto insurance policy issued to Triumph to defend and indemnify the City of New York in an underlying injury lawsuit. Travelers also sought reimbursement for defense costs it had incurred. The City was an additional insured under both the Travelers policy and the U.S. Fire policy.

The underlying lawsuit was brought by Asdrubal Rodas, a Triumph employee who was injured at a construction project in Brooklyn. Rodas alleged that he was struck by a hoisted metal plate being transported by a Komatsu WA380 wheel loader. Travelers agreed to defend the City, but U.S. Fire denied coverage. U.S. Fire then moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

The policy exclusion

The U.S. Fire policy included a Mobile Equipment Endorsement excluding coverage for bodily injury resulting from the operation of machinery or equipment that was on, attached to, or part of an insured vehicle. The court held that the alleged injury fell within this exclusion. It reasoned that the metal plate being hoisted and transported by the wheel loader was equipment that necessarily was on or attached to the vehicle. The policy therefore provided no coverage for the alleged injury under the exclusion.

Travelers’ claims

The court rejected Travelers’ arguments that the endorsement did not modify the policy’s business auto coverage and that the wheel loader’s bucket made the endorsement inapplicable. The court also refused to consider new factual allegations and theories presented for the first time in Travelers’ opposition brief, including assertions that Rodas was struck by the wheel loader itself rather than by a metal plate being transported by it.

The court further held that New York Insurance Law § 3420(d)(2), which requires a specific written notice when an insurer denies coverage for death or bodily injury, did not apply to Travelers’ claim against U.S. Fire because Travelers was another insurer rather than the insured, injured person, or another claimant covered by the statute. The court dismissed Travelers’ claims with prejudice because the underlying allegations fell within the exclusion, further amendment would be futile, Travelers had already amended its complaint once, and Travelers did not request permission to amend again.

Triumph’s claims

Triumph, the insured, argued that U.S. Fire could not rely on the Mobile Equipment Endorsement because U.S. Fire’s disclaimer letter did not identify that exclusion. The letter instead stated that coverage was unavailable because the wheel loader was not an “auto” under the policy and did not quote or refer to the endorsement.

The court concluded that, drawing reasonable inferences for Triumph at the motion-to-dismiss stage, the disclaimer may not have informed Triumph of the exclusion with the specificity required by New York law. That failure could waive U.S. Fire’s reliance on the exclusion as to Triumph. The court therefore could not conclude as a matter of law that the exclusion defeated Triumph’s claims, and those claims were allowed to proceed.

Disposition

Judge Mary Kay Vyskocil granted in part and denied in part U.S. Fire’s motion to dismiss. The claims asserted by Travelers were dismissed with prejudice. Triumph’s claims were not dismissed and could proceed.