September 17, 2021
Attorneys Spiro Bantis and Jan Duffalo of London Fischer LLP recently obtained partial summary judgment in the Southern District of New York in a case involving additional insured (“AI”) coverage and priority of coverage. The Court’s decision discusses the scope of the “caused, in whole or in part” AI language as construed by the New York Court of Appeals in Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y. 3d 313 (2017), as well as the impact of a self-insured retention (SIR) under one of two concurrent policies.
London Fischer’s client U.S. Specialty Insurance Company (“USSIC”) insured the Owner of an oil-to-gas boiler conversion project. The Owner retained contractor Aggressive to do the work. Aggressive agreed in the contract to obtain insurance naming the Owner as an AI, though the contract did not require the AI coverage to be primary and non-contributory with respect to the Owner’s own insurance. Aggressive then subcontracted the work to E.M.
An employee of E.M. was injured while working at the project and sued the Owner, but not Aggressive or E.M. Aggressive’s insurer (the “other insurer”) refused to defend the Owner in the underlying action under the other insurer’s AI endorsement which limits coverage to bodily injury caused, in whole or in part, by the acts or omissions of Aggressive or those acting on its behalf.
With respect to the other insurer’s duty to defend, the Court noted that, while the plaintiff in the underlying action was not making claims against Aggressive, he alleged that he was working for a subcontractor at the time of the accident. Further, the Owner’s Third-Party Complaint against Aggressive alleged that Aggressive was negligent. The allegations of the Complaint and Third-Party Complaint together were sufficient to trigger the other insurer’s duty to defend the Owner.
The USSIC policy and other insurer’s policy contain similar excess “other insurance” clauses which cancel each other out. The Court, however, noted the important distinction that there is a $100,000 SIR under the USSIC policy and no SIR under the other insurer’s policy. Since SIRs are not “other insurance,” the other insurer’s policy has the sole duty to defend and pay for defense costs up to $100,000. Only after $100,000 in defense costs are incurred, does USSIC begin to share in the payment of defense costs.
The Court’s opinion indicates that, while the Burlington decision has had a major impact on the duty to indemnify analysis, it is still difficult for insurers to avoid a duty to defend under the “caused, in whole or in part” AI language. In addition, SIRs must be taken into account in determining the allocation of defense obligations among multiple insurers.