|
 |
Coverage and Exclusions 1/18/2008 11:57:44 AM EST Dan D. Kohane on Liberty Mutual Insurance Company v. The Insurance Company of the State of Pennsylvania Senior Partner, Hurwitz & Fine, PC
What will be the order of insurance coverage in a construction accident lawsuit where there are primary, co-primary and excess policies? For the practitioner, understanding the order of coverage among primary and excess policies is critically important. In Liberty Mutual Ins. Co. v. The Insurance Company of the State of Pennsylvania, the Appellate Division of State Supreme Court, First Department, held that two primary policies had to contribute equally to the resolution of a lawsuit before an excess policy, providing coverage over one of the two policies, had an obligation to contribute. Following that layer of coverage would be the excess carrier's policy which referenced the coverage limits on what would have otherwise been an employer's liability policy with unlimited coverage.
The author writes:
"The underlying claim presented a typical New York construction lawsuit. A construction project was ongoing in New York City. In New York, where an injury occurs on a construction site, various provisions of the New York State Labor Law, including Section 200, 240(1) and 241(6) apply to permit an injured construction worker to bring an action against the owner, general contractor and agents, other than the worker’s own employer, to recover for sustained injuries."
The author also points out that "New York permits a party who is sued to implead the plaintiff’s employer, even if the employer has provided Workers’ Compensation benefits, in two instances. An employer can be sued for contractual indemnity, if it is a party to an enforceable contractual indemnity agreement with a party to the lawsuit. An employer can also be sued for common law negligence, for contribution, even without the presence of an indemnity agreement if the plaintiff has sustained a “grave injury” as defined by Section 11 of the Workers’ Compensation Law."
Kohane also explains that "in this case, both claims were being pursued. That led to a battle between the carriers over the obligation to defend and indemnify."
Kohane further comments "this dispute is important both to the insured as well as the claimant. The insured needs to know which carrier will provide it with primary defense. Providing counsel to practitioners, the court had to unwind the policies to determine the order of coverage."
As Kohane describes, "the Appellate Division concluded that AIG was a primary insurer whose obligation to provide indemnity “took precedence over that of Liberty.” AIG argued, unsuccessfully, that the claim by the project owner against General was an impermissible violation of the rule which prohibits insureds under the same policy from bringing claims covered by the same policy, the so-called, anti-subrogation rule. (see Jefferson Ins. Co. of N.Y. v Travelers Indem. Co., 92 NY2d 363, 375 [1998]). However, the court refused to grant judgment in favor of Liberty because it was not clear whether or not, in the underlying action, the owner and construction manager would have to secure a judgment in contribution, against the employer, General. The author questions this result."
Kohane goes on to comment that "had the underlying case gone to verdict (remember, it was settled), the owner and construction manager could not have secured a judgment for contribution that would have triggered the employer’s liability policy unless they would have established that the plaintiff suffered a “grave injury.” Since the case did not go to verdict, and the record was not clear on the subject, the court remanded the matter back for a hearing on that specific question."
Kohane concludes that "the counseling point is that allocation of coverage between and among carriers requires a close reading of policy language, particularly “other insurance” clauses. New York courts continue to insist, as a general rule, that all primary policies covering a risk be exhausted before implicating excess policies. By refusing to participation in the defense, AIG lost its opportunity to complain amount of the settlement."
Readers may also access the author's martindale.com law directory profile here. Create an account or login to post comments.
|