| Tishman Constr. Corp. of N.Y. v Great Am. Ins. Co. |
| 2008 NY Slip Op 06177 [53 AD3d 416] |
| July 8, 2008 |
| Appellate Division, First Department |
| Tishman Construction Corp. of New York et al.,Respondents, v Great American Insurance Company, Appellant, et al.,Defendant. |
—[*1] Miller & Associates, P.C., New York (Richard Imbrogno of counsel), forrespondents.
Judgment, Supreme Court, New York County (Jane S. Solomon, J.), entered March 23, 2007,granting plaintiffs' cross motion for summary judgment declaring, inter alia, the defendant GreatAmerican Insurance Company is obligated to indemnify plaintiffs Tishman Construction Corp. ofNew York and Carnegie Hall Corporation in connection with the underlying action entitledRobert J. Massie v Carnegie Hall Corp., New York County Clerk's index No. 124269/00,and denying Great American leave to amend its answer to assert affirmative defenses andcounterclaims based on the antisubrogation rule, unanimously modified, on the law, to vacatethat part of the judgment requiring defendant Great American Insurance Company to indemnifyplaintiffs Tishman Construction Corp. of New York and Carnegie Hall Corporation inconnection with the underlying action entitled Robert J. Massie v Carnegie Hall Corp., etal., and otherwise affirmed, without costs. Judgment, same court (Nicholas Doyle, Special Ref.),entered October 1, 2007, fixing the amount which Great American and Schiavone ConstructionCompany were required to pay plaintiffs consistent with the prior judgment, unanimouslymodified, on the law, to vacate that part of the judgment requiring Great American to makepayment pursuant to its policy, and otherwise affirmed, without costs.
Plaintiff Carnegie Hall Corporation retained plaintiff Tishman Construction Corporation tomanage construction of a new music hall. Pursuant to its contract with Carnegie, Tishmanprocured a commercial general liability insurance policy from plaintiff National Union FireInsurance Company naming Carnegie as an additional insured. The policy limits were $1,000,000per occurrence/$2,000,000 aggregate.
Tishman retained defendant Schiavone Construction Company to perform the excavation,foundation, structural demolition, structural steel and concrete work on the project. Under theircontract, Schiavone agreed to defend and indemnify Tishman and Carnegie for claims arising out[*2]of its own negligence, and to procure insurance of at least$10,000,000 naming Tishman and Carnegie as additional insureds. In order to satisfy the latterrequirement, Schiavone secured two separate policies. The first was a commercial generalliability policy with limits of $1,000,000 per occurrence/$2,000,000 aggregate. This was issuedby National Union, the same insurer that issued the policy to Tishman. The second policyacquired by Schiavone was a "Protector Commercial Umbrella Coverage" policy issued bydefendant Great American with limits of $25,000,000.
Two Schiavone employees were injured on the construction site when a hoist failed. Both ofthe employees commenced actions against Tishman and Carnegie. One of the actions, brought byRichard Maikowski, settled before trial for $785,000. The other, brought by Robert J. Massie,resulted in a jury verdict reduced by the trial court to $2,324,146. National Union paid the entireMaikowski settlement from the insurance policy it issued to Schiavone.
Tishman, Carnegie and National Union commenced this action against Great American andSchiavone for a declaration that after National Union paid out the remainder of the proceeds ofthe policy it issued to Schiavone, the unsatisfied portion of the Massie judgment would be theresponsibility of Schiavone pursuant to its agreement to indemnify Tishman and Carnegie. Thecomplaint further sought a declaration that Great American was required to indemnify them tothe extent the judgment exceeded the National Union policy issued to Schiavone, since the GreatAmerican excess policy named them as additional insureds.
Great American moved to amend its answer to assert additional affirmative defenses andcounterclaims premised on the antisubrogation rule, which bars an insurer from proceedingagainst its own insured because of the conflict of interest that it presents. It argued that NationalUnion's sole intention in commencing the action was to protect the separate policy it had issuedto Tishman. Plaintiffs cross-moved for summary judgment on the claims in their complaint.
The motion court denied Great American's motion and granted plaintiffs' cross motion. Itheld that the Great American policy was primary coverage for Tishman and Carnegie after theexhaustion of the National Union primary policy covering Schiavone, and entered judgmentrequiring Great American to satisfy the Massie judgment. It further ordered Schiavone to pay anysums not paid by Great American. The court referred the matter to a Special Referee to hear anddetermine the amounts which Great American or Schiavone were required to pay. The SpecialReferee fixed damages in favor of National Union and Travelers Indemnity Company, Carnegie'sinsurer.
We find, based on our recent decision in Bovis Lend Lease LMB, Inc. v Great Am. Ins.Co. (53 AD3d 140, 2008 NY Slip Op 03150 [1st Dept 2008]), that the court erredin declaring that plaintiffs were entitled to indemnification from Great American. Because GreatAmerican's policy was an excess policy which provided the final tier of coverage, it should nothave been invoked prior to the exhaustion of the National Union primary policy issued toTishman.
In Bovis, we analyzed a situation involving similar insurance policies. There, theowner and construction manager were insured by Illinois National Insurance Company. Thegeneral contractor was insured by Liberty Insurance Underwriters, Inc. under a commercialgeneral liability policy. It was further insured by Westchester Fire Insurance Company with acommercial umbrella liability policy which afforded $10,000,000 in coverage. J & A ConcreteCorp., the injured worker's employer, was insured by QBE Insurance Corporation under acommercial general liability policy. J & A was further insured by United National InsuranceCorp. pursuant to a commercial general umbrella liability policy which afforded $10,000,000 in[*3]coverage. The owner, construction manager and Illinoissought a judgment declaring the order of priority of the foregoing insurance policies. They arguedthat since both the general contractor and the subcontractor had agreed to defend and indemnifythe owner and construction manager, the policies which were procured to carry out thosepromises should be exhausted before they had to look to their own carrier.
We held that the priority of coverage in Bovis was, after the exhaustion of the QBEprimary policy, first the Liberty primary policy, then the Illinois policy and then the two umbrellapolicies, on a pro rata basis (id. at 159-160). In considering the primacy of the insurance policies in Bovis, we reiterated that in thecontext of construction projects, the terms of the individual policies take precedence over theterms of the various trade contracts for purposes of determining priority (id. at 145-146). We further stated that in analyzing each policy to determine thepriority of coverage, a court is required to consider the intended purpose of each policy " 'asevidenced by both its stated coverage and the premium paid for it, as well as upon the wording ofits provision concerning excess insurance' " (id. at 148, quoting State Farm Fire & Cas. Co. v LiMauro, 65 NY2d 369, 374 [1985]).
Accordingly, we noted that the insuring provisions of the United and Westchester policiesestablished that they were "true" excess policies which trump other policies written to provideprimary coverage (id. at 147-150, 155-156). We further observed that the premiums for the United and Westchester policies were significantly smallerthan the premiums for the primary policies at issue (id. at 150). This confirmed that those policies were "true" excess policies, since the lowpremiums reflected the underwriters' assessments that the policies were unlikely to ever beinvoked.
Here, it is similarly apparent that the Great American policy was intended only to provideexcess insurance. First, the policy language establishing it as a pure excess policy is substantiallysimilar to the language in the United policy in Bovis on which we relied to declare thatpolicy purely excess. In addition, the premium for the policy was $60,000, for coverage of$25,000,000. In contrast, the premium for the National Union policy issued to Tishman wassignificantly higher, although the coverage was for only $2,000,000 in the aggregate.
Plaintiffs argue that National Union's position as the final tier of coverage is the "OtherInsurance" provision in the National Union policy, which provides as follows:
"This insurance is excess over any other insurance, whether primary, umbrella, excess,contingent or on any other basis . . .
"(4) If a 'claim' arises out of the actions of a hired contractor or subcontractor who has agreedto either:
"a. Contractually indemnify the 'insureds' against whom 'claims' may be made for any 'claims'resulting from the actions of the hired contractor or subcontractor, or
"b. name the 'insureds' against whom 'claims' may be made as Additional Insureds on thehired contractor's or subcontractor's commercial general liability insurance policy."[*4]However, in Bovis we held that the existence of sucha clause did not transform a policy which was clearly intended to be excess into a lower-tierpolicy, as indicated by the comparatively small premium (id. at 150-151, citing Cheektowaga Cent. School Dist. v Burlington Ins. Co., 32 AD3d1265 [2006]).
Nor does the "Other Insurance" clause in the Great American policy, which plaintiffs alsorely on, change this analysis. That clause provides: "If other insurance applies to a loss that isalso covered by this policy, this policy will apply excess of the other insurance. Nothing hereinwill be construed to make this policy subject to the terms, conditions and limitations of suchother insurance. However, this provision will not apply if the other insurance is specificallywritten to be excess of this policy." Plaintiffs claim that because the National Union policy's"Other Insurance" clause states that it is excess over any other policies, the last sentence of theGreat American "Other Insurance" clause must be construed as an acknowledgment that GreatAmerican's policy is first in line. However, in Bovis, we also rejected this argument,relying on cases from other jurisdictions which hold that "a reference in an insurance policy toinsurance 'specifically purchased to apply in excess' of the subject policy (or similar phraseology)means a higher-level policy that specifically designates the subject policy as underlyinginsurance" (id. at 152). Here, the National Unionpolicy is not a "higher-level" policy, and it does not refer to the Great American policy.Accordingly, the clause is unavailing to plaintiffs' argument.
Because we vacate those parts of the judgments appealed which require Great American toindemnify plaintiffs based on the foregoing analysis, we need not reach the issue of whetherNational Union violated the antisubrogation rule by commencing this action.Concur—Mazzarelli, J.P., Andrias, Friedman and Sweeny, JJ.