Opinion
Index No. 652868/2018 MOTION SEQ. No. 003
10-17-2023
ACE AMERICAN INSURANCE COMPANY, Plaintiff, v. ADIRONDACK INSURANCE EXCHANGE, Defendant.
Unpublished Opinion
PRESENT: HON. DAKOTA P. RAMSEUR, Justice
DECISION + ORDER ON MOTION
DAKOTA D. RAMSEUR, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 82, 83, 84, 85, 86, 87,88 were read on this motion to/for REARGUMENT/RECONSIDERATION
In June 2018, plaintiff ACE American Insurance Company (hereinafter, "ACE") commenced the instant action against defendant Adirondack Insurance Exchange ("Adirondack") to recover insurance payments it made to settle Kieran Moran and Bernadette Moran v Town of Riverhead, Gladys Breitenbach and Walter Breitenbach, Supreme Court, Suffolk County, NYSCEF Index. No. 03357/2011 (the "underlying action"). As one of the Town of Riverhead ("Riverhead")'s insurers, ACE alleges that Adirondack's insurance policy covering Mr. and Mrs. Breitenbach obligated it to defend Riverhead and exhaust policy limits before ACE became liable on its policy. In this motion sequence (003), ACE moves for leave to reargue the Court's Decision and Order dated January 4, 2023 (the "January 2023 Decision"), which (1) denied it summary judgment pursuant to CPLR 3212, and (2) granted Adirondack's motion for summary judgment dismissing ACE's complaint. Adirondack opposes the motion in its entirety. For the following reasons, ACE's motion for leave to reargue is granted; upon reargument, the Court vacates the branches of its prior Decision and Order denying ACE summary judgment and granting Adirondack summary judgment. The Court further finds that ACE and Adirondack must contribute to the settlement on a pro-rata basis.
BACKGROUND
The Court set forth the relevant background in its January 2023 Decision and reproduces below the facts needed to resolve the instant motion.
In 2010, Walter Breitenbach struck pedestrian Kieran Moran with his automobile while driving within the scope of his employment with the Town of Riverhead. Before his death from injuries sustained in the accident, Moran and his wife commenced the underlying personal injury suit against the Breitenbachs and Riverhead. By December 2016, all interested parties- including ACE as an insurer of Riverhead and Adirondack as the insurer of the Breitenbachs' automobile-reached a settlement agreement. The agreement, entered by Surrogates Court, Suffolk County, required Adirondack to pay $750,000 on behalf of the Breitenbachs, Riverhead to pay $50,000 separate and apart from its insurance, ACE to pay $1,000,000 on behalf of Riverhead, and AIG (an independent insurer) to pay $200,000. In total, Mrs. Moran received $2,000,000 from the various defendants.
Though the complaint originally asserted causes of action against Riverhead for negligent hiring, supervision, and training, ultimately, the parties stipulated to their dismissal. Mrs. Moran's remaining cause of action was for negligence under a respondeat superior theory.
The Adirondack/Breitenbach Insurance Policies
On the date of the accident, Walter and Gladys Breitenbach were insured under an Adirondack Custom-Pac policy containing automobile and homeowners liability limits of $500,000 each. (NYSCEF doc. no. 44 at 1, Adirondack Policy.) In addition, the policy also contained a "Personal Protector Endorsement (Personal Umbrella For Use With Custom-Pac Policy)" policy with a liability limit of $1,000,000 in excess of the retained limit. The Personal Protector Endorsement defines "Insured" to mean the named insured and "[a]ny other person or organization but only with respect to the legal responsibility for acts or omissions of [the insured]." (Id. at 81.) Under the "Coverage" provision, entitled "Insuring Agreement," Adirondack's Personal Protector policy states, "We will pay damages in excess of the 'retained limit' for: 'bodily injury' or 'property damage' for which an 'insured' becomes legally liable due to an 'occurrence' to which this insurance applies; and 'personal injury' for which an 'insured' becomes legally liable." (Id. 87.) "Retained Limit" is defined as: "the total limits of any 'underlying insurance' or any other insurance that applies to coverage." (Id. at 88.) Lastly, under a provision entitled "Other Insurance," the Personal Protector/Umbrella policy provides, "[t]he coverage afforded by this endorsement is excess over any other insurance available to an 'insured,' except insurance written specifically to be excess over this endorsement." (Id. at 85.) With Adirondack paying $750,000 in the settlement, neither party disputes that the primary Custom Pac policy was exhausted and that $250,000 in excess liability was paid.
The ACE/Riverhead Insurance Policy
ACE provided a Public Entity "Retained Limits" Policy to Riverhead, as the policy's named insured, with an automobile liability limit of $1,000,000 per occurrence with a $150,000 self-insured retention limit (or SIR). (NYSCEF doc. no. 33 at 3, ACE insurance policy.) The policy was effective between December 31, 2009, and December 31, 2010. Parties do not dispute the policy was active when the Breitenbach/Moran accident occurred. The policy provides that ACE will indemnify Riverhead "for Damages and Claim Expenses in excess of the [$150,000] Retained Limit for which the Insured becomes legally obligated to pay because of a Claim arising out of an Accident taking place during the Policy Period for Bodily Injury or Property Damage." (Id. at 28.) Furthermore, the policy's "Other Insurance" section provides, in pertinent part, "If insurance with any other Insurer is available to cover a Claim for an Insured for any coverage under this Policy whether on a primary, excess, or contingent basis, the insurance under this Policy is excess of and does not contribute with such other insurance." (Id. at 8.) Continuing, "[i]t is also agreed that such other insurance is excess over the Retained Limit and we [ACE] will not make any payments until the other insurance and the Retained Limit have been exhausted." (Id.) ACE does not dispute that, between the settlement Riverhead paid to the Morans and the legal fees it accumulated in defending the action, Riverhead met the $150,000 self-insured retention limit.
The January 2023 Decision
The Court's January 2023 Decision resolved Adirondack's and ACE's respective motions for summary judgment pursuant to CPLR 3212. (NYSCEF doc. no. 79, Court's January 2023 Decision.) The central dispute involved which policy-whether Adirondack's or ACE's-should be considered primary (and thus would need to be exhausted for the other to become liable) and which should be regarded as an excess policy. For Adirondack, it argued that ACE's Riverhead policy was primary, and thus, its $1,000,000 liability limit would need to be exhausted before Adirondack's own Personal Protection/Umbrella Coverage took effect. By contrast, ACE argued that Adirondack's Custom Pac policy provided primary coverage, meaning Adirondack's Personal Protection/Umbrella Coverage and its $1,000,000 in excess coverage would need to be exhausted before ACE became liable.
In its January 2023 Decision, the Court recognized that where both insurers have contracted to cover the same risk at the same level, i.e., where "both [policies] are considered excess policies," neither is permitted to argue that the other insurer must bear the entire risk. Instead, the policy's "Other Insurance" provisions effectively cancel each other out and both must contribute pro rata . (Id. at 6, citing State Farm Fire & Cas. Co. v LiMauro, 65 N.Y.2d 369, 373-374 [1985].) Nonetheless, the Court determined that Adirondack and ACE's policies did not insure the same risk at the same level, instead finding ACE's Retained Limit Policy to be primary and Adirondack's Personal Protection/Umbrella policy to be in excess. To the Court, ACE's policy was primary because its policy "required Riverhead to pay a $150,000 retention limit before ACE became obligated to pay excess fees." In contrast, Breitenbach only had to pay a $258 deductible to Adirondack. (Id. at 7.) The Court's conclusion rested primarily on cases such as Tishman Const. Corp v Great Am. Ins. Co. (53 A.D.3d 416 [1st Dept 2008]) and United States Fire Ins. Co. v CAN & Transcon Ins. Co (300 A.D.2d 1054 [4th Dept 2002]), both of which supported the proposition that "such large premiums like the one paid by Riverhead to ACE typically accompany primary policies-not excess or umbrella policies." (NYSCEF doc. no. 79 at 6-7.) As such, the Court found ACE's $1,000,000 liability limit must be exhausted before Adirondack would become liable. (Id.) Accordingly, it denied ACE's motion, granted Adirondack's, and dismissed the complaint.
The Court recognizes it erred in treating the $ 150,000 self-insured retention limit as a premium. Where the holder of an excess insurance policy does not purchase underlying primary insurance, the dollar amount of loss that the policyholder must pay themselves before insurance coverage takes effect is a self-retention limit. (See Allstate Ins. Co. vAm. Home Prods. Corp., 2009 U.S. Dist. LEXIS 29113 at * n 3 [SDNY 2009].) The Court also recognizes that its comparison between the premium that Riverhead actually paid (approximately $173,000) to ACE and the premium Breitenbach paid to Adirondack was inapt: instead of insuring a single vehicle against an "occurrence" as Adirondack was, ACE's policy insured Riverhead against accidents to their entire fleet of vehicles.
The Instant Motion
On this motion, ACE moves pursuant to CPLR 2221 (d) for leave to reargue the branches of the Court's prior decision described supra. ACE contends that, in finding its policy primary to Adirondack's, the Court ignored its policy's "Other Insurance" clause, which, in its view, created an excess policy under New York law. (NYSCEF doc. no. 83 at 9-11, ACE memo of law.) From its perspective, the Court compounded the mistake by citing cases that pertain to co-primary insurance policies and not to cases that consider self-insured retention limits in relation to other excess policies. (See 233rd St. Partnership, L.P. v Twin City Fire Ins. Co. (52 A.D.3d 292, 293 [1st Dept 2008]), Cheektowaga Cent. School District v Burlington Ins. Co. (32 A.D.3d 1265, 1268 [4th Dept 2006]) and Tishman Constr. Corp. v Great Am. Ins. Co. (53 A.D.3d at 416.) In opposition, Adirondack maintains that the Court correctly determined that the policies did not provide insurance on the same levels, that its "functional analysis"-the comparison between premiums (even if the Court used the wrong premium for ACE)-was required, and that its finding that ACE's policy was primary was proper. More specifically, in Adirondack's view, ACE did not raise the argument that a self-insured retention limit creates an excess policy on the original motion; still, even if it had, the ACE policy was triggered before Adirondack's Personal Protection/Umbrella policy once Riverhead hit its self-insured retention limit. (NYSCEF doc. no. 85 at 7-10. Adirondack memo in opp.) Or, in Adirondack's own words, "since the Adirondack Umbrella coverage had yet been [sic] triggered and the ACE Policy's coverage had, there was no need for this Court to compare 'other insurance' provisions. This is because only one policy's (ACE's) coverage had been triggered." (Id. at 9.)
DISCUSSION
In determining the order of priority between two competing policies and whether one insurance policy is primary to or in excess of another, courts in this jurisdiction are required to assess whether the insurers have contracted to cover the same risk and on the same level. (LiMauro, 65 N.Y.2d at 373-374.) The order of priority "turns on the consideration of the purpose each policy was intended to serve as evidenced by both its stated coverage and the premium paid for it, as well as upon the wording of its provision concerning excess insurance." (Bovis Lend Lease LMB, Inc. v Great Am. Ins. Co., 53 A.D.3d 140 148-149 [1st Dept 2008].) Where insurers have, in fact, covered the same risk on the same level-for example, where two excess policies are concerned, one that has an "escape clause" over other automobile liability insurance and the other, a provision making the policy excess to all other coverages (Federal Ins. Co. v Atlantic Natl. Ins. Co., (25 N.Y.2d 71 [1969])-neither insurer may argue that the other must bear the entire risk, and both must contribute pro rata to the settlement. (LiMauro, 65 N.Y.2d at 374.)
Two policies, both of which contain "Other Insurance" provisions that explicitly provide coverage above other existing policies, may nonetheless cover different risks on different levels. In Lumbermens Mut. Casualty Co. v Allstate Ins. Co. (51 N.Y.2d 651 [1980]), which the LiMauro court cited, one policy described the insurance coverage as being "excess insurance over any other collectible insurance," another policy covered "net loss in excess of insured's retained limit," and another policy-issued by Lumbermens Mutual-provided coverage "in excess of any other valid and collectible insurance available to the insured, whether such other insurance is stated to be primary, contributing, excess or contingent (emphasis added)." (Lumbermens, 51 N.Y.2d at 656.) Though all three policies are termed excess policies, the Court found the Lumbermens policy to be an umbrella policy in excess of the other two since, from its plain meaning, the policy was intended to provide a final tier of coverage beyond other excess policies. (Id.) In so finding, the rule of pro-rata contribution was deemed inapplicable to the Lumbermens policy. (Id.)
Though Lumbermens used the term "final tier" to describe such a policy, the Court of Appeals notes, in LiMauro, that this is commonly referred to in the insurance industry as an "Umbrella" policy.
Applying these principles, the Court's previous decision erred in concluding that ACE's policy provided primary coverage. The "Other Insurance" clause in ACE's policy cannot be read as anything other than for excess coverage. (See NYSCEF doc. no. 33 at 3, ACE's "Other Insurance" Provision ["If insurance with any other Insurer is available to cover a Claim for an Insured for any coverage under this Policy whether on a primary, excess, or contingent basis, the insurance under this Policy is excess of and does not contribute with such other insurance."]) Furthermore, that ACE's policy disclaims coverage on a contingent basis is significant. As the Court of Appeals in LiMauro explained, "an insurance policy which purports to be excess coverage but contemplates contribution with other excess policies or does not by the language used negate that possibility must contribute ratably with a similar policy, but must be exhausted before a policy which expressly negates contribution with other carriers." (LiMauro, 65 N.Y.2d at 375-376; see also Bovis Lend Lease, 53 A.D.3d at 148-149 [holding that an excess policy was "plainly intended to constitute the final tier of insurance" where it contains an "Other Insurance" clause that requires all other applicable insurance, "whether primary, excess, contingent or on any other basis," to be exhausted before extending coverage.]) This outcome-that ACE's policy is an excess policy designed to provide a final tier of coverage-tracks with the Court of Appeals' holding in Lumbermens: in both cases, the policies at issue contain the same language disclaiming coverage irrespective of whether the other policies purport to provide coverage on a primary, excess, or contingent basis.
As to Adirondack's policy, the Court finds that it is also a true umbrella/excess policy that was intended to provide final tier coverage. First, Adirondack's policy is specifically denominated as an "umbrella" policy (NYSCEF doc. no. 44 at 6), and both LiMauro and Bovis Lend Lease emphasize the importance of such a consideration. (LiMauro, 65 N.Y.2d at 376 ["Indicative of such an intent [to be excess over other excess policies] . . . may be the fact that a policy is issued as "umbrella"]; Bovis, 53 A.D.3d at 148 ["Here, J&A's United policy is denominated a 'Commercial Umbrella Liability Policy,' and its coverage is limited to losses in excess of the coverage afforded by the 'underlying insurance.'"]) Second, although Adirondack's "Other Insurance" clause does not include specific language regarding contribution to other excess policies, the intent to create a final tier of coverage is nonetheless apparent: by its plain terms, the Personal Protection/Umbrella policy creates an obligation to pay damages in excess of the policy's retained limit, with "retained limit" defined as '"underlying insurance' or any other insurance that applies to an 'occurrence' or offense which are available to an 'insured.'" (NYSCEF doc. no. 44 at 88; see Vassar Coll. v Diamond State Ins. Co., 84 A.D.3d 942, 945 [2d Dept 2011] [holding an umbrella policy to be true excess where the coverage is triggered only after the exhaustion of the primary coverage and "any other insurance available to the insured."]) Moreover, this intent for final tiered coverage is evidenced by the premium paid by Breitenbach-only $258-relative to the amount in additional coverage-$1,000,000. (See Tishman, 53 A.D.3d at 420 [holding that the intent to create a pure excess policy was apparent by looking at the significantly lower premium for a substantially higher coverage].) Lastly, Adirondack's policy is meaningfully different from those in similar cases where courts have determined that a purported excess policy is, in actuality, not a true final-tier, umbrella policy. (SeeBovis Lend Lease, 53 A.D.3d at 149 ["Other Insurance" clause in Liberty's policy describes it as being "excess over . . . [any] other primary insurance" (emphasis original)]; Vassar Coll., 84 A.D.3d at 945 [policy issued by Diamond provided that it will pay the excess of the retained limit, defined as the sum of the underlying insurance provided by the ACE policy and "other collectible primary insurance."])
Since the Court now finds both policies to insure the same risk and at the same level, i.e., both cover the accident as true excess policies, the Court's comparison between the premiums and attendant risks of each policy is no longer warranted, and the cases it previously cited no longer persuasive. (See 223rd St. Partnership, 52 A.D.3d at 293 [holding that a purported excess policy was actually a primary policy where there is no underlying primary insurance and coverage is subject to payment of a deductible]; Cheektowaga, 32 A.D.3d at 1268 [holding that Zurich policy did not cover same risks on same level as a true excess policy since it provided excess coverage in only certain conditions].)
Given the Court's findings, both ACE and Adirondack are required to contribute pro rata to the settlement. (See Jefferson Ins. Co v Travelers Indem. Co., 92 N.Y.2d 363, 372 [1998] ["Where such terms in two or more policies conflict-as two policies that purport to be excess over each other-each insurer must contribute in the proportion their policies bear to the limit of coverage at that level"]; Bovis Lend Lease, 53 A.D.3d at 155 [recognizing that where two policies provide umbrella coverage, the insurers must contribute on a pro rata basis after the other policy's exhaustion].)
To the extent that either party argues that the other's was triggered first, the Court finds such an argument unpersuasive as both ACE's $150,000 self-insured retention limit and Adirondack's $500,000 Custom Pac primary liability limit were both exhausted in the defending and/or settling the underlying action.
Accordingly, for the foregoing reasons, it is hereby
ORDERED that plaintiff ACE American Insurance Company's motion for leave to reargue pursuant to CPLR 2221 (d) is granted; and upon argument, the Court vacates the branches of its Decision and Order dated January 4, 2023, that granted defendant Adirondack Insurance Exchange's motion for summary judgment pursuant to CPLR 3212 and denied ACE summary judgment; and it is further
ORDERED that the matter of each party's contribution is hereby referred to the Special Referee Clerk (Room 119, 646-386-3028 or sprefajnycourts.gov) for placement at the earliest possible date upon the calendar of the Special Referees Part (Part SRP), which, in accordance with the Rules of that Part (which are posted on the website of this court at www.nycourts.gov/supctmanh at the "References" link), shall assign this matter at the initial appearance to an available JHO/Special Referee; and it is further
ORDERED that counsel for plaintiff shall serve a copy of this order, along with notice of entry, on all parties within twenty (20) days of entry.
This constitutes the Decision and Order of the Court.