Opinion
159175/2018
12-12-2019
COUNTRY-WIDE INSURANCE COMPANY, Plaintiff, v. GREAT AMERICAN ASSURANCE COMPANY, Dewitt Linton, Start and Finish Trucking, LLC, Christina Romito, Defendants.
Thomas Torto, Esq., New York, NY for plaintiff Country-Wide Insurance Company. Methfessel & Werbel (Fredric Paul Gallin of counsel), for defendant Great American Assurance Company.
Thomas Torto, Esq., New York, NY for plaintiff Country-Wide Insurance Company.
Methfessel & Werbel (Fredric Paul Gallin of counsel), for defendant Great American Assurance Company.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45 were read on this motion for
SUMMARY JUDGMENT
This insurance-coverage action arises from an automobile collision between defendant Christina Romito and defendant Dewitt Linton. At the time of the collision, Linton was driving a truck dispatched by non-party International Warehouse Group (IWG). Linton's truck was leased by IWG's affiliated company, International Trucking Group (ITG), from defendant Start and Finish Trucking, LLC. Plaintiff, Country-Wide Insurance Company, provided a motor-vehicle-insurance policy to ITG and IWG. Defendant Great American Assurance Company provided a motor-vehicle insurance policy to Start and Finish.
Romito was injured in the collision with Linton. She brought a personal-injury action in Supreme Court, Nassau County, against Linton, Start and Finish, and ITG. Great American assumed the defense of Linton and Start & Finish. Great American and Country-Wide later disputed which insurer is responsible for defending (and indemnifying) Linton and Start and Finish.
Country-Wide brought this coverage action, seeking a declaration that as between Great American's policy and Country-Wide's policy, Great American's is primary, such that Great American has the primary duty to defend (and indemnify) the defendants in the underlying action. Great American now moves for summary judgment under CPLR 3212, requesting a declaration that Country-Wide 's policy is primary and Great American's policy is excess, that Country-Wide owes Linton and Start and Finish a duty to defend in the underlying action, and that Country-Wide owes Great American reimbursement for already-expended defense costs (and certain related settlement expenses).
BACKGROUND
The Insurance Policies
Start and Finish owns a 1995 Freightliner truck. In 2012 Start and Finish leased that truck to ITG. Great American provided motor-vehicle liability insurance to Start and Finish. Country-Wide issued a motor-carrier insurance policy to ITG and IWG.
The Great American Policy
The named insured under the Great American insurance policy is Start and Finish. (See NYSCEF No. 25, at 4.) The policy covers sums that an "insured" becomes legally liable to pay as damages for bodily injury or property damage. (See id. at 72.) As relevant here, the policy defines "insured" to include Start and Finish as the named insured (see id. at 70), and "[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow" (id. at 72). The policy contains, however, a "non-trucking" exclusion barring coverage for "[b]odily [i]njury or property damage arising out of any accident which occurs while the covered ‘auto’ is being used in the business of a lessee," or "while the covered auto is being used to transport cargo of any type." (Id. at 37.)
The Great American policy also contains an "Other Insurance" provision. This section of the policy provides that the policy's coverage "is primary for any covered ‘auto’ while hired or borrowed by you," and "excess over any other collectible insurance for any covered ‘auto’ while hired or borrowed from you by another ‘trucker.’ " (Id. at 82.)
The Country-Wide Policy
The Country-Wide policy lists ITG and IWG as named insureds. (See NYSCEF No. 24, at 2.) The Country-Wide policy, like the Great American policy, covers damages that an "insured" becomes legally liable to pay to cover claims for bodily injury or property damage. (Id. at 19.)
Section 1 (a) of the "Who Is An Insured" section of the policy defines "insured" to include ITG and IWG as named insureds. (Id. at 20.) Section 1 (b) extends this definition also to include "[a]nyone else while using with your permission a covered ‘auto’ you own, hire, or borrow." (Id. ) This definition, though, is subject to an exception in § 1 (b) (1) for the "owner or any ‘employee,’ agent or driver of the owner, or anyone else from whom you hire or borrow a covered ‘auto.’ " (Id. ) That said, § 1 (d) provides that "insured" includes the "lessor of a covered ‘auto’ that is not a ‘trailer’ or any ‘employee’, agent or driver of the lessor while the ‘auto’ is leased to you under a written agreement if the written agreement between the lessor and you does not require the lessor to hold you harmless," and then "only when the leased ‘auto’ is used in your business as a ‘motor carrier’ for hire." (Id. )
The Country-Wide policy also contains an "Other Insurance" provision. This section of the policy provides that while ITG and IWG are borrowing a covered "auto" from another "motor carrier," the policy's liability coverage is "[p]rimary if a written agreement between the other ‘motor carrier’ as the lessor and you as the lessee does not require the lessor to hold you harmless, and then only while the covered ‘auto’ is used exclusively in your business as a ‘motor carrier’ for hire." The liability coverage, however, is "[e]xcess over any other collectible insurance if a written agreement between the other ‘motor carrier’ as the lessor and you as the lessee requires the lessor to hold you harmless." (NYSCEF No. 24, at 28.)
The lease agreement under which Start and Finish leased the 1995 Freightliner to ITG does not contain a provision requiring Start and Finish to hold ITG harmless. (See NYSCEF No. 22 [lease agreement].)
The Underlying Action
On May 5, 2016, the 1995 Freightliner was involved in a collision with a vehicle driven by defendant Christina Romito. At the time of the accident, the 1995 Freightliner was being operated by defendant Dewitt Linton to make deliveries as directed by IWG.
Start and Finish promptly submitted a claim to Great American. Great American claims that on June 5, 2016, it sent a letter to Start and Finish (and cc'ing Linton, ITG, and Country-Wide) denying coverage and disclaiming liability for Start and Finish's loss in light of the non-trucking provision in the Great American policy. (See Aff. in Supp. of Mot. for Summary Judgment, NYSCEF No. 17, at 16 [referencing disclaimer letter]; NYSCEF No. 27 [disclaimer letter].)
In July 2016, Romito brought a personal-injury action in Supreme Court, Nassau County, against Start and Finish, Linton, and ITG. (See NYSCEF No. 18 [summons and complaint].) Notwithstanding any prior disclaimer letter, Great American retained counsel to defend Start and Finish and Linton in Romito's action. (See Compl., NYSCEF No. 1, at17-18; Am. Ans., NYSCEF No. 9, at 2.) In January 2018, though, Great American sought to tender the defense of Start and Finish and Linton to Country-Wide. Country-Wide refused the tender. (See NYSCEF No. 1, at21-22; NYSCEF No. 9, at2, 7.)
This Action
In October 2018, Country-Wide brought this declaratory-judgment action, naming Great American, Linton, Romito, and Start and Finish as defendants. Country-Wide seeks a declaration that as between Great American and Country-Wide, Great American's policy is primary; and that Great American has the primary duty both to defend and to indemnify Linton, Start and Finish, and ITG in the underlying action. (See NYSCEF No. 1, at 5.)
Great American answered, raising the affirmative defense that the Great American policy "is a non-trucking policy which does not apply in this situation." In the alternative, Great American raised the defense that any coverage provided by the Great American policy "is excess to the coverage provided by the Countrywide policy." (See NYSCEF No. 9, at10-11.)
Great American later filed this motion for summary judgment. In its motion papers, Great American expressly disavowed any reliance in its motion on the nontrucking provision. Rather, Great American said, its arguments were based only on "other insurance clauses which are a battle between insurance carriers and do not implicate disclaimer of coverages." (NYSCEF No. 17, at 9.)
DISCUSSION
Under CPLR 3212, a movant must "make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." ( Alvarez v. Prospect Hosp., 68 NY2d 320, 324 [1986].) The burden on the movant is heavy, and "facts must be viewed in the light most favorable to the non-moving party." ( William J. Jenack Estate Appraisers & Auctioneers, Inc. v. Rabizadeh , 22 NY3d 470, 475 [2013].) After the movant makes a prima facie showing, the burden shifts to the non-movant to produce sufficient evidentiary proof to raise material issues of fact requiring a trial. (See Alvarez , 68 NY2d at 324.)
The Language of the Parties' Respective Other-Insurance Clauses
The parties here principally dispute how their respective insurance policies interact with each other. Great American argues that Country-Wide must provide primary insurance coverage, with Great American providing only excess coverage (if any). Country-Wide argues that Great American is the primary insurer, or at the very least that their two policies are co-primary, such that the two insurers should be responsible for paying out pro rata on any claims from their insureds. This court agrees with Great American.
Given Great American's disavowal in its motion papers of reliance on the nontrucking exclusion (see NYSCEF No. 17, at 16.), this court has not considered whether that exclusion would apply here, and if so whether Great American timely served notice of its reliance on that exclusion. Rather, the court considers only the issue of whether Great American or Country-Wide is the primary insurance carrier in this case.
In assessing the relationship between two applicable insurance policies, the court "must review and consider all of the relevant policies at issue to determine the priority of coverage among them." ( Sport Rock Intl., Inc. v. American Cas. Co. of Reading, Pa. , 65 AD3d 12, 13 [1st Dept 2009].) Where several policies cover the same risk and provide the same level of coverage, it is necessary to compare their "other insurance" clauses to determine priority of coverage. (See Sport Rock Intl., Inc. , 65 AD3d at 18.)
The Great American policy's other-insurance clause provides that the policy's coverage is excess while the covered auto (the 1995 Freightliner truck) is "hired or borrowed from you by another ‘trucker.’ " (NYSCEF No. 25, at 82.) Since the underlying collision in this case undisputedly occurred while the 1995 Freightliner was being leased by ITG from Start and Finish, the Great American policy provides only excess coverage.
The Country-Wide other-insurance clause, on the other hand, provides that where the covered auto is being used in ITG's motor-carrier business pursuant to a lease agreement with the owner that does not require the owner to hold ITG harmless, the policy's coverage is primary. (See NYSCEF No. 24, at 28.) The agreement under which ITG leased the 1995 Freightliner from Start and Finish does not contain a provision requiring Start and Finish to hold ITG harmless. (See NYSCEF No. 22.) The Country-Wide other-insurance provision, as applied to the facts of this case, makes Country- Wide the primary insurer. Great American is required to contribute coverage under its policy only once the Country-Wide policy has been exhausted. (See Sport Rock Intl. , 65 AD3d at 19.)
Country-Wide's Arguments for Disregarding the Language of the Other-Insurance Clauses
Country-Wide advances a series of arguments for why this court should not give effect to the other-insurance provisions in the parties' insurance policies, but should instead grant Country-Wide summary judgment declaring Great American to be the primary insurer. This court is not persuaded.
A. The Estoppel Argument
Country-Wide argues first that because Great American previously disclaimed coverage under Insurance Law § 3420 (d) (2) without mentioning the policies' other-insurance provisions, Great American is estopped from moving now for summary judgment on an other-insurance argument. No estoppel is present here.
To be sure, Country-Wide is correct that where an insurer initially denies coverage or disclaims liability on one ground, it may not later deny coverage or disclaim liability on a different ground. (See e.g. Benjamin Shapiro Realty Co. v. Agricultural Ins. Co. , 287 AD2d 389, 389 [1st Dept 2001].) But that is not what is occurring here. Great American is not arguing on this motion that Start and Finish and Linton lack coverage under Great American's policy—only that the coverage provided by that policy is excess to Country-Wide's liability coverage. As Justice Rakower of this court has held, an insurer's request for a declaration that a different insurer must provide primary coverage is materially different from the insurer denying coverage altogether. (See QBE Ins. Corp. v. Interstate Fire & Cas. Co. , Index No. 116947/2009, 2012 NY Slip Op 32747 (U), at *9 & n2 [Sup Ct, NY County Oct. 25, 2012].) Indeed, the Appellate Division, First Department, has carefully distinguished between an insurer's disclaimer of coverage in light of a policy exclusion and an insurer's arguments on other grounds for limiting its liability. (See Pav-Lak Industries, Inc. v. Arch Ins. Co. , 56 AD3d 287, 288 [1st Dept 2008] [holding that an insurer had waived reliance on a policy exclusion by failing timely to raise the exclusion, but had not waived reliance on a provision making the insured subject to a large policy deductible].)
This court notes that if Country-Wide were instead to rely on common-law estoppel principles, Country-Wide would have to establish that Great American's shift in arguments against liability caused Country-Wide prejudice—for example by lulling Country-Wide into detrimentally changing its position in reliance on Great American's original basis for avoiding liability. (See e.g. Sulner v. G.A. Ins. Co. of NY , 224 AD2d 205, 206 [1st Dept 1996] ; accord Provencal, LLC v. Tower Ins. Co. of NY , 138 AD3d 732, 734 [2d Dept 2016].) Country-Wide has made no such showing.
Country-Wide also contends that because Great American's summary-judgment motion does not merely request contribution from Country-Wide, but also seeks a declaration that Country-Wide rather than Great American is the primary insurer, "the requirement of prompt disclaimer under Insurance Law § 3420(d) is applicable." (See NYSCEF No. 43, at 15.) This contention is without merit. The question whether § 3420 (d) applies does not turn on whether an insurer's defenses would have the effect of substantially (or indeed wholly) limiting the insurer's liability, but on whether those defenses have that effect because they "bar coverage" under the policy "or implicate policy exclusions." ( Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co. of Pitt. , 21 NY3d 139, 147 [2013].) If, as here, the limits on liability at issue would instead stem from some other source, the requirements of § 3420 (d) (2) do not apply. (See id. [holding § 3420 (d) inapplicable where the insurance company was arguing that the insured had not satisfied a policy provision operating as a deductible and also that liability under the policy should be allocated pro rata]; accord Pav-Lak Industries , 56 AD3d at 288 ].)
Indeed, given § 3420 (d) (2)'s purpose of protecting insureds , it would make little sense to hold that provision applicable to an insurer's arguments for a particular allocation of coverage liability among insurers. That allocation would by definition have no effect on whether the insured receives coverage—merely on which insurer must provide it.
Nor has Country-Wide provided this court with any prior case holding either (i) that an insurer's initial disclaimer of coverage precluded the insurer from later arguing that it covered the loss on an excess basis; or (ii) that an insurer must timely provide notice under § 3420 (d) (2) that the insurer intends to argue that its coverage liability is excess rather than primary.
This court concludes that Great American is not barred from arguing on the present motion that Country-Wide's insurance policy is primary, and that Great American's policy covers the occurrence at issue in the underlying action only on an excess basis.
B. The Active/Passive Tortfeasor Argument
Country-Wide also argues that ITG (covered by Country-Wide's policy) was only a passive tortfeasor while Linton and Start and Finish (covered by Great American's policy), were the active tortfeasors, and therefore that Great American's policy is primary and Country-Wide's is excess. (See NYSCEF No. 43, at 13-14.) The principle, however, that the insurer of the active tortfeasor is primary and the insurer of the passive tortfeasor excess will apply only when the passive tortfeasor "has the right to full indemnification" from the active tortfeasor. ( Liberty Mut. Ins. Co. v. Aetna Cas. & Sur. Co. , 168 AD2d 121, 134 [2d Dept 1991].) And that is not the case here.
Linton and Start and Finish are insured by Country-Wide , as well as by Great American. To the extent that Linton is considered to have been employed by ITG at the time of the accident, he is covered as a permissive user of the 1995 Freightliner under § 1 (b) of the Country-Wide policy's definition of "Who Is An Insured"; and to the extent that Linton was employed by Start and Finish, he is covered as a Start and Finish driver under § 1 (d) of that definition. (See NYSCEF No. 24, at 20; see generally supra at Background Section I.B.) Start and Finish, as lessor of the truck to ITG, under a lease that does not contain a hold-harmless provision, is an insured under § 1 (d) of Country-Wide's policy as well.
Since ITG, Linton, and Start and Finish are each insured by Country-Wide, any indemnification claim in the underlying action brought by ITG against Linton or Start and Finish would be, in substance, an insurer subrogating against its own insured. Such a claim may not be maintained because it violates the antisubrogation rule, under which "an insurer of two parties" may not "seek[ ] to recover from its insured for the very loss for which the insured is supposed to be covered." ( Alinkofsky v. Country-Wide Ins. Co. , 257 AD2d 70, 73 [1st Dept 2004] ; see generally North Star Reins. Corp. v. Continental Ins. Co. , 82 NY2d 281, 294-296 [discussing antisubrogation rule].)
This is true even if an indemnification claim in the underlying action is currently contingent and hypothetical. The conflict of interest implicating the antisubrogation rule "exists the moment that the competing [insurance] coverages are triggered," not merely when a claim violating the rule is ultimately brought. (Alinkofsky , 257 AD2d at 74.)
Because the antisubrogation rule forecloses an indemnification claim by ITG against Linton and Start and Finish in the underlying action, Country-Wide cannot rely on the possibility of that indemnification claim as a basis for this court to declare that Great American is the primary insurer.
To be clear, any indemnification claim by ITG against Linton and Start and Finish would be made, and adjudicated, solely in the underlying action, which remains pending in Supreme Court, Nassau County. (See Romito v. Linton , Index No. 5115/2016 [Sup Ct, Nassau County].) This court addresses merely whether a possibility of indemnification in the underlying action renders Great American's insurance coverage primary for purposes of the present coverage action. The court concludes that it does not.
The Argument that Great American Acknowledged Itself to be the Primary Insurer
Finally, Country-Wide argues again that Great American was obligated to serve a prompt disclaimer of coverage under Insurance Law § 3420 (d) (2), and that by "disavow[ing] reliance on its disclaimer, Great American necessarily acknowledges that its coverage is primary," such that at most Country-Wide and Great American are co-primary insurers. (NYSCEF No. 43, at 16-18.)
As discussed above, however, § 3420 (d) did not oblige Great American promptly to serve notice of Great American's position that its insurance coverage is excess rather than primary. (See Discussion Section II.A, supra. ) To the extent that Country-Wide is suggesting that Great American's choice now to forgo reliance on the nontrucking exclusion itself altered whether Great American's policy is primary or excess, this court disagrees. (See Bovis Lend Lease , 53 AD3d at 145 [emphasizing that since "[a]n insurance policy is a contract between the insurer and the insured....the extent of coverage (including a given policy's priority vis-a-vis other policies) is controlled by the relevant policy terms" rather than by other extra-policy considerations].) To the extent that Country-Wide is arguing that Country-Wide and Great American are co-primary insurers in light of the other-insurance clauses of the two policies at issue, this court has already concluded otherwise. (See Discussion Point I, supra. )
Accordingly, for the foregoing reasons it is hereby
ORDERED that Great American's motion for summary judgment on the branch of Country-Wide's cause of action seeking a declaratory judgment that Great American is the primary insurer and has the duty to defend Dewitt Linton, Start and Finish Trucking, and International Trucking Group, in the action of Romito v. Linton , Index No. 5115/2016 Nassau County, is granted; and it is further
ADJUDGED AND DECLARED that Country-Wide Insurance Company has a duty to defend Linton, Start and Finish, and ITG in the Romito action pending in Nassau County; and it is further
ADJUDGED AND DECLARED that Great American's insurance policy covering Linton, Start and Finish, and ITG, is excess to the Country-Wide insurance policy covering Linton, Start and Finish and ITG; and it is further
ADJUDGED AND DECLARED that Country-Wide must reimburse Great American for all past legal fees expended in defense of Linton and Start and Finish; and it is further
ADJUDGED AND DECLARED that Country-Wide must reimburse Great American for the $4,500 that Great American paid to settle the property-damage subrogation action that Allstate Insurance brought against Linton and Start and Finish; and it is further
ORDERED that the balance of this action is severed and continued.