Who Pays Where Multiple CGL Policies Confer Additional Insured Status on the Defendant (NY)?

In Murnane Bldg. Contrs., Inc. v Zurich Am. Ins. Co., the plaintiff was the general contractor on the subject construction project.  Darby Oakes, an employee of subcontractor J.T. Erectors was injured on the job and commenced a lawsuit against Murnane, Luck Bros, Inc., and others to recover damage for personal injuries.  Luck Bros. had a CGL policy issued by Zurich Insurance Company that conferred additional insured status to Murnane.  Murnane filed this declaratory judgment to enforce its claimed entitlement to a defense and indemnification based on the additional insured provision.  Zurich in turn commenced a third-party action against Lexington Insurance Company, J.T. Erectors insurer, on the basis that Lexington had the duty to defend Murnane since Murnane was listed as an additional insured under Lexington’s CGL policy.  Both policies purported to be excess over other insurance policies covering the same risk.

On Murnane’s summary judgment motion, the trial court held that Zurich and Lexington were required to provide a defense to Murnane on a primary, pro-rata “co-basis” and, in effect, that Murnane was entitled to recover only 50% of the costs incurred by it or on its behalf in defending the underlying action.  On appeal, the Second Department reversed the trial court’s decision noting that “where there are multiple policies covering the same risk, and each generally purports to be excess to the other, the excess coverage clauses are held to cancel out each other and each insurer contributes in proportion to its limit amount of insurance.”  Furthermore, examining the facts surrounding the injury, the Court found it significant that Oakes’ injury arose out of work Luck Bros. was performing for Murnane and not through work J.T. Erectors was performing.  By the plain terms of the Zurich policy, these facts warranted that Zurich was obligated to fully defend and indemnify Murnane on a primary and non-contributory basis.

Special thanks to Michael Nunley for his contributions to this post.  For more information, please contact Nicole Brown at nbrown@wcmlaw.com.