Unlimited WC Coverage Prevents Excess Coverage from Being Triggered (NY)

In Vincent & Sons Construction v. Century Surety Insurance, et al, the Second Department recently discussed the unlimited workers compensation coverage interacts with excess policies.

This declaratory judgment action was brought by Arthur Vincent & Sons Construction  seeking defense and indemnification from defendants Century Surety Insurance Company and Admiral Insurance Company in an underlying action wrongful death action, which arose during a project in which Fordham University hired Vincent Construction to install a new roof on one of its research buildings. As part of their contract, Vincent Construction agreed to indemnify Fordham against any claims arising out of Vincent Construction’s negligence and to carry comprehensive commercial general liability insurance naming Fordham as an additional insured.

During the course of the project, one of Vincent Construction’s employees had a fatal accident, and his estate commenced a wrongful death action against Fordham. In turn, Fordham commenced a third-party action against Vincent Construction seeking contribution, common-law indemnification, and contractual indemnification. At the time of the accident, Vincent Construction was covered by three policies: (1) a worker’s compensation and employer’s liability policy issued by Commerce and Industry Insurance Company (“Commerce”) that covered common-law indemnification claims and excluded coverage for contractual indemnification claims, (2) a CGL policy issued by Century that covered contractual indemnification claims, and (3) an excess policy issued by Admiral that also covered contractual indemnification claims.

After learning of the accident, only Commerce acknowledged coverage and provided Vincent Construction with defense, so Vincent Construction commenced this action to obtain a judgment declaring that Admiral was obligated to defend and indemnify it, and to defend and indemnify Fordham as an additional insured in the underlying wrongful death action.

Admiral moved for summary judgment, arguing that it was not obligated to defend or indemnify Vincent Construction because Vincent Construction’s primary coverage under the Commerce policy was unlimited, so excess coverage could never be triggered. Vincent Construction argued that because the Commerce policy excluded claims for contractual indemnification, the Admiral policy provided it with excess coverage for those claims. The Supreme Court agreed with Vincent Construction, and declared that Admiral must indemnify Vincent Construction in the underlying action with excess, noncontributory coverage. Admiral appealed.

On appeal, the Second Department noted that the Admiral excess policy stated that it provided coverage in the amount of the “ultimate net loss” in excess of the “underlying insurance limit.” The policy defined “underlying insurance limit” as the sum of the amounts of “other insurance” and “underlying insurance.” At issue for the Second Department was the meaning of “underlying insurance,” which the Admiral policy defined as “coverage(s) afforded under insurance policies, for the limits shown, as designated in the schedule of underlying insurance.”  The schedule of “underlying insurance” listed Century’s CGL policy, but it did not list Commerce Workers’ Compensation policy. Despite this, the court explained that the coverage afforded under the Commerce policy was included in the “underlying insurance limit,” because it was considered “other insurance.”

Here, the Commerce policy contained a New York Limit of Liability Endorsement providing Vincent Construction with unlimited coverage in cases where bodily injury to an employee arises in the course of employment. Because there was no question that the facts of the wrongful death action fell within the meaning of the endorsement, Admiral was correct that Vincent Construction’s primary policy provided unlimited coverage. Accordingly, the Second Department reversed the trial court, and held that by its “clear and unambiguous terms” the Admiral excess policy was not could be triggered for the wrongful death suit, regardless of the exclusion for contractual claims.   Admiral’s policy language governed, and the WC carrier is responsible for the entire underlying judgment, whatever that may be.  Thanks to Evan King for his contribution to this post.  Please email Brian Gibbons with any questions.