Jefferson Ins. Co. of New York v. Travelers Indem. Co., 92 N.Y.2d 369 (1998)
An insurer cannot seek subrogation against its own insured for the very claim for which the insured was covered, and an insurer’s unreasonable delay in disclaiming coverage can result in coverage that wouldn’t otherwise exist.
Summary
This case involves a dispute among insurers regarding coverage for an accident involving a leased van. The New York Court of Appeals addressed whether the anti-subrogation rule bars an indemnity claim and whether an insurer was primary or excess. The court held that Travelers, as a primary coinsurer of A-Drive, was liable under its business auto policy; that Reliance’s ‘step-down’ endorsement was ineffective; and that the anti-subrogation rule barred the indemnity claim against Travelers as Continental Copy’s insurer. The court emphasized the importance of timely disclaimers and the application of the anti-subrogation rule to permissive users of vehicles.
Facts
A-Drive leased a van to Continental Copy. A-Drive purchased primary insurance from Reliance and excess insurance from Jefferson. Continental Copy had comprehensive coverage from Travelers, with A-Drive named as an additional insured. An employee of Continental Copy, driving the van, injured a pedestrian, Perun. Perun sued the driver and A-Drive. Reliance paid its $500,000 limit, and Jefferson paid $400,000 of its $500,000 excess policy to settle Perun’s claim.
Procedural History
Jefferson sued Travelers, Reliance, A-Drive, and Continental Copy, seeking relief only from Travelers. The lower courts granted Jefferson’s motion for summary judgment, holding Travelers liable for the $900,000 settlement, except for $10,000 attributed to Reliance’s step-down endorsement. Travelers appealed. The Court of Appeals modified the order, granting Travelers’ motion for summary judgment against Reliance and denying Reliance’s motion. The appellate division was modified and affirmed.
Issue(s)
1. Whether Travelers’ policy insured A-Drive.
2. Whether Travelers’ coverage of A-Drive was primary or excess.
3. Whether Reliance’s “step-down” endorsement limited its coverage.
4. Whether the anti-subrogation rule bars the indemnity claim against Travelers.
Holding
1. Yes, because Travelers’ policy endorsements, specifically the “Hired and Non-Owned Coverage” rider and failure to timely disclaim, provided coverage for A-Drive under its business auto policy.
2. Primary, because the Travelers policy was designed to provide primary insurance for Continental Copy, and A-Drive was an additional insured under this policy. Jefferson’s policy was explicitly for excess coverage.
3. No, because the “step-down” endorsement only applied to leases where the lessee was required to provide primary insurance, which was not the case here.
4. Yes, because Jefferson and Reliance, as insurers of A-Drive, were attempting to recover from Travelers in its capacity as insurer of Continental Copy, which was a permissive user and thus also an insured under the Reliance policy. This violates the anti-subrogation rule.
Court’s Reasoning
The court reasoned that Travelers’ endorsements, particularly the