New York Law Review

Tag: CGL Policy

  • BP Air Conditioning Corp. v. One Beacon Insurance Group, 8 N.Y.3d 708 (2007): Duty to Defend Additional Insureds

    BP Air Conditioning Corp. v. One Beacon Insurance Group, 8 N.Y.3d 708 (2007)

    An insurer’s duty to defend an additional insured is triggered by the allegations of the complaint and the terms of the insurance policy, and is not contingent on a prior determination of liability against the additional insured.

    Summary

    This case addresses whether an insurer has a duty to defend an additional insured under a commercial general liability (CGL) policy before a determination of liability. BP Air Conditioning was named as an additional insured on a policy issued to Alfa Piping. An employee of another subcontractor sued BP for injuries sustained at the job site. One Beacon, Alfa’s insurer, refused to defend BP, arguing that its duty was contingent on a finding that the injury arose from Alfa’s work. The New York Court of Appeals held that the duty to defend an additional insured is as broad as the duty to defend the named insured and is triggered when the complaint suggests a reasonable possibility of coverage, regardless of a liability determination. The court modified the appellate division order regarding priority of coverage, remanding for further consideration.

    Facts

    Henegan Construction was the general contractor for a renovation project. They subcontracted HVAC work to BP Air Conditioning, who then subcontracted steam fitting work to Alfa Piping. The subcontract required Alfa to indemnify BP and name BP as an additional insured on its CGL policy. Joseph Cosentino, an employee of another subcontractor, was injured at the work site and sued Henegan, who then brought a third-party action against BP and Alfa.

    Procedural History

    Cosentino sued Henegan, who then sued BP and Alfa. BP then commenced a fourth-party action against One Beacon, seeking a declaration of its rights as an additional insured under Alfa’s policy. The Supreme Court granted BP’s motion for partial summary judgment, finding One Beacon had a duty to defend BP. The Appellate Division modified, holding that One Beacon’s coverage was primary. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether an insurer’s duty to defend an additional insured under a CGL policy is contingent upon a determination of liability against the additional insured.

    Holding

    No, because the duty to defend an additional insured is as broad as the duty to defend the named insured and is triggered when the complaint suggests a reasonable possibility of coverage, regardless of a liability determination.

    Court’s Reasoning

    The Court of Appeals emphasized that an insurer’s duty to defend is “exceedingly broad” and is triggered whenever the complaint alleges facts that suggest a reasonable possibility of coverage. The Court cited Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137 (2006). The duty is based on the allegations of the complaint and the terms of the policy, not on the merits of the underlying claim. The Court stated: “[a]n [a]dditional insured is a recognized term in insurance contracts, . . . [and that] the well-understood meaning of the term is an entity enjoying the same protection as the named insured” (Pecker Iron Works of N.Y. v Traveler’s Ins. Co., 99 NY2d 391, 393 [2003]). The Court reasoned that BP’s reasonable expectation, when requiring Alfa to name it as an additional insured, was to obtain protection from lawsuits arising out of Alfa’s work, which constitutes “litigation insurance”. Denying a defense would rewrite the policy and provide a windfall to the insurer. The court distinguished the case from cases requiring a determination of liability before a defense is owed. The Court also determined that it could not decide on priority of coverage because all relevant policies and parties were not before the court.

  • Continental Casualty Co. v. Rapid-American Corp., 80 N.Y.2d 641 (1993): Scope of Duty to Defend in Asbestos Exposure Cases

    Continental Casualty Co. v. Rapid-American Corp., 80 N.Y.2d 641 (1993)

    Under a standard Comprehensive General Liability (CGL) policy, an insurer has a broad duty to defend its insured in asbestos-related bodily injury lawsuits where there is a reasonable possibility of coverage, even if the pollution exclusion clause exists, provided the underlying complaints allege an “occurrence” during the policy period.

    Summary

    Continental Casualty Company (CNA) sought a declaratory judgment that it had no duty to defend Rapid American Corporation in asbestos-related personal injury lawsuits. Rapid, as a successor to Philip Carey Manufacturing, faced numerous claims from individuals exposed to asbestos. The New York Court of Appeals held that CNA had a duty to defend Rapid because the complaints alleged an “occurrence” (bodily injury resulting from continuous exposure) during the policy period. The court found that the pollution exclusion clause was ambiguous as applied to asbestos exposure in enclosed spaces, and therefore did not negate CNA’s duty to defend. The court deferred the issue of contribution from other insurers or self-insured periods.

    Facts

    Rapid American Corporation, as a successor to Philip Carey Manufacturing Corporation, inherited asbestos-related liabilities. CNA issued four CGL policies to Rapid covering 1971-1980. These policies required CNA to defend and indemnify Rapid for bodily injury caused by an “occurrence.” From 1990 onward, Rapid faced numerous asbestos-related bodily injury lawsuits alleging injuries from sustained exposure to asbestos products from the 1950s through the 1980s. CNA disclaimed coverage, arguing no “occurrence” happened within the policy period and the pollution exclusion applied.

    Procedural History

    CNA initiated a declaratory judgment action seeking a ruling that it had no duty to defend Rapid. The Supreme Court granted summary judgment to CNA. The Appellate Division reversed, granting partial summary judgment to Rapid, declaring that CNA must defend Rapid in the underlying suits. The Court of Appeals affirmed the Appellate Division’s decision.

    Issue(s)

    1. Whether the underlying complaints allege an “occurrence” covered by the CNA policies, thus triggering CNA’s duty to defend?

    2. Whether the policies’ pollution exclusion clause negates CNA’s duty to defend in the asbestos-related lawsuits?

    Holding

    1. Yes, because the complaints allege personal injury and wrongful death suffered by contractors who worked with asbestos products for sustained periods of time, which can be considered a repeated exposure to conditions that unexpectedly and unintentionally results in bodily injury during the policy period.

    2. No, because the pollution exclusion clause is ambiguous as applied to asbestos-related bodily injury claims, and therefore, CNA cannot escape its duty to defend.

    Court’s Reasoning

    The court emphasized that the duty to defend is broader than the duty to indemnify, requiring an insurer to defend if there is a reasonable possibility of coverage based on the complaint’s allegations or the insurer’s knowledge of facts. The court rejected CNA’s argument that the asbestos injuries were not “unexpected or unintentional,” noting that intent to cause injury must be shown for the exclusion to apply. The court also rejected the argument that Rapid’s past insurance practices constituted a “practical construction” that coverage was triggered only upon manifestation of the disease, stating, “[t]he fact that Rapid called upon other insurance coverage issued [by National] or obtained indemnification elsewhere, cannot be considered a concession that would relieve CNA of their contractual responsibilities” (177 AD2d 61, 70).

    Regarding the pollution exclusion, the court found it ambiguous as applied to asbestos exposure in enclosed spaces. While asbestos could be considered an irritant or pollutant, the court questioned whether asbestos fibers inhaled by workers were “discharged into the ‘atmosphere’ as contemplated by the exclusion.” The court noted that the exclusion was intended to address environmental pollution and the terms used in the exclusion, such as “discharge” and “dispersal,” are terms of art in environmental law. The Court stated, “The crucial distinction, therefore, is not whether the asbestos products were launched into the stream of commerce or remained under the control of the manufacturer, but rather whether asbestos was placed into the environment.” Because the asbestos fibers could have been transmitted by direct contact, CNA did not meet its burden of proving that the exclusion applied and was subject to no other reasonable interpretation.

    The court deferred the issue of contribution from other insurers or self-insured periods, stating that the insured should not be denied initial recourse to a carrier merely because another carrier may also be responsible. It said, “That is the ‘litigation insurance’ the insured has purchased.”