New York Law Review

Tag: Excess Coverage

  • Pecker Iron Works, Inc. v. Travelers Ins. Co., 99 N.Y.2d 391 (2003): Interpreting Primary vs. Excess Coverage for Additional Insureds

    Pecker Iron Works, Inc. v. Travelers Ins. Co., 99 N.Y.2d 391 (2003)

    Unless unambiguously stated otherwise in a written agreement, an entity designated as an “additional insured” under an insurance policy is presumed to receive primary, not excess, coverage.

    Summary

    This case addresses whether an insurance policy extended primary or excess coverage to an additional insured. Pecker Iron Works, a general contractor, was named as an additional insured under a subcontractor’s (Upfront Enterprises) policy with Travelers Insurance. An Upfront employee was injured, leading to a lawsuit where Pecker sought a declaration that Travelers provided primary coverage. The Court of Appeals held that, absent explicit language in the agreement between Pecker and Upfront specifying excess coverage only, Pecker was entitled to primary coverage under the Travelers policy as an additional insured. The court reasoned that the default understanding of “additional insured” status is the same protection as the named insured, which includes primary coverage.

    Facts

    Pecker Iron Works engaged Upfront Enterprises as a subcontractor for a construction project. The subcontract required Upfront to provide certificates of insurance naming Pecker as an additional insured. Upfront had a primary insurance policy with Travelers Insurance Company. An Upfront employee was injured at the construction site and sued the general contractor and property owner, who then impleaded Pecker. Pecker sought a declaratory judgment that Travelers was obligated to provide primary coverage.

    Procedural History

    The Supreme Court granted Travelers’ motion to dismiss, concluding the policy provided only excess coverage absent an express designation of primary coverage in writing. The Appellate Division reversed, holding there was no indication in the Pecker-Upfront agreement that Pecker would receive only excess coverage. The Court of Appeals affirmed the Appellate Division.

    Issue(s)

    1. Whether an entity named as an “additional insured” under an insurance policy is entitled to primary coverage, absent a clear and unambiguous written agreement specifying only excess coverage.

    Holding

    1. Yes, because the well-understood meaning of “additional insured” is an entity enjoying the same protection as the named insured, and absent an explicit written agreement to the contrary, this includes primary coverage.

    Court’s Reasoning

    The Court of Appeals emphasized the established understanding of the term “additional insured.” The court cited Del Bello v General Acc. Ins. Co., 185 AD2d 691, 692 (1992), stating that the term has a “well-understood meaning” as “an ‘entity enjoying the same protection as the named insured.’” The court determined that when Pecker engaged Upfront and required to be named as an additional insured, it signified that Upfront’s carrier would provide Pecker with primary coverage for the relevant risk. The Travelers policy covered additional insureds, as long as Upfront had contracted in writing for the insurance to apply on a primary basis. Upfront’s agreement to name Pecker as an additional insured satisfied this requirement, because there was no explicit agreement that coverage would be excess only. The Court therefore resolved the ambiguity in favor of primary coverage, stating that “[w]hen Upfront agreed to it, the policy provision was satisfied.” The court essentially placed the burden on the insurer to clearly specify excess-only coverage for additional insureds in the written agreement to avoid the presumption of primary coverage.

  • Northbrook Excess & Surplus Ins. Co. v. Chubb Group of Ins. Cos., 71 N.Y.2d 1016 (1988): Resolving ‘Other Insurance’ Clauses in Overlapping Coverage Scenarios

    Northbrook Excess & Surplus Ins. Co. v. Chubb Group of Ins. Cos., 71 N.Y.2d 1016 (1988)

    When multiple insurance policies potentially cover the same loss, the specific language of the ‘other insurance’ clauses within each policy dictates the order in which the insurers are obligated to provide coverage.

    Summary

    This case addresses a dispute between two insurance companies, Northbrook and Chubb, regarding their respective obligations to cover a loss involving a hired automobile. The New York Court of Appeals held that Northbrook’s policy provided excess coverage over any other collectible insurance, while Chubb’s policy contained conflicting language. Because the driver of the vehicle was an ‘interest’ covered by the Chubb policy, the Court found Northbrook’s coverage would only apply after Chubb’s coverage was exhausted. The Court emphasized that the specific wording of the ‘other insurance’ clauses determined the order of coverage.

    Facts

    Chrysler Corporation’s parent company, DRAG, leased out cars. An accident occurred involving a vehicle owned by DRAG and leased to a customer. Both Northbrook and Chubb insured DRAG. Northbrook’s policy stated its coverage was excess over any other collectible insurance. Chubb’s policy contained language that excluded coverage for the owner of a hired auto if the auto was otherwise covered, but also stated that for covered autos not owned, its insurance was excess.

    Procedural History

    The Appellate Division ruled in favor of Northbrook, finding that Chubb’s policy provided primary coverage. The Court of Appeals affirmed the Appellate Division’s order based on the reasoning articulated by Justice Sandler at the lower court.

    Issue(s)

    Whether the ‘other insurance’ clauses in the Northbrook and Chubb insurance policies should be interpreted to determine which insurer has primary responsibility for covering the loss arising from the accident.

    Holding

    Yes, because the specific language in Northbrook’s policy provided that its coverage was excess, while Chubb’s policy contained conflicting language and the driver was an ‘interest’ covered by the Chubb policy, Chubb was responsible for primary coverage.

    Court’s Reasoning

    The Court of Appeals adopted the reasoning of the Appellate Division, emphasizing the importance of the specific language used in the insurance policies. The Court highlighted the conflict within Chubb’s policy, noting that it both excluded coverage for the owner of a hired auto and provided excess coverage for non-owned autos. The court stated: “[F]or any covered auto you don’t own, the insurance provided by this policy is excess over any other collectible insurance.”, and then noted the Northbrook policy language providing that “if other valid and collectible insurance is available to any interest such interest shall not become an insured with respect to this coverage until all other applicable coverage available to them has been exhausted”. The driver of the accident vehicle was considered an ‘interest’ covered by Chubb’s policy. Because Northbrook’s policy unequivocally stated that its coverage was excess, the Court concluded that Chubb’s policy should provide primary coverage. The Court also distinguished this case from prior precedent by noting that the comprehensive nature of the Northbrook policy, which covered a wide range of corporate liabilities, made it difficult to determine if the premium reflected a reduced risk related to the DRAG cars.