New York Law Review

Tag: indemnification

  • Millennium Holdings LLC v. Glidden Co., 30 N.Y.3d 409 (2017): Antisubrogation Rule Does Not Apply Where Party Sued by Insurer Was Not an Insured

    <strong><em>Millennium Holdings LLC v. Glidden Co.</em>, 30 N.Y.3d 409 (2017)</em></strong>

    The antisubrogation rule, which prevents an insurer from subrogating against its own insured, does not apply where the party against whom the insurer seeks subrogation was not an insured under the relevant insurance policy.

    <strong>Summary</strong>

    In a dispute over indemnification obligations stemming from lead paint lawsuits, several insurers sought to subrogate against Akzo Nobel Paints (ANP) for payments made to Millennium Holdings LLC, the insurers’ insured. The New York Court of Appeals held that the antisubrogation rule did not bar the insurers’ claims because ANP was not an insured under the policies in question. The court clarified that the antisubrogation rule applies when the party against whom subrogation is sought is covered by the insurance policy. Since ANP was not covered, the insurers could pursue their subrogation claims based on contractual and equitable grounds. This decision reaffirms the fundamental requirement that the party against whom subrogation is sought must be an insured under the policy for the antisubrogation rule to apply.

    <strong>Facts</strong>

    The Glidden Company manufactured lead paint and was later acquired by SCM Corporation. SCM had insurance policies with various insurers. SCM’s assets and liabilities, including the Glidden paints business, were later distributed to HSCM-6 and HSCM-20 as part of SCM’s liquidation. HSCM-20 entered into a purchase agreement, selling HSCM-6 to ICI American Holdings, but retained the insurance policies. This agreement included indemnification obligations related to product liability claims. A series of lead paint lawsuits were filed against predecessors of Millennium and ANP. The insurers paid settlements on behalf of Millennium. Millennium sought indemnification from ANP. The insurers intervened, seeking to subrogate against ANP, but ANP argued that the antisubrogation rule barred the claims.

    <strong>Procedural History</strong>

    The insurers filed a motion to intervene in the action, which was granted. They then filed a second amended complaint to seek subrogation. The trial court granted ANP’s motion for summary judgment, holding that the antisubrogation rule barred the insurers’ subrogation claims. The Appellate Division affirmed. The Court of Appeals reversed.

    <strong>Issue(s)</strong>

    1. Whether the antisubrogation rule prevents the insurers from subrogating against ANP, a party not insured under the policies, for payments made on behalf of Millennium, the insurers’ insured.

    <strong>Holding</strong>

    1. No, because ANP was not an insured under the relevant policies, the antisubrogation rule does not apply.

    <strong>Court's Reasoning</strong>

    The court emphasized that the antisubrogation rule is an exception to the right of subrogation. The purpose of the rule is to prevent an insurer from suing its own insured for a claim arising from the risk covered by the policy and to avoid a conflict of interest where an insurer might favor one insured over another. The court stated that the essential element of the antisubrogation rule is that the party against whom the insurer seeks to subrogate must be covered by the insurance policy. In this case, ANP and its predecessors were not insured under the policies in question because the policies were explicitly excluded from the distribution of assets to ANP’s predecessor. The court distinguished this case from *Jefferson Ins. Co. of N.Y. v. Travelers Indent. Co.*, where the antisubrogation rule applied because the permissive user was covered by the policy.

    The court noted: “If we were to extend application of the antisubrogation rule to all non-covered third parties, an insurer who fulfills its obligation to pay on the risks insured by the relevant policy would essentially be foreclosed from the ability to subrogate.”

    <strong>Practical Implications</strong>

    This case clarifies the scope of the antisubrogation rule in New York. It confirms that an insurer can pursue subrogation against a third party that is not an insured under the policy, even if the third party has an indemnification agreement with the insured. This decision informs how insurers analyze whether they have subrogation rights. It also provides guidance on the specific factual circumstances needed for the antisubrogation rule to apply. Law firms handling insurance litigation should carefully examine the insurance policy and determine whether the third party is an insured under the policy, even if the third party may have an indemnification relationship with the insured. Later cases will likely cite this decision to clarify that the rule against subrogation does not apply where the third party is not covered by the policy.

  • Cunha v. City of New York, 13 N.Y.3d 502 (2009): Common-Law Indemnification in Labor Law Cases

    Cunha v. City of New York, 13 N.Y.3d 502 (2009)

    A party held strictly liable under the Labor Law is entitled to full common-law indemnification from the party wholly at fault, even if the strictly liable party settles the underlying claim.

    Summary

    Cunha sued the City for injuries sustained at a construction site. The City, in turn, sued HAKS, an engineering firm, for indemnification. Cunha settled with both the City and HAKS. The trial proceeded on the City’s indemnification claim against HAKS. The jury found HAKS negligent but only 40% at fault. The City sought a directed verdict for 100% indemnification, which was denied at trial but granted on appeal. The Court of Appeals affirmed, holding that the City, vicariously liable under Labor Law § 241(6), was entitled to full common-law indemnification from HAKS, the party actually at fault. The court emphasized that because no other tortfeasor was properly before the jury, HAKS was liable for 100% of the damages.

    Facts

    Cunha, an employee of JLJ Enterprises, was injured while working in a trench. The City hired JLJ as the prime contractor, and HAKS was contracted for engineering inspection services. City employees and inspectors determined a trench could no longer be cleared by machinery. JLJ ordered Cunha to dig by hand in the unprotected trench, which collapsed and injured him. The City conceded a Labor Law § 241(6) violation predicated on a violation of Industrial Code § 23-4.1 because the shoring and trench where the accident occurred was greater than five feet and the trench collapsed causing injury to plaintiff.

    Procedural History

    Cunha sued the City for Labor Law violations. The City brought a third-party action against HAKS for contractual and common-law indemnification. The City’s motion for summary judgment dismissing Cunha’s Labor Law § 200 claim and for indemnification against HAKS was initially denied. The City renewed its motion, and the Labor Law § 200 claim was dismissed. Cunha settled with the City and HAKS. The indemnification claim proceeded to trial, with the jury finding HAKS negligent and 40% at fault. The trial court denied the City’s motion for a directed verdict for 100% indemnification. The Appellate Division reversed, granting the City conditional judgment for 100% indemnification. The Court of Appeals granted leave to appeal and affirmed the Appellate Division.

    Issue(s)

    Whether a party, strictly liable under Labor Law § 241(6) and having settled with the plaintiff, is entitled to full common-law indemnification from the negligent third party when no other tortfeasor is properly before the court.

    Holding

    Yes, because a party held strictly liable under the Labor Law is entitled to “full indemnification from the party wholly at fault” (Chapel v Mitchell, 84 NY2d 345, 347 [1994]), and in this case, HAKS was the only possible negligent party before the court.

    Court’s Reasoning

    The Court of Appeals reasoned that the City’s voluntary concession of liability under Labor Law § 241(6) did not preclude its indemnification claim. The court emphasized that the City presented sufficient evidence to demonstrate vicarious liability, and HAKS waived its right to a jury determination on this issue by failing to request it. Citing Rosado v Proctor & Schwartz, 66 NY2d 21 (1985), the court stated that a party may settle and seek indemnification as long as they show they may not be held liable in any degree. The court found the City’s active negligence was not at issue. The court distinguished the case from Frank v Meadowlakes Dev. Corp., 6 NY3d 687 (2006), noting that no Article 16 issue existed, as no other tortfeasor could be found liable. The court interpreted the jury’s allocation of only 40% fault to HAKS as potentially attributing culpability to Cunha’s employer (JLJ), but JLJ’s fault was irrelevant because the plaintiff did not sustain a grave injury, precluding them from being part of the action. To the extent the jury might have considered plaintiff himself at fault, his negligence must be excluded. The court concluded that “once HAKS was found to be negligent—and since HAKS was the only possible negligent party to the lawsuit—the City was entitled to 100% indemnification from HAKS.” Because the court found in favor of the City on its common-law indemnification claim, it did not address the contractual indemnification claim.

  • City of New York v. Welsbach Electric Corp., 9 N.Y.3d 124 (2007): Res Judicata and Collateral Estoppel Require Identity of Litigating Parties

    9 N.Y.3d 124 (2007)

    Res judicata and collateral estoppel do not bar a subsequent action where the parties were not directly adverse in the prior action and the specific issue in the subsequent action was not actually litigated and decided in the prior action.

    Summary

    The City of New York sued Welsbach Electric for indemnification and contribution related to a prior negligence case. Welsbach moved for summary judgment, arguing that res judicata and collateral estoppel barred the City’s action because Welsbach had been dismissed from the prior suit. The Court of Appeals held that neither doctrine applied because the City and Welsbach were not adverse parties in the prior action, and the issue of Welsbach’s contractual obligations to the city was not litigated. This case clarifies that these doctrines require an identity of parties actually litigating claims against each other.

    Facts

    A traffic accident occurred at an intersection with a traffic signal maintained by Welsbach under contract with the City. The injured parties (Angerome plaintiffs) sued multiple parties including the City and Welsbach, alleging the accident was caused by a malfunctioning traffic signal. Welsbach moved for summary judgment, arguing it owed no duty to the public and had performed its contractual obligations. The City did not cross-claim against Welsbach in that initial action.

    Procedural History

    The Supreme Court granted Welsbach’s motion for summary judgment, dismissing the claims against it in the original action. The City did not appeal. The case proceeded to trial against the City, and the jury found the City 100% liable. After settling the judgment, the City then sued Welsbach for indemnification and contribution. The Supreme Court initially denied Welsbach’s motion for summary judgment based on res judicata and collateral estoppel. The Appellate Division reversed, but the Court of Appeals then reversed the Appellate Division, reinstating the Supreme Court’s original order.

    Issue(s)

    1. Whether res judicata bars the City’s action against Welsbach when the City made no claim against Welsbach in the prior action.
    2. Whether collateral estoppel bars the City’s action against Welsbach when the issue of Welsbach’s contractual obligations to the City was not actually litigated and decided in the prior action.

    Holding

    1. No, because res judicata requires an identity of parties actually litigating successive actions against each other; it applies only when a claim between the parties has been previously “brought to a final conclusion.”
    2. No, because collateral estoppel applies only “if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action.”

    Court’s Reasoning

    The Court of Appeals reasoned that res judicata requires an identity of parties actually litigating claims against each other. Since the City made no claim against Welsbach in the prior action, res judicata does not apply. The court stated, “Here, the City made no claim against Welsbach in the Angerome action.”

    Regarding collateral estoppel, the Court found that the issue of Welsbach’s contractual obligations to the City was not actually litigated and decided in the prior action. The Supreme Court’s grant of summary judgment to Welsbach was based solely on the grounds that Welsbach owed no duty to the general public, not on whether Welsbach had properly performed its contractual obligations to the City. The Court emphasized that because the City never cross-claimed against Welsbach, the issue of Welsbach’s contractual obligations was never properly before the court in the first action. The court quoted from Parker v. Blauvelt Volunteer Fire Co., 93 NY2d 343, 349 to clarify the standard for collateral estoppel.

  • Great Northern Ins. Co. v. Interior Constr. Corp., 7 N.Y.3d 412 (2006): Enforceability of Indemnification Clauses in Commercial Leases

    Great Northern Ins. Co. v. Interior Constr. Corp., 7 N.Y.3d 412 (2006)

    An indemnification clause in a commercial lease, coupled with an insurance procurement provision, obligates the tenant to indemnify the landlord for its share of liability, and such a lease provision does not violate General Obligations Law § 5-321.

    Summary

    This case concerns the enforceability of an indemnification provision in a commercial lease where the lease also contains an insurance procurement clause. A tenant, Depository Trust, hired a contractor to renovate its leased premises. The contractor’s work on a sprinkler system caused a flood, damaging another tenant’s property. That tenant’s insurer, Great Northern, sued the landlord, New Water, and Depository. New Water cross-claimed against Depository for indemnification based on the lease. The New York Court of Appeals held that the indemnification clause, coupled with the insurance procurement provision, was enforceable, obligating Depository to indemnify New Water for its share of liability, and that this arrangement did not violate General Obligations Law § 5-321, because the parties allocated the risk of loss to third parties through insurance.

    Facts

    New Water Street Corp. leased space to Depository Trust & Clearing Corp. The lease included a clause where Depository would indemnify New Water against claims arising from the premises, specifically covering accidents unless solely caused by New Water’s negligence. The lease also required Depository to maintain liability insurance naming New Water as an additional insured. Depository hired Interior Construction Corp. to renovate the premises, and Interior subcontracted with TM & M Mechanical Corp. During the renovation, a flood occurred due to improper draining of sprinkler pipes, damaging the premises of Neuberger & Berman, a tenant below.

    Procedural History

    Great Northern Insurance, Neuberger’s insurer, sued New Water, Depository, and Interior to recover for the damages paid to Neuberger. New Water filed a cross-claim against Depository for contractual indemnification. The subrogation action settled, except for New Water’s indemnification claim against Depository. The parties stipulated that a jury would have allocated 90% of the liability to New Water and 10% to Interior. Supreme Court denied New Water’s motion for summary judgment on its indemnification claim. The Appellate Division initially affirmed, then reversed on reargument, granting New Water’s motion. Depository appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the indemnification clause in the lease unmistakably requires Depository to indemnify New Water under the circumstances of this case.

    2. Whether the lease provision is unenforceable under General Obligations Law § 5-321 because it obligates the tenant to indemnify the landlord for the landlord’s own negligence.

    Holding

    1. Yes, because the broadly drawn provision unambiguously evinced an intent that Depository indemnify New Water for the latter’s own negligence, provided New Water was not 100% negligent.

    2. No, because, consistent with Hogeland v Sibley, Lindsay & Curr Co., General Obligations Law § 5-321 does not prohibit indemnity where the parties are allocating the risk of liability to third parties between themselves, essentially through the employment of insurance.

    Court’s Reasoning

    The Court of Appeals stated that contracts are construed to provide indemnity for a party’s own negligence only where the contractual language demonstrates an “unmistakable intent” to indemnify. The Court found that subsection (C) of the indemnification clause, requiring Depository to indemnify New Water for “any” accident unless caused solely by New Water’s negligence, unambiguously evinced such intent. The parties’ stipulation that New Water was 90% at fault meant New Water was not solely liable, triggering the indemnification obligation.

    Regarding General Obligations Law § 5-321, the Court relied on Hogeland v. Sibley, Lindsay & Curr Co., emphasizing that the statute primarily targets exculpatory clauses where lessors avoid direct liability. The Court reasoned that in this case, the parties were allocating risk through insurance. The Court emphasized, quoting Hogeland, “[The landlord] is not exempting itself from liability to the victim for its own negligence. Rather, the parties are allocating the risk of liability to third parties between themselves, essentially through the employment of insurance. Courts do not, as a general matter, look unfavorably on agreements which, by requiring parties to carry insurance, afford protection to the public.” Because the lease included both an indemnification provision and an insurance procurement requirement, the Court found the indemnification enforceable, reasoning that Depository’s insurer would bear the ultimate responsibility, which was the parties’ intention. The Court declined to overrule Hogeland, citing stare decisis and the reliance of commercial parties on that precedent.

  • Frank v. Meadowlakes Development Corp., 6 N.Y.3d 685 (2006): Limits on Indemnification Under CPLR Article 16

    6 N.Y.3d 685 (2006)

    Under CPLR Article 16, a tortfeasor whose liability is determined to be 50% or less can be held responsible for indemnification of noneconomic loss only to the extent of their proportionate share of fault.

    Summary

    Frank, injured at a construction site, sued Meadowlakes (the property owner) and D.J.H. Enterprises (the general contractor). Meadowlakes then filed a third-party action against Frank’s employer, Home Insulation. After a trial, the jury apportioned fault: 10% to Frank, 10% to Home, and 80% to D.J.H. Frank settled with D.J.H. and Meadowlakes. Meadowlakes then sought full indemnification from Home. The Court of Appeals held that while Meadowlakes retained its right to indemnification, Home, found only 10% liable, was responsible only for its proportionate share of noneconomic damages and all economic damages. The court reconciled CPLR 1602(1) and 1602(2)(ii), emphasizing the legislative intent to protect low-fault defendants from disproportionate liability.

    Facts

    Stephen Frank, while working at a building site owned by Meadowlakes, fell and sustained serious injuries. The accident occurred when Frank, carrying insulation up a staircase lacking a railing, lost his balance. Frank and his wife sued Meadowlakes and D.J.H. Enterprises (general contractor) for negligence. Meadowlakes initiated a third-party action against Home Insulation, Frank’s employer, seeking indemnification.

    Procedural History

    The case proceeded to a bifurcated trial on liability. The jury apportioned fault: 10% to Frank, 10% to Home, and 80% to D.J.H. The court directed a verdict against Meadowlakes and D.J.H. based on a Labor Law § 240(1) violation. Frank settled with D.J.H. and Meadowlakes. Supreme Court granted Meadowlakes’ motion for common-law indemnification against Home for the full settlement amount. The Appellate Division affirmed. The Court of Appeals reversed in part, limiting Home’s indemnification liability.

    Issue(s)

    Whether a tortfeasor whose liability is 50% or less can be found responsible for total indemnification of noneconomic loss, despite CPLR Article 16.

    Holding

    No, because CPLR Article 16 limits the amount a low-fault defendant must pay in indemnification for noneconomic damages to their proportionate share of fault, even while preserving the underlying right to indemnification itself.

    Court’s Reasoning

    The Court of Appeals reconciled CPLR 1602(1) and 1602(2)(ii). CPLR 1602(1) states that Article 16 applies to indemnification claims. CPLR 1602(2)(ii) states that Article 16 should not limit any existing right to indemnification. The Court reasoned that 1602(2)(ii) is a savings provision meant to preserve the *right* of indemnification, but not to allow for unlimited recovery from a low-fault defendant. The court stated that the purpose of Article 16 was “to place the risk of a principally-at-fault but impecunious defendant on those seeking recovery and not on a low-fault, deep pocket defendant.” The court explicitly rejected the First Department’s holding in Salamone v. Wincaf Props., which found an irreconcilable conflict between CPLR 1602(1) and 1602(2)(ii) and gave precedence to the latter. The proper calculation of Home’s share involves dividing indemnity among potential indemnitors, excluding Frank’s own share of fault. Thus, Home’s indemnity to Meadowlakes is limited to all economic loss and one-ninth of noneconomic loss.

  • Bovis Lend Lease LMB, Inc. v. Lower Manhattan Development Corp., 3 N.Y.3d 480 (2004): Indemnification Agreements Must Expressly Name Indemnitees

    Bovis Lend Lease LMB, Inc. v. Lower Manhattan Development Corp., 3 N.Y.3d 480 (2004)

    An indemnification clause in a contract will be strictly construed, and a party seeking indemnification must be unambiguously identified in the contract as an intended beneficiary of the indemnification obligation.

    Summary

    This case addresses the scope of an indemnification clause in a renovation contract. VEH, a contractor, agreed to indemnify the Port Authority, the building owner, and its “agents.” Bovis, a construction manager for the Port Authority, sought indemnification from VEH after an employee of VEH was injured and sued both the Port Authority and Bovis. The Court of Appeals held that Bovis was not entitled to indemnification because the contract did not unambiguously identify Bovis as an intended beneficiary of the indemnification clause. The court emphasized that indemnity agreements must be strictly construed and cannot be expanded beyond their express terms.

    Facts

    The Port Authority contracted with VEH for heating and ventilation work at One World Trade Center. The Port Authority also contracted with Bovis for construction management services for the same project. A VEH employee was injured on the job and sued the Port Authority and Bovis, alleging negligence and Labor Law violations. The Port Authority then initiated a third-party action against Bovis, who in turn sued VEH, seeking contractual indemnification based on the indemnity clause in the VEH-Port Authority contract.

    Procedural History

    The Supreme Court granted VEH’s motion to dismiss the third-party complaint against it, finding that Bovis was not entitled to indemnification. The Appellate Division affirmed. The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

    Issue(s)

    Whether Bovis, as a construction manager for the Port Authority, qualifies as the Port Authority’s “agent” under the indemnification clause of the contract between VEH and the Port Authority, thereby entitling Bovis to indemnification from VEH.

    Holding

    No, because the indemnification clause did not unambiguously identify Bovis as an intended beneficiary of the indemnification obligation. The contract language was not clear enough to create an obligation to indemnify Bovis. The Court declined to rewrite the contract to include an obligation the parties did not explicitly include.

    Court’s Reasoning

    The Court of Appeals emphasized that indemnification agreements must be strictly construed. Quoting Hooper Assoc. v AGS Computers, 74 NY2d 487 (1989), the Court stated, “[w]hen a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed.” The Court reasoned that if the Port Authority and VEH intended to include Bovis as a potential indemnitee, they should have explicitly stated so in the contract. The Court noted that while the contract referred to the “construction manager” multiple times, it did not refer to the construction manager as an agent of the Port Authority in the indemnification clause. The Court also pointed out that in a section of the contract prohibiting VEH from giving gifts to Port Authority, the terms “agent” and “construction manager” were used as separate classifications. The Court further noted that its holding was in keeping with the Omnibus Workers’ Compensation Reform Act of 1996, which limits employers’ liability to third parties for injury to their employees, unless the employer “expressly agreed” to indemnify the claimant. The Court emphasized the need for the indemnification contract to be clear and express to further the spirit of the legislation. There were no dissenting or concurring opinions.

  • Westmoreland Coal Co. v. Entech, Inc., 100 N.Y.2d 351 (2003): Exclusive Remedy Provisions in M&A Agreements

    100 N.Y.2d 351 (2003)

    When a stock purchase agreement contains both purchase price adjustment and indemnification provisions, objections to asset values based on failures to comply with GAAP existing at the time of the agreement are claims for breach of warranty, subject to the exclusive remedies specified in the indemnification provisions.

    Summary

    Westmoreland Coal Co. acquired Entech’s coal mining subsidiaries via a stock purchase agreement containing both price adjustment and indemnification clauses. Westmoreland objected to Entech’s closing date certificate, claiming GAAP violations in asset valuations. Entech refused to submit to alternative dispute resolution (ADR) under the price adjustment clause, arguing that the indemnification clause provided the exclusive remedy for breaches of representation or warranty. Westmoreland sued to compel ADR. The New York Court of Appeals held that Westmoreland’s objections were claims for breach of warranty, governed by the indemnification provisions, and thus not subject to ADR.

    Facts

    Entech and Westmoreland entered into a stock purchase agreement where Westmoreland would acquire Entech’s coal mining subsidiaries. The agreement included interim financial statements warranted by Entech as compliant with GAAP. The purchase price was subject to adjustment based on the closing date net asset value. After closing, Westmoreland objected to the closing date certificate, alleging the asset values didn’t comply with GAAP and sought a significant price adjustment. Entech argued that these objections were warranty breaches subject to the agreement’s indemnification clause, which dictated litigation as the exclusive remedy.

    Procedural History

    Westmoreland petitioned to compel ADR per the purchase price adjustment provisions. The Supreme Court granted the petition. The Appellate Division affirmed, holding any material objection to the closing date certificate must be submitted to an independent accountant for arbitration. Entech appealed to the New York Court of Appeals.

    Issue(s)

    Whether Westmoreland’s objections to the closing date certificate, based on alleged failures to comply with GAAP, fall under the stock purchase agreement’s purchase price adjustment provisions requiring ADR, or the indemnification provisions providing for exclusive litigation in court for breaches of representation and warranty?

    Holding

    No, because Westmoreland’s objections related to accounting conventions and asset values already present in the interim financial statements, which Entech warranted as GAAP-compliant. These objections are claims for breach of warranty and are subject to the exclusive remedies detailed in the indemnification provisions, namely litigation.

    Court’s Reasoning

    The court emphasized interpreting the contract as a whole, stating, “A written contract ‘will be read as a whole, and every part will be interpreted with reference to the whole; and if possible it will be so interpreted as to give effect to its general purpose.’” The court reasoned that the purchase price adjustment clause required the closing date certificate to be prepared consistently with the interim financial statements. Entech warranted that the interim financial statements complied with GAAP. Westmoreland’s objections essentially alleged a breach of this warranty. The indemnification clause provided the exclusive remedy for warranty breaches, specifying litigation. Allowing ADR would circumvent the indemnification clause’s limitations and the $1.75 million threshold for indemnification. The court also noted Westmoreland’s due diligence obligations and experience in the coal business. It stated, “These sophisticated commercial parties surely could not have intended to consign a significant portion of the purchase price to ADR.” The court emphasized that warranty claims require the protections of discovery, evidence rules, and appellate review, which are absent in ADR. The court found that “Westmoreland’s objections related to noncompliance with GAAP are, in fact, claims for breach of a representation or warranty. These claims may only be pursued in a court of law”.

  • City of New York v. State, 89 N.Y.2d 742 (1997): Clarifying Indemnification for Highway Maintenance

    City of New York v. State, 89 N.Y.2d 742 (1997)

    Highway Law § 349-c (8-a) does not mandate the State to indemnify New York City for personal injury claims arising from accidents on state arterial highways within the city, as the statute was enacted to address the State’s inability to provide liability insurance to other cities, not to alter existing agreements with New York City.

    Summary

    The City of New York sought to compel the State to defend and indemnify it in personal injury lawsuits related to accidents on state arterial highways within the city, citing Highway Law § 349-c (8-a). The Supreme Court initially sided with the City, but the Appellate Division reversed. The Court of Appeals affirmed the Appellate Division’s decision, holding that the statute’s amendment in 1985 was intended to resolve the State’s contractual obligation to provide liability insurance to other cities, not to extend indemnification to New York City, which had a different maintenance agreement without such a clause. The legislative history and existing contractual arrangements between the State and New York City supported this interpretation.

    Facts

    The City of New York faced several personal injury lawsuits stemming from accidents on state arterial highways located within the city and maintained by the city.

    Since 1952, New York City has maintained and repaired these highways under agreements with the State.

    Unlike agreements with other cities, New York City’s agreements did not include a clause requiring the State to indemnify or insure the City against property damage or personal injury claims.

    In 1985, the State was unable to procure liability insurance for other cities, as required by their maintenance agreements.

    Procedural History

    The City of New York initiated a proceeding to compel the State to defend and indemnify it in the personal injury actions.

    The Supreme Court ruled in favor of the City.

    The Appellate Division reversed the Supreme Court’s decision.

    The Court of Appeals affirmed the Appellate Division’s ruling.

    Issue(s)

    Whether Highway Law § 349-c (8-a) requires the State to defend and indemnify the City of New York in personal injury actions arising from accidents on state arterial highways located within the city, given that the City’s maintenance agreements with the State did not include an indemnification clause.

    Holding

    No, because the 1985 amendment to the statute was intended to address the State’s inability to fulfill its contractual obligation to provide liability insurance to other cities, and it did not seek to alter existing agreements between New York City and the State that did not include such indemnification.

    Court’s Reasoning

    The Court focused on the legislative intent behind the 1985 amendment to Highway Law § 349-c (8-a).

    The Court determined that the amendment’s purpose was to provide a remedy for the State’s failure to meet its contractual obligation to provide liability coverage to other cities.

    The Court noted that New York City’s maintenance agreements with the State differed from those of other cities; the City’s agreements did not include a clause requiring the State to provide liability insurance or indemnification.

    The Court reasoned that the amendment did not seek to create statutory mandates for maintenance contracts or to alter existing agreements between New York City and the State.

    The Court emphasized that, unlike other cities, New York City retained “jurisdiction” over the roads in question per Highway Law § 349-c (3.4).

    The Court stated: “The amendment did not seek to create statutory mandates for the maintenance contracts nor did it attempt to alter the existing agreements between New York City and the State in this regard. Therefore, the Appellate Division correctly concluded that the City of New York is not within the phrase ‘such city’ in section 349-c (8-a); it cannot seek indemnification under the statute.” This highlights the specific and limited scope of the statutory amendment.

  • Corning v. Allied Piping Inc., 86 N.Y.2d 261 (1995): Establishing Liability Under New York’s Labor Law § 240(1) for Elevated Risks

    Corning v. Allied Piping Inc., 86 N.Y.2d 261 (1995)

    New York Labor Law § 240(1) imposes absolute liability on owners and contractors when a worker’s injuries are proximately caused by the failure to provide adequate safety devices to protect against elevation-related risks at a construction site.

    Summary

    This case concerns a painter who fell from a ladder while attempting to paint an alcove, falling over a wall and through a suspended ceiling. The New York Court of Appeals held that Labor Law § 240(1) was violated because the contractor failed to provide any safety device to protect the painter from the specific risk of falling over the alcove wall. The court affirmed summary judgment for the plaintiff and held the painting subcontractor liable for common-law indemnification to the general contractor because the subcontractor supervised the work. The ruling emphasizes the non-delegable duty of owners and contractors to provide adequate safety measures against elevation-related hazards.

    Facts

    Corning Incorporated owned a property called Sullivan Park and contracted with Wellco to perform construction work. Wellco subcontracted with Cook to perform painting work. Plaintiff, an employee of Cook, was injured while painting an alcove. He was positioned on a ladder, reaching over an eight-foot alcove wall to paint, when he lost his balance and fell over the wall and through a suspended ceiling to the floor below. No safety devices were provided to prevent a fall over the alcove wall.

    Procedural History

    The plaintiff sued Corning and Wellco, alleging violations of Labor Law §§ 240, 241, and 200. The Supreme Court granted summary judgment to the plaintiffs against Corning and Wellco on the issue of liability under Labor Law § 240(1). Corning was granted contractual indemnity against Wellco, and Wellco was granted common-law indemnity against Cook. The Appellate Division affirmed. The Court of Appeals granted Cook leave to appeal from the Supreme Court judgment awarding damages.

    Issue(s)

    1. Whether summary judgment on liability was properly granted to the plaintiffs under Labor Law § 240(1)?

    2. Whether the general contractor Wellco is entitled to indemnification from Cook in the absence of a showing of negligence by Cook and in view of the contractual indemnification agreement between the parties?

    Holding

    1. Yes, because the contractor failed to provide any safety device to protect the plaintiff from the specific elevation-related risk of falling over the alcove wall and through the suspended ceiling.

    2. Yes, because Cook supervised and controlled the work of the injured plaintiff and is therefore liable for common-law indemnification, which is not superseded by the contractual agreement.

    Court’s Reasoning

    The Court of Appeals emphasized that Labor Law § 240(1) places responsibility for worker safety on owners and contractors. The court identified two distinct elevation-related risks: the need to elevate the painter via a ladder, and the risk of falling over the alcove wall. While the ladder itself was not alleged to be defective, the critical failure was the lack of any safety device to protect the painter from falling over the alcove wall. The court cited Zimmer v. Chemung County Performing Arts, stating that an owner or contractor who fails to provide safety devices is absolutely liable when the absence of such devices is the proximate cause of injury. The court also referenced Gordon v. Eastern Ry. Supply, noting that a plaintiff need not demonstrate that the precise manner of the accident was foreseeable, only that some risk of injury was foreseeable. The court determined that the absence of protection against a fall through the elevated open area above the alcove was the proximate cause of the plaintiff’s injuries as a matter of law. Regarding indemnification, the court found that Cook supervised the work and was therefore liable for common-law indemnification, consistent with Hawthorne v. South Bronx Community Corp. The court clarified that a contractual agreement to indemnify does not supersede the common-law duty to provide indemnification when the subcontractor directly controlled the work.

  • Matter of Committee of Interns v. NYC, 87 N.Y.2d 419 (1995): Arbitrability of Indemnification for Public Employees

    Matter of Committee of Interns and Residents v. New York City, 87 N.Y.2d 419 (1995)

    A contractual agreement to arbitrate disputes between a municipality and its employees is enforceable unless a statute, decisional law, or public policy precludes arbitration of the specific subject matter.

    Summary

    This case concerns whether the City of New York must arbitrate a dispute over its duty to defend a resident physician, Anyakora, in a malpractice suit. Anyakora allegedly refused to treat a woman in labor, leading to disciplinary action, criminal charges, and a civil suit. The union, Committee of Interns and Residents, sought arbitration based on a collective bargaining agreement requiring the City to provide malpractice insurance. The City argued that General Municipal Law § 50-k and public policy prohibit representing or indemnifying an employee facing criminal charges for the same conduct. The Court of Appeals held that arbitration was permissible because no statute or public policy explicitly prohibits arbitrating the City’s obligation to provide insurance coverage under the collective bargaining agreement. The court emphasized that any potential conflict with public policy could be addressed by the arbitrator when fashioning a remedy.

    Facts

    Peter Anyakora, a resident physician at Harlem Hospital, allegedly refused to admit, examine, or treat a woman brought in by ambulance in active labor.
    Despite a direct order from the hospital administrator, Anyakora did not provide treatment, and the patient gave birth in the admitting room attended only by EMS personnel.
    Anyakora faced disciplinary charges from the hospital and criminal prosecution under Public Health Law § 2805-b (2) (b).
    The patient, Charlesetta Brown, sued Anyakora for medical malpractice, breach of statutory duty, and intentional infliction of emotional distress.
    Anyakora requested the City to represent and indemnify him in the civil suit, citing the collective bargaining agreement between his union and the New York City Health and Hospitals Corporation.
    The City denied the request, citing General Municipal Law § 50-k, which limits the obligation to defend and indemnify when the employee’s conduct violates disciplinary rules.

    Procedural History

    The union filed a grievance alleging the City’s refusal violated the malpractice insurance provision of the collective bargaining agreement.
    After the grievance was denied, the union filed a notice of arbitration and commenced a CPLR article 75 proceeding to compel arbitration and stay the civil action.
    The City moved to dismiss and for a permanent stay of arbitration, arguing public policy and General Municipal Law § 50-k prohibit representation/indemnification when an employee faces criminal charges for the same conduct.
    Supreme Court rejected the City’s motions and directed immediate arbitration.
    The Appellate Division unanimously affirmed.

    Issue(s)

    Whether a dispute over a municipality’s duty to defend and indemnify a public employee in a civil action is arbitrable when the employee faces criminal charges for the same underlying conduct, given a collective bargaining agreement requiring such indemnification.

    Holding

    Yes, because no statute, decisional law, or public policy prohibits arbitration of the dispute over the City’s obligation to provide malpractice insurance coverage to its employee under the terms of the collective bargaining agreement.

    Court’s Reasoning

    The Court outlined a two-part inquiry to determine arbitrability: (1) whether arbitration is authorized under the Taylor Law for the subject matter; (2) whether the arbitration clause includes the subject area. (Matter of Acting Supt. of Schools [United Liverpool Faculty Assn.] 42 NY2d 509, 513).
    The court emphasized that arbitration is permissible unless a statute, decisional law, or public policy prohibits it. The court distinguished between situations where granting any relief would violate public policy and where only the requested remedy would do so. In the latter, courts should not preemptively intervene (Matter of Port Wash. Union Free School Dist. v Port Wash. Teachers Assn., 45 NY2d 411, 417).
    The Court rejected the City’s argument that General Municipal Law § 50-k sets the outer limits of its duty to defend, noting that the statute explicitly states it should not impair other rights to defense or indemnification (General Municipal Law § 50-k [7], [9]).
    The court noted that the City’s policy arguments were directed at the specific relief sought (representation) and not the underlying arbitrability of the insurance coverage issue. Any policy concerns can be addressed by the arbitrator when fashioning a remedy. The court stated, “[S]hould the arbitrator’s exercise of remedial discretion end in perceived policy conflicts, review by the courts will not have to rest on speculation or assumption” (id., at 419).
    Since the collective bargaining agreement provided for malpractice insurance and no statute prohibits such coverage as a condition of employment, and the arbitration clause broadly covered disputes over contract interpretation, the Court concluded that the dispute was arbitrable.