New York Law Review

Tag: Travelers Insurance

  • 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.

  • County of St. Lawrence v. Travelers Ins. Cos., 54 N.Y.2d 482 (1981): Contribution is Not Indemnification Under Insurance Policy Exclusion

    County of St. Lawrence v. Travelers Ins. Cos., 54 N.Y.2d 482 (1981)

    An insurance policy exclusion for “any obligation of the insured to indemnify another” does not relieve the insurer of liability when the insured is sued for contribution under Dole v. Dow Chemical Co. because contribution and indemnification are distinct legal concepts.

    Summary

    St. Lawrence County was sued by a college and a tool manufacturer after a county employee was injured using a saw. The college and manufacturer sought contribution from the county. The county’s insurer, Travelers, disclaimed liability based on an exclusion for obligations to indemnify another for employee injuries. The Court of Appeals held that the exclusion did not apply to contribution claims because contribution and indemnification are distinct legal concepts. The court reasoned that insurance policies are construed against the drafter, and the exclusion’s language was unambiguous and did not encompass contribution.

    Facts

    George Donnelly, a St. Lawrence County employee, was injured while using a saw at a local college. Donnelly sued the college and Rockwell International Power Tools. The college and Rockwell then filed third-party actions against the county, seeking indemnification or contribution. St. Lawrence County had a general liability policy with Travelers Insurance Co. Travelers disclaimed liability based on Exclusion (j), which excluded coverage for “any obligation of the insured to indemnify another because of damages arising out of such injury” to an employee.

    Procedural History

    St. Lawrence County sued Travelers for a declaratory judgment, seeking a declaration that Travelers was obligated to defend and indemnify the county. The trial court ruled in favor of the county, finding the exclusion inapplicable to contribution claims. The Appellate Division, Third Department, reversed. The County appealed to the Court of Appeals.

    Issue(s)

    Whether an employer’s general liability policy containing an exclusion for “any obligation of the insured to indemnify another because of damages arising out of” personal injury to an employee relieves the carrier of liability when the employer is sued for contribution pursuant to Dole v Dow Chem. Co.

    Holding

    Yes. Because contribution and indemnification are distinct legal concepts, and insurance policies are construed against the insurer.

    Court’s Reasoning

    The court focused on the exclusion for “any obligation of the insured to indemnify another because of damages arising out of such injury”. The insurance companies argued that Dole v. Dow Chem. Co. established a right of “partial indemnification,” and the exclusion should include any obligation to reimburse a third party. The court stated, “Whatever confusion may have initially existed concerning the nature of a Dole apportionment was dispelled by the time the policies in the cases now before us were issued.”

    The court reasoned that by 1977 and 1979, when the policies were issued, contribution was not recognized as a form of indemnification. The court cited Rock v. Reed-Prentice Div. of Package Mach. Co., 39 NY2d 34, where the court discussed the distinction between contribution and indemnity. The court dismissed the insurance companies’ arguments that the history of the clause showed that it was intended to exclude coverage for Dole recoveries. The court noted that “the intent of the insurance company is not controlling when, as here, the words used in the policy do not adequately convey that intent.”

    The court also rejected the argument that the average business person would consider “indemnify” synonymous with “reimburse.” If that were the intent, the court argued, it could easily have been stated in those terms. The court concluded that the carriers’ broad reading does not accurately state the law and, at best, reveals a potential ambiguity in the contract, which must be resolved against the insurance companies, which drafted the policy. The court directly references the principle of contra proferentem.