Aspen Specialty Ins. Co. v. RLI Ins. Co.

• Decision Date: 06 April 2021
• Docket Number: Index No. 652215/18,Appeal No. 13420,Case No. 2020-04416
• Parties: ASPEN SPECIALTY INSURANCE COMPANY, Plaintiff-Respondent, v. RLI INSURANCE COMPANY, INC., Defendant-Appellant.
• Court: New York Supreme Court — Appellate Division

194 A.D.3d 206
145 N.Y.S.3d 50

ASPEN SPECIALTY INSURANCE COMPANY, Plaintiff-Respondent,
v.
RLI INSURANCE COMPANY, INC., Defendant-Appellant.

Appeal No. 13420
Index No. 652215/18
Case No. 2020-04416

Supreme Court, Appellate Division, First Department, New York.

ENTERED April 6, 2021

Ford Marrin Esposito Witmeyer & Gleser, LLP, New York (Joseph D'Ambrosio and Jon R. Grabowski of counsel), for appellant.

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., New York (Scott A. Rader and Marc L. Abrams of counsel), for respondent.

Dianne T. Renwick, J.P., Angela M. Mazzarelli, Anil C. Singh, Lizbeth González, JJ.

Renwick, J.P.

145 N.Y.S.3d 52

194 A.D.3d 208

Plaintiff Aspen Specialty Insurance Company commenced this action seeking a declaration that the excess insurance policy issued by RLI Insurance Company, Inc. was next in order of coverage for a personal injury action, in which Aspen and RLI's common insured, Alphonse Hotel Corporation, was a defendant. The issue in this case is whether RLI, an excess insurer with a follow form policy, is bound by a prior judicial determination of this Court that the primary policy issued by Ironshore Indemnity Inc., which underlies RLI's excess policy, covers the defendant in the personal injury action, Alphonse, as an additional insured. In the prior declaratory judgment action between Aspen and Ironshore, this Court declared that the language in the additional insured endorsement extends coverage broadly to any injury causally linked to the named insured, which was satisfied in this case because the loss involved an employee of the named insured who was injured while performing the named insured's work under the contract with the additional insured. RLI argues that it is not bound by this Court's prior determination because it was not part of the prior declaratory judgment action. In the present declaratory judgment action, RLI wishes to relitigate the issue of whether Ironshore's policy covers Alphonse as an additional insured. RLI relies upon the 2017 Court of Appeals decision in Burlington Ins. Co. v. NYC Tr. Auth., 29 N.Y.3d 313, 57 N.Y.S.3d 85, 79 N.E.3d 477 (2017), which interpreted language in an additional insured endorsement similar to the language here as covering the additionally insured party, vicariously, only for negligent acts of the named insured. It is undisputed in the instant case that the named insured was not in control of the instrumentality of the accident that caused the underlying personal injuries. For the reasons that follow, we agree that RLI is not bound by our prior determination and

194 A.D.3d 209

that it is entitled to a declaration that it has no obligation to defend or indemnify in the underlying personal injury action.

Factual and Procedural Background

The unique circumstances of this case are essentially undisputed. In May 2013, Michael Patalano, an employee of Transel Elevator & Electric, Inc., commenced a personal injury action against Alphonse, as owner of the Carter Hotel. Patalano, on October 12, 2012, while working within the scope of his employment with Transel, exited the elevator shaft on the 24th floor of the Carter Hotel building and began to descend the interior stairway; a step collapsed, and he fell down the stairway.

145 N.Y.S.3d 53

The complaint alleges that the accident and resulting injuries were caused by Alphonse's negligence in allowing an unsafe condition to exist on the hotel premises.

Transel was not a defendant, and the complaint did not allege negligence against Transel. However, a service agreement between Transel and Alphonse required that Transel obtain general liability insurance and excess liability coverage and name Alphonse as an additional insured. Transel obtained general liability insurance from Ironshore, with a limit of coverage of $1,000,000 per occurrence. The policy included an endorsement providing coverage as an additional insured "[a]s required by written contract," but only for bodily injury "caused, in whole or in part, by ‘[Transel's] work’ at the location."

Transel also obtained excess liability coverage from RLI, which provided, in part, that it would pay the net loss from an occurrence insured by the primary insurance, but only once the primary insurance had been exhausted. The policy states that it "is subject to all of the conditions and agreements ... of and shall follow the underlying insurance in all respects." The underlying insurance is identified as the above-referenced Ironshore policy. The RLI policy includes an "other insurance" endorsement that states: "To the extent required under written contract and provided by the underlying insurance, this policy will apply as primary insurance, excess of scheduled underlying insurance, to additional insureds [,] and other insurance which may be available to such additional insureds will be non-contributory."

Alphonse obtained liability insurance from Aspen. The policy provides that it is primary "except when Paragraph b. below applies." Paragraph b. states that the Aspen policy shall be excess over any other primary insurance available to Alphonse

194 A.D.3d 210

covering liability for damages "arising out of the premises or operations ... for which you have been added as an additional insured." When the Aspen policy "is excess over other insurance," it pays the loss that exceeds the sum of the total amount that all such "other insurance" would pay in the absence of this insurance.

In July 2013, Alphonse tendered its defense to Transel under the Ironshore policy. Ironshore denied additional insured status to Alphonse on the ground that the allegations in Patalano's action were solely related to the negligence of Alphonse. Aspen (Alphonse's insurer) then commenced a declaratory judgment action against Ironshore (Transel's primary insurer), seeking coverage for Alphonse under the Ironshore policy as an additional insured. RLI was not a named party even though its excess policy follows the form of Ironshore's primary policy.

In July 2015, Supreme Court granted Aspen's motion for partial summary judgment declaring that Alphonse was an additional insured on the Ironshore policy and that Ironshore was required to defend Alphonse in the underlying personal injury action. The court reasoned that, in an additional insured endorsement, the phrase losses "caused by" the named insured's "acts or omissions" did not differ materially from the phrase "liability arising out of" the named insured's work, and concluded that additional insured coverage was triggered because Patalano was performing contract work, and it was immaterial whether Transel was actually at fault. On or about December 9, 2015, upon Aspen's motion to reargue, the court modified its prior order to the extent of finding that Ironshore insured Alphonse in the underlying personal injury action on a primary basis and that Aspen's coverage was excess to Ironshore's policy. The declaratory judgment action was marked as "disposed / concluded" on March 9, 2016.

145 N.Y.S.3d 54

Ironshore appealed from the July 2015 order, and this Court affirmed ( Aspen Specialty Ins. Co. v. Ironshore Indem. Inc., 144 A.D.3d 606, 42 N.Y.S.3d 121 [1st Dept. 2016] ). As indicated, this Court relied primarily upon Burlington Ins. Co. v. NYC Tr. Auth., 132 A.D.3d 127, 135, 14 N.Y.S.3d 377 (1st Dept. 2015) and analogous decisions in which this Court has held that, where a policy endorsement extends coverage to additional insureds for losses "caused by" the named insured's "acts or omissions or operations, the existence

194 A.D.3d 211

of coverage does not depend upon a showing that [the named insured's] causal conduct was negligent or otherwise at fault" ( Aspen, 144 A.D.3d at 607, 42 N.Y.S.3d 121 [internal quotation marks omitted]). Thus, this Court found that Alphonse was "entitled to coverage as an additional insured under the Ironshore policy with respect to the claim of injuries sustained by Transel's employee [Patalano] when he lost his footing on the hotel stairway, which resulted from his ‘acts or omissions’ while performing his work" ( id. at 606, 42 N.Y.S.3d 121 ). Ironshore took no further action and did not seek review by the Court of Appeals.

Meanwhile, in 2017, the Court of Appeals reversed this Court's decision in Burlington, holding that coverage under a policy restricted to liability "caused, in whole or in part" by the acts or omissions of the named insured applies only to injuries "proximately caused by the named insured," thus requiring a showing that the named insured's causal conduct was negligent or otherwise at fault ( Burlington Ins. Co. v. NYC Tr. Auth., 29 N.Y.3d 313, 317, 57 N.Y.S.3d 85, 79 N.E.3d 477 [2017] ).

Although the Aspen/Ironshore declaratory judgment action had been marked as disposed, Ironshore moved to renew the prior motions. Supreme Court denied Ironshore's motion. The court acknowledged that the rule set forth by Burlington would have required a different result on the prior motions, i.e., that...