Bp Air Conditioning v. One Beacon Ins.

• Decision Date: 27 June 2007
• Docket Number: 93.
• Citation: 871 N.E.2d 1128,8 N.Y.3d 708
• Parties: BP AIR CONDITIONING CORP., Respondent, v. ONE BEACON INSURANCE GROUP, Appellant.
• Court: New York Court of Appeals Court of Appeals

871 N.E.2d 1128

8 N.Y.3d 708

BP AIR CONDITIONING CORP., Respondent, v. ONE BEACON INSURANCE GROUP, Appellant.

93.

Court of Appeals of New York.

June 27, 2007.

Lustig & Brown, LLP, Buffalo (Jonathan Schapp and Russell N. Brown of counsel), for appellant.

Wechsler & Cohen, LLP, New York City (Mitchell S. Cohen and Debora A. Pitman of counsel), for respondent.

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OPINION OF THE COURT

CIPARICK, J.

We are asked to decide within the context of a comprehensive general liability (CGL) insurance policy whether liability must be determined before an additional named insured is entitled to a defense in an underlying personal injury action. We conclude that additional insured coverage is not contingent upon a liability finding and that the obligation of an insurer to provide a defense to an additional named insured under the policy exists to the same extent as it does to a named insured. We are unable to answer a second question regarding priority of coverage since the relevant parties and policies at issue are not before us.

In 2000, Henegan Construction Company, Inc., a general contractor on a multi-floor renovation project at the World Trade Center, subcontracted the HVAC work to BP Air Conditioning Corp. BP subsequently subcontracted the HVAC-related steam fitting work to Alfa Piping Corp. The purchase order memorializing the subcontract between BP and Alfa contained the following indemnification/hold-harmless clause:

"To the fullest extent permitted by law, Subcontractor shall indemnify and hold harmless the Owner, General Contractor and BP Air Conditioning and their agent and employees from and against all claims, damages, losses, and expenses, including, but not limited to attorneys fees, arising out of or resulting from the performance of the Work, provided that any such claims, damages, losses or expenses are (1) attributable to bodily injury[,] sickness, disease or death or to injury or to destruction of tangible property including the loss of use resulting therefrom and (2) caused in whole or in part by any negligent act or omission of the Subcontractor, any sub-subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them be liable, regardless of whether or not it is caused in part by a party indemnified hereunder."

Furthermore, the purchase order required Alfa to obtain "Comprehensive General Liability [I]nsurance ... naming [BP] ... additional insured." The CGL policy issued by defendant, One Beacon Insurance Group,¹ to Alfa included an additional insured endorsement, which provided in relevant part that:

"Who is An Insured (Section II) is amended to include as an insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability arising out of your ongoing operations performed for that insured. A person's or organization's status as an insured under this endorsement ends when your operations for that insured are completed."

In December 2000, Joseph Cosentino, an employee of Karo Sheet Metal, Inc., another subcontractor hired by BP, was allegedly injured when he slipped and fell on an oil slick that had originated from a machine used to cut and thread pipe at the work site. Cosentino commenced an action against Henegan,² who then brought a third-party action against BP and Alfa, who were subsequently added as direct defendants in the Cosentino action.

BP, as an additional named insured on Alfa's policy, tendered its defense in the Cosentino action to One Beacon, which declined to defend BP, although it defended Alfa, its insured in the underlying action. BP then commenced a fourth-party action against One Beacon, seeking a declaration of its rights as an additional insured under Alfa's policy, and against Karo, asserting various contractual and common-law claims. One Beacon subsequently moved to sever BP's fourth-party declaratory judgment action against it from the Cosentino action. The motion court granted One Beacon's motion, which left Karo as the sole fourth-party defendant in the underlying action and BP and One Beacon as the remaining parties to this declaratory judgment action.

Thereafter, BP moved for partial summary judgment, seeking an order requiring One Beacon to defend it in the underlying action and for reimbursement of its past defense costs. One Beacon opposed summary judgment contending that it was not obligated to defend BP until it was determined that Cosentino's alleged injury arose out of Alfa's activities, and that One Beacon's responsibility, if any, for the costs of BP's defense could not be determined without considering other relevant policies at issue.

Supreme Court granted BP's motion for partial summary judgment, to the extent that One Beacon is obligated to defend BP in the Cosentino action. However, the court declined to declare that One Beacon was primarily responsible for BP's defense costs. The court opined that since no copies of other relevant insurance policies were submitted, it was "unable to ascertain whether ... some other carrier[] should be treated as a co-insurer or an excess carrier to [One Beacon, and that its] ultimate contribution for defense and indemnification[,] if any, cannot be determined from the present submissions" (2004 N.Y. Slip Op. 30129[U], *7). The Appellate Division, with two Justices dissenting, modified Supreme Court's order, holding that One Beacon must provide BP a defense in the Cosentino action and that this coverage is primary and BP's coverage under its own policy is excess (33 A.D.3d 116, 821 N.Y.S.2d 1 [2006]).

Relying on the Appellate Division's holding in AIU Ins. Co. v American Motorists Ins. Co., 292 A.D.2d 277, 740 N.Y.S.2d 296 (1st Dept.2002), the dissenting Justices stated that because "the [additional insured] endorsement creates a condition precedent to the triggering of additional insured coverage ... it must be shown that the [cause of] Cosentino['s] ... slip and fall emanated ... from Alfa's work" (33 A.D.3d at 133, 821 N.Y.S.2d 1). The dissent further stated that because liability in the underlying Cosentino action must be determined before One Beacon is obligated to defend BP, the court need not reach the issue of the priority of coverage. The Appellate Division granted leave to appeal to this Court and certified the following question: "Was the order of this Court, which modified the order of the Supreme Court, properly made?" We answer the certified question in the negative, modify the order of the Appellate Division and reinstate the order of Supreme Court.

Addressing first whether BP is entitled to be defended by One Beacon, it is well settled that an insurer's "duty to defend [its insured] is `exceedingly broad' and an insurer will be called upon to provide a defense whenever the allegations of the complaint `suggest ... a...