Northern District Finds Modified Employer’s Liability Exclusion In Policy Ambiguous
The general contractor for a construction project hired DJ Heating & Cooling to perform HVAC work at the project and Rocker II Drywall Services, LLC, to install sheetrock. Rocker purchased its sheetrock from a supplier that hired Jumpstart Reality LLC to provide laborers to distribute the sheetrock at the project. Plaintiff, a DJ Heating employee, was injured in the course of his employment when sheetrock placed by a Jumpstart laborer fell on him. Plaintiff filed an action against Jumpstart and others seeking damages for his alleged injuries. Jumpstart placed its insurer, Mesa Underwriters Specialty Insurance Company, on notice of the action and Mesa disclaimed coverage based upon an employer’s liability exclusion in its policy. Jumpstart defaulted and plaintiff obtained a monetary judgment against Jumpstart and then filed a direct action against Mesa seeking satisfaction of the judgment. Both plaintiff and Mesa moved for summary judgment. The Southern District of New York denied Mesa’s motion and granted, in part, plaintiff’s motion. The court found that the modified employer’s liability exclusion in the Mesa policy, which precludes coverage for “bodily injury” to “[a]n ‘employee’, ‘temporary worker’, ‘leased employee’, or independent contractor of the insured or any additional insured or employee of any independent contractor arising out of and in the course of …” employment, is ambiguous and does not preclude coverage for the judgment. The court rejected Mesa’s argument that the exclusion “precludes coverage where, as here, an individual is injured in the course of employment with any independent contractor, regardless of whether that independent contractor was hired or otherwise performing work for the Insured.” The court found plaintiff’s argument more reasonable – the exclusion “applies to four different categories: an (1) ‘employee,’ (2) ‘temporary worker,’ (3) ‘leased employee,’ or (4) independent contractor of the insured or any additional insured or employee of any independent contractor [of the insured or any additional insured].” The court explained that, although the Mesa policy does not define “independent contractor,” “it is reasonable to interpret that term in the context of the definitions of the [other] terms …, which all include a relationship with the insured.” The court noted that the exclusion is a modified “employer’s liability” exclusion and, thus, it is reasonable for the insured to read it to exclude “coverage to individuals who work directly or indirectly for the insured” and not to an employee of an independent contractor that has no relationship to the insured. Accordingly, the court ordered Mesa to pay that portion of plaintiff’s judgment within the limits of the Mesa policy. [Wiley v. Mesa Underwriters Specialty Ins. Co., No. 24-cv-72 (ECC/ML), 2025 U.S. Dist. LEXIS 108576 (S.D.N.Y. June 9, 2025).]
First Department Finds Additional Insured Owner’s Late Notice Did Not Prejudice Tenant’s Insurer And Tenant’s Policy Primary To Owner’s Own Policy
Wesco Insurance Company issued a liability policy to the owner of a building and Kookmin Best Insurance Company, Ltd., issued a liability policy to the tenant. Wesco tendered the owner’s defense in an underlying bodily injury action to Kookmin more than three years after the owner was served with the summons and complaint and did not offer an excuse for the delay. Kookmin denied coverage to the owner based upon late notice prejudice. Wesco filed a declaratory judgment action and moved for summary judgment seeking a declaration that Kookmin has a primary duty to defend and to indemnify the owner in the underlying action and to reimburse Wesco for past defense costs. The Supreme Court denied Wesco’s motion and the Appellate Division, First Department, on reargument, reversed. The court found that Wesco’s notice was late, but Kookmin was not prejudiced because Wesco “promptly began investigating and defending” and “was fully prepared to share its information relating to its investigation and defense.” The court also found that Kookmin “is required to provide primary coverage” to the owner. The court explained that the governing lease “is silent as to whether the additional insured coverage the tenant was to furnish to the owner was primary or excess” and “[u]nder virtually identical circumstances, the Court of Appeals has found such coverage to be primary,” citing Pecker Iron Works of N.Y. v. Travelers Ins. Co., 99 N.Y.2d 391 (2003). [Wesco Ins. Co., Inc. v. Kookmin Best Ins. Co., Ltd., 2025 NY Slip Op 04299, 2025 N.Y. App. Div. LEXIS 4344 (1st Dep’t July 24, 2025).]
