Indemnity Provision Prevails Over “Other Insurance” Clause

Tred R. Eyerly | Insurance Law Hawaii

    The Second Circuit predicted that the New York appellate courts would find the contractual indemnity provision prevailed over the application of an “other insurance” provisions. Cent. Sur. Co. v. Metro. Transit Auth., 2021 U.S. App. LEXIS 29860 (2nd Cir. Oct. 5,2021). 

    Long Island Railroad (LIRR) contracted with general contractor Rukh Enterprises, Inc. to complete a railroad bridge lead paint removal and repainting project on Metropolitan Transit Authority property. Rukh hired subcontractor, East Coast Painting & Maintenance to complete certain lead-related work on the project. 

    An employee of East Coast suffered an injury while working on the project. The employee sued LIRR and Rukh. A settlement in the underlying case was reached, implicating three of four policies – Admiral (primary for LIRR), Arch (CGL for Rukh), and Harleysville (primary for East Coast). Century Surety (excess liability for Rukh) did not contribute to the settlement and disclaimed all coverage.

    Century Surety filed for declaratory judgment that it had no duty to defend or indemnify. The district granted Century Surety’s motion for summary judgment, concluding that based on the language contained on the “other insurance” provision in its policy, the policy was an excess policy that was not liable to tender payment until the other available policies, including the Admiral policy, had tendered payments pursuant to their policy limits.

    On appeal, the other insurers argued that the indemnity agreement between Rukh and LIRR should control and Century Surety should tender payment and exhaust its policy limits ahead of Admiral. The appellate court agreed. The Second Circuit predicted that the New York Court of Appeals would find that an indemnity agreement in the underlying contract between the insureds governed over the terms of an insurance policy concerning priority of coverage.

    Therefore, the judgment of the district court was reversed.

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