Duty to defend endures: Appellate Division affirms summary judgment declaring that plaintiff insurer continues to owe duty to defend, notwithstanding developments in underlying action

New York Marine and General Insurance Company v. Eastman Cooke & Associates et al., ___ A.D.3d ___ (1st Dep't October 28, 2021)

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The New York Supreme Court, Appellate Division, affirmed a lower court's Decision declaring that one of a contractor's three insurers has a duty to defend it in an underlying property damage action, and that the insurer had not shown that its duty was terminated by developments in that litigation.

The facts were previously summarized on this website. (See "Vexations in a veterinary clinic", Newswire Sept. 14, 2021). Briefly, New York Marine initiated a declaratory judgment action against its insured, a construction contractor, and another of its insurers, to avoid defending the insured in a third-party action commenced by the owner of a building who was sued by a commercial tenant. The tenant claimed that construction work at another space in the building led to property damage and business disruptions in its veterinary medicine practice over a lengthy period. The two insurers initially agreed to defend their mutual insured, as they provided coverage for successive one-year policy periods that overlapped the dates when the alleged property damage occurred. At the close of discovery in the declaratory judgment action, the insurers made opposing motions for summary judgment on whether New York Marine had a duty to defend. The Supreme Court held that New York Marine owed the contractor a duty to defend based upon the allegations of the Complaint and terms of the policy which, in part, defined property damage to include "loss of use". New York Marine appealed.

The Appellate Division issued a unanimous Decision and Order affirming the order granting Mt. Hawley's motion for summary judgment. The five judges again compared the pleadings to the policy, and found allegations of property damage, including loss of use, during the New York Marine policy period. It firmly rejected the plaintiff insurer's core argument, writing,

"Marine does not seriously contest that the CGL policy here covering damage to property applies where the complaint alleges that the damage from the occurrence caused a constructive eviction and breach of quiet enjoyment that resulted in damages in addition to the physical losses; and 'property damage' in the policy is defined to include 'all resulting loss of the use' of the property. Instead, Marine essentially argues that it has no indemnification/defense obligation because the underlying complaint's claims for constructive eviction/breach of quiet enjoyment do not seek any damages that arose during the Marine policy period, given the pleading admission that plaintiffs were reimbursed for damages during the relevant time frame by another insurer. However, the evidence adduced by Marine does not show that the underlying claims do not seek any damages related to the relevant time period or that the insurance payments from other insurers resolved any and all damages from that period; instead the evidence shows that such claims were asserted and are being pursued and that the payments covered only a certain part of the damages sought, leaving a reasonable possibility that some unreimbursed damages may be found to fall within the Marine policy."

AGF&J partner Thomas R. Maeglin argued on behalf of the Defendant/Respondent Mt. Hawley Insurance Company.


Thomas R. Maeglin

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