Indemnitee Must Prove that Indemnitor Could Have Been Liable at Trial to Recover Settlement

On December 16, 2015, the Second Department issued a decision in Leon Holdings, LLC v. Northville Industries Corp., 2015 NY Slip Op. 09260, holding that indemnification claims by a plaintiff who settled an action should have been dismissed, explaining:

To recover a settlement from an indemnitor who had prior notice of the settled claim, an indemnitee must demonstrate not only notice to the indemnitor and that it made a reasonable settlement in good faith, but also that the indemnitee could have been held liable if it had proceeded to trial. The defendant here demonstrated that [the plaintiff], which settled the actions on behalf of CP and Tartan, would not have been held liable had it proceeded to trial because CP and Tartan had no potential exposure to liability in the federal actions. Therefore, the defendant conclusively established, as a matter of law, a defense to [the plaintiff's] indemnification claims, asserted under the common law and the contract, and pursuant to Navigation Law § 181.

(Internal quotations and citations omitted).