Summary Judgment Granted To Insurer That Had Satisfied Its Policy Obligations

On July 9, 2024, Justice Melissa A. Crane granted summary judgment dismissing an insurer from liability to another insurer. Lexington Ins. Co. v New York Mar. & Gen. Ins. Co., Index No. 651214/2022.

The action concerned insurance coverage for a California bus accident that had settled for $10,500,000. Under a reservation of rights, defendant New York Marine and General Insurance Company (“NYM”) had accepted the defense of various parties in the underlying litigation, including the tour bus operator (defendants Twin America and Mark Marmurstein, the “Twin Defendants”). The Twin Defendants were potentially contractual indemnitees of NYM’s insureds, non-parties CS Global, which owned the bus, and SFTS, which employed the driver.

Plaintiff Lexington Insurance Co., which provided umbrella coverage the Twin Defendants, brought suit to recover $2,500,000 that it had paid, subject to a reservation of rights, towards the settlement.

The Court found that NYM had satisfied its insurance obligations to Lexington. Under applicable California law, the policy language defining the insured to include “[a]nyone liable for the conduct of an ‘insured’ described above but only to the extent of that liability”, Slip Op., p. 2, created liability only for vicarious liability, “not something else, such as alter ego liability.” Id., p. 3.

There was no factual basis to contend that any of NYM’s insureds had engaged in conduct that would give rise to vicarious liability. The facts on which Lexington relied, if proven would, rather, support alter ego or joint venture liability, which are beyond the policy’s scope. Id., pp. 3-5. The Court therefore denied Lexington’s motion for summary judgment against NYM and granted NYM’s motion for summary judgment and declaratory relief. Lexington’s claims against the Twin Defendants were severed and allowed to proceed.

The attorneys at Schlam Stone & Dolan frequently litigate cases involving insurance disputes. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.