Court Opinion

ID: 9909069
Source: CourtListenerOpinion
Date Created: 2023-12-12 16:00:34.914035+00
Date Added: 2024-06-11T12:50:03.508495
License: Public Domain

22-2697-cv
    Zurich Am. Ins. Co. v. Certain Underwriters at Lloyd’s of London Subscribing to Policy Number B12630308616

                              UNITED STATES COURT OF APPEALS
                                  FOR THE SECOND CIRCUIT

                                             SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL
APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY
CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

               At a stated term of the United States Court of Appeals for the
    Second Circuit, held at the Thurgood Marshall United States Courthouse, 40
    Foley Square, in the City of New York, on the 12th day of December, two
    thousand twenty-three.

    PRESENT:
               AMALYA L. KEARSE,
               GUIDO CALABRESI,
               ALISON J. NATHAN,
                     Circuit Judges.
    _____________________________________

    Zurich American Insurance Company,
    American Zurich Insurance Company,

                          Plaintiffs-Appellees,                                  22-2697

                     v.

    Certain Underwriters at Lloyd’s of
    London Subscribing to Policy
    Number B12630308616,
               Defendant-Appellant,

Arch Insurance Company,

              Defendant.
_____________________________________

FOR PLAINTIFFS-APPELLEES:                    GABRIEL E. DARWICK, Coughlin
                                             Midlige & Garland LLP, New York,
                                             NY.

FOR DEFENDANT-APPELLANT:                     STEVEN E. PEIPER (Dan D. Kohane,
                                             on the briefs), Hurwitz Fine P.C.,
                                             Buffalo, NY.

      Appeal from a judgment of the United States District Court for the

Southern District of New York (Oetken, J).

      UPON     DUE    CONSIDERATION,          IT   IS   HEREBY     ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is

AFFIRMED.

      Appellees, Zurich American Insurance Company and American Zurich

Insurance Company (together, Zurich) sued their coinsurers—Appellant Certain

Underwriters at Lloyd’s of London Subscribing to Policy Number B12630308616

(Lloyd’s) and Defendant Arch Insurance Company (Arch)—seeking a

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declaratory judgment that Lloyd’s is barred under New York law from bringing

a common law indemnification or contribution claim against a party insured by

Zurich, Arch, and Lloyd’s.     The district court granted Zurich’s motion for

summary judgment, holding that New York’s anti-subrogation rule precludes

Lloyd’s from bringing that claim. Zurich Am. Ins. Co. v. Certain Underwriters at

Lloyd’s of London, 627 F. Supp. 3d 325, 330 (S.D.N.Y. 2022).     We assume the

parties’ familiarity with the remaining underlying facts, procedural history, and

issues on appeal, to which we refer only as necessary to explain our decision.

      As a preliminary matter, under the specific factual circumstances of this

case, we conclude we have subject matter jurisdiction because “there is a

substantial controversy, between parties having adverse legal interests, of

sufficient immediacy and reality to warrant the issuance of a declaratory

judgment.” Admiral Ins. Co. v. Niagara Transformer Corp., 57 F.4th 85, 92 (2d Cir.

2023) (cleaned up).     We review a grant of summary judgment de novo,

“resolv[ing] all ambiguities and draw[ing] all inferences against the moving

party.” Garcia v. Hartford Police Dep’t, 706 F.3d 120, 126–27 (2d Cir. 2013) (per

curiam). “Summary judgment is proper only when, construing the evidence in

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the light most favorable to the non-movant, ‘there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.’”

Doninger v. Niehoff, 642 F.3d 334, 344 (2d Cir. 2011) (quoting Fed. R. Civ. P. 56(a)).

      This dispute arises out of a large construction project at LaGuardia

Airport. The Port Authority of New York and New Jersey (Port Authority)

hired LaGuardia Gateway Partners, LLC (LGA) as the developer for the project,

which then subcontracted with a joint venture among Skanska USA Building

Inc., Skanska USA Civil Northeast Inc., and Walsh Construction Company II,

LLC (together, Skanska) to perform the necessary work. The contract required

LGA to obtain a commercial general liability insurance policy under which

Skanska, LGA, and Port Authority would be insureds.               The contract also

required Skanska to indemnify LGA and Port Authority for certain personal

injury claims, including for “any losses suffered or costs incurred” from third-

party personal injury claims arising from Skanska’s negligence.

      Pursuant to the contract, Skanska and LGA obtained a Contractors

Controlled Insurance Program for the project, which included a “tower” of

general liability insurance with $300 million of coverage in three layers. Zurich

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underwrote the base layer of coverage, Arch provided a first layer of excess

coverage, and then Lloyd’s provided a second excess policy, i.e. a third layer of

coverage on top of Arch’s.

      Each layer of coverage, including Lloyd’s, contains a standard employer’s

liability exclusion, which carves out from coverage liability for bodily injury to

an employee of the insured arising from the employee’s employment by the

insured.   However, there is an exception to this exclusion.     The policy does

cover liability assumed by the insured in an “insured contract” such as the

contract between Skanska and LGA. App’x 422.

      All of this background is necessary to understanding the present dispute,

which arose from a personal injury suit filed against Port Authority and LGA by

a Skanska employee injured while working on the LGA project. Zurich agreed

that the general liability insurance policy provided coverage for the suit and

arranged for counsel to represent Port Authority and LGA beginning in August

2018. Roughly three years later, Lloyd’s contacted that counsel and requested

that LGA and Port Authority commence a third-party claim for common law

indemnification or contribution against Skanska.         Counsel analyzed the

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feasibility of such a claim but concluded that New York’s anti-subrogation rule

would bar it. After continued disputes between Lloyd’s, Zurich, and counsel

for each, Zurich commenced this action, seeking a declaratory judgment that the

anti-subrogation rule would indeed bar the indemnification or contribution

claim against Skanska.

      We agree with the district court that New York’s anti-subrogation rule

prevents Lloyd’s from bringing the claim.        The anti-subrogation rule is an

exception to an insurer’s usual right of subrogation against third parties. See

Pennsylvania Gen. Ins. Co. v. Austin Powder Co., 502 N.E.2d 982, 985 (N.Y. 1986).

It provides that “[a]n insurer has no right of subrogation against its own insured

for a claim arising from the very risk for which the insured was covered.” Id. at

983. As New York’s courts have explained, the anti-subrogation rule is needed

“both to prevent the insurer from passing the incidence of loss to its own insured

and to guard against the potential for conflict of interest that may affect the

insurer’s incentive to provide a vigorous defense for its insured.”         N. Star

Reinsurance Corp. v. Cont’l Ins. Co., 624 N.E.2d 647, 653 (N.Y. 1993). The rule also

prevents an insurer from “‘fashion[ing] the litigation’” against its own insured

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“so as to minimize its own liability by triggering coverage under other insurance

policies.” Nat’l Cas. Co. v. State Ins. Fund, 641 N.Y.S.2d 665, 667 (N.Y. App. Div.

1996) (quoting N. Star, 624 N.E.2d at 654).

      The anti-subrogation rule prevents an insurer from recouping losses from

its insured “even where the insured has expressly agreed to indemnify the party

from whom the insurer’s rights are derived and has procured separate insurance

covering the same risk.” Pennsylvania Gen. Ins. Co., 502 N.E.2d at 983. As the

New York Court of Appeals has explained, the important public policies served

by the rule mean that it “must take precedence over the parties’ private

contractual arrangements.” Id. at 986.

      Nor can an insurer bypass the anti-subrogation rule by asserting a

common law indemnity claim against its insured when it only covers the insured

for contractual indemnity claims. See Ohio Cas. Ins. Co. v. Transcon. Ins. Co., 372

F. App’x 107, 111-12 (2d Cir. 2010) (summary order) (discussing New York law);

Leyden v. Square Arch Realty Corp., 626 N.Y.S.2d 352, 354 (N.Y. Sup. Ct. 1995); 16

Couch on Insurance 3d § 224:4.

      The two key elements for the anti-subrogation rule to apply are present

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here. Lloyd’s insures Skanska under the general liability policy. That policy,

through the insured contract provision, covers Skanska for the obligation it

assumed in the contract to indemnify LGA and Port Authority for losses

resulting from third-party claims for bodily injury like the one underlying the

present action.   Thus, Lloyd’s cannot subrogate against Skanska—its own

insured—for losses arising from the underlying suit, exactly the risk for which

Lloyd’s insures Skanska. What Lloyd’s proposes is precisely what the anti-

subrogation rule prohibits.   Straightforward application of the rule bars the

claim.

                                   *   *   *

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       We have considered the remaining arguments advanced by Lloyd’s and

find them to be without merit. Accordingly, we AFFIRM the judgment of the

district court.

                                   FOR THE COURT:
                                   Catherine O’Hagan Wolfe, Clerk of Court

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