Maxum Indemnity Co. v. A One Testing Laboratories, Inc.
150 F. Supp. 3d 278
S.D.N.Y.2015Background
- Maxum provides commercial general liability coverage to A-l for 02/28/2011–02/28/2012.
- Policy covers damages caused by an occurrence during the policy period; occurrence means an accident, including continuous exposure.
- Property damage has two definitions: (a) physical injury to tangible property and loss of use, deemed at time of injury; (b) loss of use not physically injured, deemed at time of the occurrence.
- An endorsement excludes coverage for breach of contract claims.
- The Underlying Action (UAC) alleges breach of contract and negligence against Riverview, B&V, and A-l for defective drywall/inspections; 610 West seeks damages and indemnity.
- Maxum offered defense under a reservation of rights while investigating coverage; in June 2014, Maxum filed a declaratory-judgment action seeking non-coverage and recovery of defense costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy provides coverage for the UAC’s claims. | Maxum: no occurrence causing property damage during policy period. | A-l: allegations may involve ongoing or continuous occurrence and potential coverage. | No coverage; no occurrence within policy period. |
| Whether the UAC claims arise from contractual breach rather than covered property damage. | Maxum: claims are contractual in nature and excluded. | A-l: negligence theories may create coverage. | No coverage; contract-based damages exclude coverage. |
| Whether Maxum may recover defense costs under a reservation of rights after non-coverage is determined. | Maxum reserved rights to recoup defense costs. | Not necessary to decide as primary non-coverage established. |
Key Cases Cited
- George A. Fuller Co. v. U.S. Fid. & Guar. Co., 200 A.D.2d 255 (N.Y. App. Div. 1994) (no coverage where allegations relate to contract duties and not an occurrence)
- Maryland Casualty Co. v. Cont’l Cas. Co., 332 F.3d 145 (2d Cir. 2003) (insurer defense duties broader than indemnification; no coverage if no possible basis)
- QBE Ins. Corp. v. Adjo Contracting Corp., 121 A.D.3d 1064 (N.Y. App. Div. 2014) (insurer must defend where reasonable possibility of coverage exists)
- Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61 (N.Y. 1991) (injury-in-fact analysis and occurrence concepts)