Wausau Underwriters Insurance v. Old Republic General Insurance, 122 F. Supp. 3d 44

Background

170 Broadway hired McGowan as construction manager under a written CMA requiring McGowan to procure general liability insurance naming 170 Broadway and affiliates as additional insureds.
McGowan had an Old Republic policy effective August 12, 2012; 170 Broadway maintained a separate Wausau policy.
On October 23, 2012, Adam Burawski (a Tyco employee visiting to bid as a potential subcontractor) was injured on site and later sued the Broadway Defendants; McGowan was later added as a defendant.
The Broadway Defendants tendered defense to McGowan; Old Republic denied coverage in August 2013 asserting the claim fell outside the additional-insured endorsements and reserved other defenses.
Wausau sued Old Republic for declaratory judgment (duty to defend and indemnify the Broadway Defendants); Wausau moved for summary judgment; the court granted it.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Old Republic had a duty to defend the Broadway Defendants	The underlying complaint alleges injury arising from McGowan’s ongoing operations and a written contract required additional-insured coverage, so a reasonable possibility of coverage exists	The injury did not arise from McGowan’s “Work” because actual construction had not begun; thus no coverage	Duty to defend exists: complaint and extrinsic facts show injury arose out of McGowan’s ongoing operations and endorsements apply
Whether Old Republic had a duty to indemnify (pay liability)	Regal Construction and related precedent require only a causal connection between the injury and the named insured’s operations; indemnification follows if injury arose out of operations	Indemnity requires determination of legal causation or vicarious liability; premature to decide before underlying liability is adjudicated	Duty to indemnify exists: factual nexus suffices under Regal; indemnity can be decided before final liability where policy covers liability “arising out of” operations
Whether Old Republic can deny coverage for untimely notice	Notice was timely to trigger coverage or, if late, Old Republic must show actual prejudice under amended N.Y. Ins. Law; Old Republic cannot show prejudice	Old Republic says notice was late and prejudice excuses coverage	Old Republic cannot show material prejudice from any delay it received; under Ins. Law for policies issued after Jan 17, 2009, late notice alone is insufficient to deny coverage
Whether Old Republic’s policy is primary or excess to Wausau	Old Republic did not contest Wausau’s showing that Old Republic’s policy is primary	Old Republic did not respond on this point	Court deems Old Republic’s policy primary (plaintiff's uncontested argument treated as conceded)

Key Cases Cited

BP Air Conditioning Corp. v. One Beacon Ins. Grp., 8 N.Y.3d 708 (N.Y. 2007) (allegations that named insured performed work at site, breached duty to keep site safe, and caused injury create reasonable possibility of coverage)
Regal Construction Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 15 N.Y.3d 34 (N.Y. 2010) ("arising out of" requires connection between injury and operation; indemnity may be determined without resolving precise legal causation)
Worth Constr. Co. v. Admiral Ins. Co., 10 N.Y.3d 411 (N.Y. 2008) (distinguishes cases where injured party’s connection to named insured’s work is absent)
Servidone Constr. Corp. v. Sec. Ins. Co. of Hartford, 64 N.Y.2d 419 (N.Y. 1985) (duty to indemnify is distinct from duty to defend)
Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61 (N.Y. 1991) (insurer may be contractually bound to defend even if ultimately not liable to pay)
Maroney v. N.Y. Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467 (N.Y. 2005) (construction of "arising out of" as requiring inquiry into general nature of operation rather than precise cause)
Euchner-USA Inc. v. Hartford Cas. Ins. Co., 754 F.3d 136 (2d Cir. 2014) (reasonable possibility test governs duty to defend)