677 N.Y.S.2d 105 | N.Y. App. Div. | 1998
OPINION OF THE COURT
In November 1990, Chaos Construction Corp. (Chaos) was hired as the general contractor for a construction project requiring the demolition of the existing roof, and installation of a new roof, at the Bulova Corporate Center in Queens, New York.
Chaos was insured under a commercial general liability policy issued by Hartford Insurance Company of the Midwest (Hartford). Chaos also contracted with its subcontractor, All Seasons, to be named on All Seasons’ general liability policy issued by National Union Fire Insurance Company of Pittsburgh, Pa. (National Union). The subcontract between Chaos and All Seasons also included an indemnification provision requiring All Seasons to “indemnify and hold harmless” Chaos for any liability arising out of the construction work, including loss for “bodily injuries.” This indemnification provision was expressly incorporated into the All Seasons policy by an endorsement. Initially, Hartford and National Union discussed the possibility of mutually representing Chaos, their mutual insured, in defense of the Boyd action. However, when National Union eventually disclaimed coverage, Chaos commenced a second third-party action against National Union, its insurance broker and All Seasons, seeking a declaration that National Union was obligated to defend and indemnify Chaos in the Boyd action, and to reimburse it for all legal expenses (second third-party action).
Chaos moved for summary judgment in the second third-party action. By decision dated November 10, 1993, the IAS Court (Stuart Cohen, J.), granted the motion declaring that National Union, by virtue of the additional-insured provision in its policy and the endorsement incorporating the All Seasons agreement to indemnify Chaos, was obligated to defend and indemnify Chaos in the Boyd action.
Subsequently, the IAS Court dismissed Chaos’s first third-party action against All Seasons as barred by the antisubrogation rule.
Meanwhile, National Union then settled the Boyd action for $1,050,000, of which it contributed $1,000,000, the limits of its policy.*
In the order appealed from, the IAS Court granted Hartford’s cross motion for summary judgment on the ground that Justice Cohen’s November 1993 decision “collaterally estopp [ed] National [Union] from relitigating * * * Hartford’s [coinsurance] obligation.” The court noted that in its defense of the second third-party action, National Union argued at length that Hartford was the real party in interest behind that action, and that in such role, Hartford was attempting to establish National Union’s liability in order to reduce or eliminate its own coinsurance obligation. The court further stated that although National Union did not implead Hartford in the second third-party action, it consistently argued that Hartford was a coinsurer of Chaos, and that a declaration of the insurers’ rights should await disposition of the Boyd action, when other “necessary parties” could be included.
The court concluded that National Union had a full and fair opportunity to litigate Hartford’s coinsurance obligation, and National Union’s failure to implead Hartford, “whether by neglect or design,” did not prevent National Union from making the same argument that it makes in the present action: that Hartford is a coinsurer who must share equally in the costs of
On appeal, National Union argues that the doctrine of collateral estoppel is inapplicable since Hartford’s coinsurance obligations were not decided in the prior action. We agree.
Collateral estoppel is an equitable doctrine that is based on the notion that a party should not be permitted to relitigate an issue previously decided against it (D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664; Kaufman v Eli Lilly & Co., 65 NY2d 449, 455). The party seeking to invoke the doctrine need only establish two requirements: (1) that the identical issue was necessarily decided in the prior action and is decisive in the present action; and (2) that the party to be precluded from relitigating an issue must have had a full and fair opportunity to contest the prior determination (D’Arata v New York Cent. Mut. Fire Ins. Co., supra, at 664; Kaufman v Eli Lilly & Co., supra, at 455).
While the record supports the IAS Court’s determination that National Union received a full and fair opportunity to litigate the question of Hartford’s coinsurance obligation, we do not agree that the issue was necessarily decided by Judge Cohen’s determination (see, Matter of Halyalkar v Board of Regents, 72 NY2d 261, 268). Collateral estoppel will only be given to matters “actually litigated and determined” in a prior action (Restatement [Second] of Judgments § 27; see also, D’Arata v New York Cent. Mut. Fire Ins. Co., supra, at 666; Kaufman v Eli Lilly & Co., supra, at 456; Singleton Mgt. v Compere, 243 AD2d 213). For a question to have been actually litigated, “it must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding” (Matter of Halyalkar v Board of Regents, supra, at 268).
There was no actual determination of Hartford’s coinsurance obligation before Justice Cohen (see, Gloria Vanderbilt Home Furnishings v Cooper, 215 AD2d 162, 162-163; Merchants & Bus. Men’s Mut. Ins. v Savemart, Inc., 213 AD2d 607, 609). In the second third-party action, Chaos sought a declaration of
Concluding, as we have, that National Union is not precluded from litigating the issue of coinsurance, we must address the parties’ arguments as to whether National Union may seek recovery of one half the amount of the settlement from Hartford, as a coinsurer of Chaos. In light of its collateral estoppel determination, the IAS Court did not reach this issue. Hartford contends that the indemnification provision requiring All Seasons to indemnify Chaos for any loss arising out of the work demonstrates that the parties intended that Chaos would be fully insured and indemnified by the insurance procured by All Seasons. Thus, according to Hartford, it was contemplated from the very beginning that All Seasons, and its insurer National Union, would bear the brunt of any loss occurring at the construction site.
National Union responds that the indemnification provision cannot override the “other insurance” provisions contained in both Hartford’s and National Union’s policies, and that since both insurers insure the same party for the same risk, they are concurrent insurers as a matter of law who must share equally in the cost of defending and settling the underlying action on behalf of their mutual insured.
More importantly, while we agree that the subcontract and insurance policies were structured in a way that the subcontractor (and its insurer) would bear primary responsibility for any liability arising out of the construction work (see, Fitch v Turner Constr. Co., 241 AD2d 166), that obligation was entirely fulfilled when National Union, on Chaos’ behalf, paid $1,000,000 to settle the Boyd action. Since National Union has fulfilled its duty as indemnitor pursuant to the subcontract and insurance policy, the existence of the indemnification provision may not serve as a bar to an otherwise permissible action against a coinsurer.
National Union has demonstrated that it and Hartford were coinsurers of Chaos. “Generally, where insurance policies provide coverage for the same interest and against the same risk, concurrent coverage exists and two or more primary insurers will be held to be coinsurers (see, Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 655; B.K. Gen. Contrs. v Michigan Mut. Ins. Co., [supra], at 585).” (Southgate Owners Corp. v Public Serv. Mut. Ins. Co., 241 AD2d 397, 398.) Hartford’s arguments that it and National Union’s policies did not insure the same risk are not persuasive. The fact that the Hartford policy was a commercial general liability policy, much broader than National Union’s, does not establish that the policies did not insure the same risk. Indeed, notwithstanding its present efforts at distancing its policy from the risk giving rise to Boyd’s injuries, Hartford initially undertook the defense of Chaos in the Boyd action, and even discussed the possibility of joint representation with National Union.
We further reject Hartford’s argument that the antisubrogation rule bars National Union’s action. The antisubrogation rule provides that an insurer has no right of subrogation against its own insured for a claim arising from the very same risk for which the insured was covered (see, North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294, supra; Pennsylvania Gen. Ins. Co. v Austin Powder Co., 68 NY2d 465, 468). “Public policy requires this exception to the general rule [of subrogation] 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” (North Star Reins. Corp. v Continental Ins. Co., supra, at 294-295).
In the present case, National Union is not seeking subrogation against one of its own insured; rather, it seeks recovery from a coinsurer after it has satisfied its duties to each of its insured. In this respect, this case differs from those where an insurance carrier has assumed its defense and indemnity obligations for both a third-party plaintiff contractor and the third-party defendant subcontractor for the same risk, and seeks recovery from a coinsurer of the subcontractor (see, National Cas. Co. v State Ins. Fund, 227 AD2d 115, Iv denied 88 NY2d 813; National Union Fire Ins. Co. v State Ins. Fund, 213 AD2d 164; Avalanche Wrecking Corp. v New York State Ins. Fund, 211 AD2d 551). In such instance, a conflict of interest is readily apparent since any effort to seek reimbursement from the subcontractor’s insurer is essentially a subrogation action against its own insured, which is barred by the antisubrogation rule (see, National Union Fire Ins. Co. v State Ins. Fund, 213 AD2d 164, supra; Avalanche Wrecking Corp. v New York State Ins. Fund, 211 AD2d 551, supra).
Since both National Union’s and Hartford’s policies insured the same risk, both the policies provide for primary coverage and the policies have matching “other insurance” clauses, National Union has a cause of action against Hartford for one half of the amount it expended in defense and settlement of the underlying action (see, Investors Ins. Co. v Hartford Fire Ins. Co., 233 AD2d 197; National Union Fire Ins. Co. v State Ins. Fund, 222 AD2d, supra, at 372). Further, as the policies establish that Hartford is a concurrent insurer as a matter of law, National Union is entitled to judgment declaring that Hartford is obligated to defend and indemnify Chaos, and must share equally in the costs of defending and settling the action on behalf of Chaos.
Accordingly, the judgment of the Supreme Court, New York County (Herman Cahn, J.), entered August 21, 1997, which denied plaintiffs motion for summary judgment and granted defendant’s cross motion for summary judgment dismissing the complaint, should be reversed, on the law, without costs, the cross motion denied and the complaint reinstated, and plaintiffs motion, for a declaration that Hartford is obligated to defend and indemnify Chaos Construction Corp. in the underlying action and must share equally in the costs of defending and indemnifying Chaos, granted.
Milonas, J. P., Wallach, Tom and Saxe, JJ., concur.
Judgment, Supreme Court, New York County, entered August 21, 1997, reversed, on the law, without costs, the defendant’s cross motion for summary judgment dismissing the complaint denied, the complaint reinstated, and the plaintiffs motion for a declaration that Hartford is obligated to defend and indemnify Chaos Construction Corp. in the underlying action and must share equally in the costs of defending and indemnifying Chaos granted.
. In a prior ruling, the IAS Court had dismissed the first third-party action up to the limits of the insurance coverage provided by All Seasons for Chaos, pursuant to the preindemnification doctrine. The court granted reargument of this ruling in light of the Court of Appeals decision in North Star
. All Seasons’ excess insurer, Chubb, contributed the remaining $50,000 to the settlement.