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Insurers Overcome Potential Estoppel in DJ Action (NY)

April 5, 2017

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In <em><a href="">77 Water St., Inc. v JTC Painting &amp; Decorating Corp</a></em>, the Second Department recently discussed the burden to succeed on a summary judgment motion seeking status as additional insured in a declaratory judgment action.
In the underlying personal injury action, <em>Muhaj v. 77 Water Street</em>, an employee of JTC Painting &amp; Decorating Corp. slipped and fell on debris on a construction site.  The worker commenced an action against the property owner, 77 Water Street, and Structure Tone, the general contractor that contracted with JTC. As part of the underlying personal injury, 77 Water Street and Structure Tone commenced a third-party action for contractual defense and indemnification against JTC. JTC moved for summary judgment dismissing the third-party claims on the grounds that there was no written contract between JTC and either 77 Water Street or Structure Tone on the date of loss. The trial court granted JTC’s motion.
77 Water Street and Structure Tone (“Plaintiffs”) subsequently commenced a declaratory judgment action against JTC and JTC’s commercial general liability insurer, Allied World Assurance Company (“Defendants”). Plaintiffs contended that JTC and Structure Tone entered into two written contracts, a blanket insurance/indemnity agreement and an unsigned purchase order, in which JTC agreed to obtain general liability insurance and to name Plaintiffs as additional insureds on the policy.
Plaintiffs argued that Defendants were obligated to defend and indemnify plaintiffs because an endorsement in the CGL policy amended the definition of "insured” to include entities “[a]s required by written contract.”  Defendants cross-moved for summary judgment declaring, <em>inter alia</em>, that they were not obligated to defend or indemnify the Plaintiffs in the underlying action. In their cross-motion, they argued that the Plaintiffs were barred by the doctrine of collateral estoppel from asserting that JTC had agreed in a written contract to name them as additional insureds on its insurance policy. The trial court agreed, granting the Defendant’s cross-motion for summary judgment and denying the Plaintiff’s motion for summary judgment.
On appeal, the Second Department reversed in part, since the Plaintiffs put forth prima facie evidence that the blanket insurance/indemnity agreement required JTC to obtain liability insurance for Structure Tone. Essentially, the blanket insurance/indemnity agreement <strong>was</strong> a written contract between Structure Tone and JTC. Accordingly, Structure Tone was an additional insured within the meaning of the CGL policy endorsement, and as such, Allied and JTC were obligated to defend and indemnify Structure Tone as an additional insured.  (77 Water Street was not an additional insured, as 77 Water was not a "specific owner" as required by the agreement.)
Counsel for Structure Tone were able to transfer their clients' risk, despite the uphill battle presented by estoppel in the underlying action.  Thanks to Evan King for his contribution to this post.  Please email <a href="">Brian Gibbons</a> with any questions.


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