Savin Engineers P.C. v. Ironshore Specialty Insurance, Sup. Ct. Nassau County, Index Number 8611, January 29, 2013

On July 10, 2010, Wieslaw Kantorowicz was injured when he fell from a roof on which he was working at a project in Long Beach New York Middle School. The owner of the property—the Long Beach City School District—had hired our client, an engineering firm, as its construction manager. The plaintiff, Kantorowicz, was employed by a contractor, which had also been engaged by the School District, named Milcon Construction.

Kantorowicz sued the School District as the owner of the property and our client under the New York State Labor Law.  Section 240 of the Labor Law makes the owner and construction manager absolutely liable for plaintiff’s injury.  However, under the terms of the contract between Milcon Construction (Kantorowicz’s employer) and the District, Milcon was obligated to name both the District and its construction manager, our client, as additional insureds on its policy of insurance. The contract also required a $1 million primary policy as well as $10 million excess.

Milcon’s carrier, Ironshore Insurance, picked up the defense of the School District, which promptly dropped Milcon as a third-party defendant. On behalf of our client, we tendered its defense to Ironshore, but Ironshore never responded. We then impleaded both Milcon and Ironshore as third-party defendants.  Discovery progressed and settlement was discussed. Plaintiff’s demand was $3 million. However, because of an adverse ruling by the court, severing our client’s case against Milcon, the attorneys for School District demanded one third of the settlement from our client, or $1 million, relying on a provision in the contract between the District and our client that provided for full indemnity from it to the District if our client was found negligent. Given certain deposition testimony, this was a distinct possibility. Thus, a verdict could have resulted in our client’s professional liability carrier paying not just $1 million, but the entire amount of the judgment.

The Rawle & Henderson attorney handling the coverage issue, Derek E. Barrett, filed a declaratory judgment action against Ironshore, arguing that Ironshore did not timely respond to Rawle & Henderson’s client’s tender and thus, under the owner contract with Milcon it owed our client full defense and indemnity. The attorneys for Ironshore argued that Ironshore was only one of several policies available and that the court could not rule that Ironshore was responsible for our client’s defense and indemnity without analyzing the role of the other policies, including our client’s professional liability policy.

Generally, New York has followed what is called “horizontal exhaustion”; that is, all primary policies available to a party must be used before an excess policy pays.  Here, we argued that our client was entitled to all of Ironshore’s coverage. Ironshore also argued that there was a question as to our client’s active negligence, which should further preclude the court from ruling in our client’s favor.

In a sweeping decision, the court ruled that our client was entitled to full defense and indemnity by Ironshore.  In addition, the court totally rejected any claim that other policies needed to be exhausted before Ironshore paid its policies.  The court also rejected the argument that our client’s potential negligence precluded the court from ruling on Ironshore’s coverage obligation to our client. Rather, the court held that our client’s negligence, if any, was absolutely irrelevant to their right to coverage.

Indeed, the court quoted from Ironshore’s own policy, which stated that the Ironshore coverage was primary to all other coverage and that Ironshore would not look to other policies for their obligation to our client. In a subsequent judgment signed by the court, the court directed Ironshore to cover our client to the “full extent of its available coverage”, defeating any attempt by Ironshore to claim that our client was only entitled to its primary $1 million policy, if at all.

Partner Robert A. Fitch prepared the case for trial and went to the trial court with the favorable underlying coverage decision on appeal by Ironshore, the School District arguing active negligence against our client and plaintiff’s counsel still pursuing the §240 Labor Law claim.  Rawle & Henderson took a firm position that we would win the case on liability and were entitled to the excess coverage without the professional liability policy for our client being excess over the Ironshore primary policy.  The case settled just prior to jury selection for $2.7 million, with our client’s professional liability carrier paying nothing.

Robert A. Fitch is the resident partner in the New York office. He concentrates his practice in the defense of architects and engineers, construction, medical and oral surgery malpractice claims, and commercial motor vehicle litigation. He received his undergraduate degree from Syracuse University and his J.D. from Syracuse University College of Law. He is admitted to practice in New York since 1974, as well as in federal courts in Southern, Eastern and Northern Districts of New York and the Second Circuit Court of Appeals. He has tried over 100 cases to verdict and is a member of the Defense Research Institute, Federal Bar Council, PIAA and Trucking Industry Defense Association. He was selected as a New York Metro Super Lawyer by the publishers of Law & Politics in 2013. He has a peer review rating by Martindale-Hubbell of AV (the highest).

Derek E. Barrett, Counsel to the Firm in Rawle & Henderson’s New York office, is an active trial lawyer whose practice is concentrated in the areas of commercial motor vehicle litigation, construction and premises liability as well as medical and dental malpractice. Mr. Barrett obtained his law degree from New York Law School in 1991. He graduated with a B.S. degree from Queens College of the City University of New York. He is admitted to practice in New York and New Jersey, and before the U.S. District Court for the District of New Jersey and the United States District Courts for the Northern and Southern Districts of New York.