The New York Court of Appeals considered the impact of competing “other insurance” provisions located in both a CGL policy and a D&O policy. See Fieldston Property Owners Assoc., Inc. v. Hermitage Ins. Co., Inv., 2011 N.Y. LEXIS 254 (N.Y. Feb. 24, 2011).
In the underlying case, Fieldston’s officers were charged with making false statements and fraudulent claims with respect to a customer's right to access its property from adjacent streets. Suit was eventually filed against Fieldston and its officers, alleging several causes of action including injurious falsehood. Damages were sought.
Fieldston’s CGL policy was issued by Hermitage. The “other insurance” provision stated, “If other valid and collectible insurance is available to the insured for a loss we cover . . . our obligations are limited,” but also stated it would share with all other insurance as a primary policy.
Federal's Directors and Officers Liability policy's “other insurance” provision, on the other hand, stated,
If any Loss . . . is insured under any other valid polices. . ., then this policy shall cover such Loss, . . . only to the extent that the amount of such Loss is in excess of the amount of such other insurance whether such other insurance is stated to be primary, contributory, excess, contingent or otherwise, unless such other insurance is written only as specific excess insurance over the limits provided in this policy.
Hermitage demanded that Federal defend Fieldston, noting that the only cause of action triggering the CGL policy was the claim for injurious falsehood. Relying on its other “insurance clause,” Federal refused to defend. Thereafter, Hermitage defended under a reservation of rights.
In the coverage action between the two insurers, Federal’s motion for summary judgment was granted. The trial court determined that the “other insurance” clause in the respective policies rendered Hermitage the primary and Federal the excess insurer. The appellate court reversed, however, finding that Hermitage was entitled to recover from Federal its equitable share of defending except to the extent the defense costs related to the injurious falsehood claims.
The Court of Appeals reversed. Based on the “other insurance” clauses, Hermitage’s CGL policy was primary to Federal's D&O policy as they related to defense costs. The issue, then, was whether the Hermitage policy’s primacy on the injurious falsehood claim triggered a primary duty to defend against the remaining causes of action in the complaint, meaning Federal did not have any obligation? The Court said it did.
Federal’s D&O policy provided its coverage was excess where “any Loss arising from any claim made against the Insured is insured under any other valid policy.” “Loss” was defined to include “defense costs.” Because Hermitage’s policy covered at least one cause of action, it had a duty to defend the entirety of the complaint. Thus, Hermitage had an obligation to defend without contribution from Federal notwithstanding the fact that Federal would appear to have an obligation to indemnify Fieldston for a greater proportion of the causes of action, if successfully prosecuted.
