The appellate court reversed, in part, determining that the insurer had a duty to defend. Cumberland Farms, Inc. v. Tower Group, Inc., 2026 N. Y. App. Div. LEXIS 2039 ( Supr. Ct. N. Y. App. Div. March 23, 2016).
In 2008, the underlying plaintiff was injured when he tripped and fell on a sidewalk in front of a gas station operated by Noori Auto & Fuel, Inc. Noori was a franchisee and lesser with Cumberland Farms, Inc. Noori was insured by Mountain Valley Indemnity Company. Cumberland was an additional insured under the policy.
The underlying plaintiff sued Mountain Valley and its affiliate, Tower Group, Inc. Mountain Valley and Tower Group moved for summary judgment, seeking a ruling that they were not obligated to defend. Cumberland cross appealed. The lower court denied both motions.
On appeal, the insurers contended that although Cumberland was an additional insured under the policy, an endorsement stated that Cumberland was an additional insured "only with respect to its liability as a grantor of a franchise to the named insured." Because the underlying complaint did not specifically allege that Cumberland was liable as a franchiser, Cumberland was not an additional insured. Cumberland also argued that Tower Group was not obligated to defend because it did not issue the policy to Noori.
The underlying complaint alleged that Cumberland was negligent in its ownership, operation, control, and maintenance of the gas station. But in support of their motion, the insurers submitted evidence that Cumberland leased the gas station to Noori as a franchisee. Since Cumberland's liability, if any, could hinge on the scope of its obligations under the franchisor/franchisee agreement, the allegations of the complaint suggested a reasonable possibility of coverage for Cumberland in the underlying action.
The lower court also erred in not granting the insurers' motion to the extent it sought a ruling that Tower Group was not obligated to defend or indemnify Cumberland in the underlying action.