One insurer, who accepted the tender of defense in a construction defect case, successfully moved for summary judgment against the second insurer, who denied the insured’s tender. Interstate Fire & Cas. v. Aspen Ins. UK Ltd., 2019 N.Y. Misc. LEXIS 5800 (N.Y. Sup. Ct. Oct. 25,2019).
Standard Waterproofing Corporation was hired by the construction manager, G Builders, to perform waterproofing work as part of condominium conversion project. After the project was completed,the condominium occupants experienced water damage in their units. The Condominium Board retained an engineer who reported numerous issues of water infiltration relating to Standard’s work.
The Condominium Board filed suit against the construction manager, who filed a third party complaint against Standard. Standard tendered to four different insurers, including plaintiff Interstate and defendant Aspen. Interstate agreed to defend, while Aspen and the other two insurers declined. Aspen argued there were no allegations of an occurrence resulting in property damage during its policy periods. Interstate filed for declaratory relief against Aspen and Standard.
Standard and Interstate moved to dismiss. The court rejected Aspen’s arguments that the other two insurers were necessary parties. Complete relief could be accorded to the existing parties without the other two insurers being involved.
Turning to Interstate’s motion for summary judgment, the court determined that Aspen had a duty to defend. The pleadings in the underlying case alleged that the renovation work “caused the condominium and its unit owners significant injury and damage.” The third-party complaint alleged that Standard’s work and culpable conduct led to the condominium damage. Aspen’s CGL policy covered consequential property damage due to a contractor’s faulty workmanship as “property damage” caused by an “occurrence,” even if the cost of repairing the defective work itself was not covered. Therefore, the underlying pleadings created a reasonable possibility of coverage, triggering Aspen’s duty to defend.
Accordingly, Aspen was obligated to reimburse Interstate for a portion of the defense costs. Where in insurer failed to undertake the common insured’s defense and the other insurer was forced to defend alone and then seek reimbursement, New York courts applied the allocation method most favorable to the insurer who properly defended. Given the length of their respective policy periods, Interstate’s share was 44% and Aspen’s share was 56%. Interstate was also entitled to prejudgment interest at 9% from the date each invoice was paid.