Great Northern Insurance Company and Linn Howard Selby v. Mount Vernon Fire Insurance Company

Citations: 143 F.3d 659; 1998 U.S. App. LEXIS 8413; 1998 WL 217211Docket: 364

Court: Court of Appeals for the Second Circuit; May 1, 1998; Federal Appellate Court

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Great Northern Insurance Company and Linn Howard Selby appeal a judgment from the United States District Court for the Southern District of New York, which determined that the insurance policies from Great Northern and Mount Vernon Fire Insurance Company are excess to one another regarding coverage for injuries sustained by a carpenter, John Hlavaty, while working on Selby’s apartment. The appeal centers on the interpretation of the "other insurance" clause in the Mount Vernon policy, specifically whether it renders Mount Vernon's coverage excess relative to Great Northern's coverage.

Both Great Northern and Mount Vernon acknowledge that their policies provide coverage for Hlavaty's claims against Selby. However, they dispute how the costs for defense and indemnity should be shared. Both policies contain "other insurance" clauses that dictate when their coverage is considered primary or excess. It is agreed that Great Northern's policy is excess concerning Mount Vernon's. The crux of the dispute is whether Mount Vernon's coverage is primary or excess to Great Northern's.

Under New York law, if Mount Vernon's coverage is deemed excess, the two "other insurance" clauses will cancel each other, leading to a pro rata apportionment of costs. Conversely, if Mount Vernon's coverage is classified as primary, it must cover claims up to its policy limits before Great Northern's coverage is invoked. The court is tasked with clarifying this interpretation under New York law.

The Mount Vernon policy specifies that if other valid insurance is available, its obligations are limited. It designates itself as primary insurance unless other insurance is also primary, in which case coverage will be shared on a pro rata basis. Conversely, it acts as excess insurance over other types, specifically excluding fire, extended coverage, builder's risk, or similar coverage for "your work," as well as fire insurance for rented premises, and instances involving aircraft, autos, or watercraft.

In this case, the Great Northern policy does not fall into the excluded categories, and the dispute revolves around the interpretation of "similar coverage for 'your work.'" Great Northern contends its third-party liability coverage is not similar to first-party property insurance types listed in Mount Vernon’s policy. It also argues that since the Mount Vernon policy defines "your" as referring only to "Named Insureds," it does not apply to Selby, designated as an "additional insured."

Mount Vernon counters that the policies are similar, as both cover third-party tort claims arising from renovations of Selby’s apartment, and that Great Northern’s coverage would also indemnify against damage to Selby’s possessions. Furthermore, Mount Vernon argues that "Named Insured" and "insured" are interchangeable, implying "your work" includes all insureds, including Selby.

Great Northern references case law supporting its interpretation of the "other insurance" clause, but New York courts have not yet defined "similar coverage for 'your work'" in this context. Consequently, the matter of whether this phrase in Mount Vernon’s policy makes it excess to Great Northern’s third-party liability coverage is certified for court review, particularly regarding the sharing of defense and indemnification costs in a construction-related injury incident.

The New York Court of Appeals should decide the interpretation of the "other insurance" clause due to the absence of state court precedents on the matter. New York has a vested interest in addressing this issue rather than relying solely on potentially erroneous federal court rulings. The insurance contract involved is a standard commercial general liability policy widely used in New York, impacting property owners, management companies, contractors, and injured parties. Given the likelihood of recurring similar questions, a timely resolution by the New York Court of Appeals would promote justice. The order directs the Clerk of the Court to send a Certificate, along with all relevant briefs and records, to the New York Court of Appeals. The current panel retains jurisdiction to address the appeal following the Court of Appeals' response. The parties will share any incurred fees or costs as requested by the New York Court of Appeals. The Mount Vernon policy defines "your work" as operations performed by the insured and related materials, specifying that "you" and "your" refer to the Named Insured and that "insured" includes various designated individuals and organizations. Additionally, newly acquired organizations may qualify as Named Insureds under certain conditions. The endorsement extending coverage to Selby identifies Selby as an "additional insured."