An Umbrella is not a CGL

The Supreme Court, New York County (Barbara Jaffe, J.) [the trial court], ruled,  granted the motion of defendants/third-party plaintiffs Hyatt Corporation and Hyatt Equities, L.L.C. (together, Hyatt) for summary judgment on their third-party claim for breach of an insurance procurement obligation because the Defendant Securitas failed to acquire a Commercial General Liability policy with limits of no less than $3 million.

In Dominick Benedetto et al. v. Hyatt Corporation et al., Hyatt Corporation, Sued Herein as Hyatt Corporation, Doing Business as Grand Hyatt New York, et al. v. Securitas Security Services USA Inc., Appeal No. 15506-15507 Nos. 2021-00256, 2020-00374, No. 2022-01732, Index Nos. 160322/14, 595457/15, Supreme Court of New York, First Department (March 15, 2022) the appellate court affirmed the decision of the trial court without costs.

DISCUSSION

A party moving for summary judgment on its claim for failure to procure insurance meets its prima facie burden by establishing that a contract provision requiring the procurement of insurance was not complied with. The burden then shifts to the opposing party, who may raise an issue of fact by tendering the procured insurance policy in opposition to the motion. As with any summary judgment motion, the evidence submitted both in support of and in opposition must be tendered in admissible form.

The appellate court found that Securitas failed to raise an issue of fact precluding summary judgment in Hyatt’s favor on their third-party claim for failure to procure insurance. The parties’ agreement required Securitas to procure $3 million worth of commercial general liability insurance coverage, but both the certificate of liability insurance and the policy declarations that Securitas submitted in support of its cross motion and in opposition to Hyatt’s motion only indicate $2 million worth of commercial general liability insurance coverage. While the certificate of liability insurance also indicates that Securitas procured an additional $1 million in umbrella liability coverage per occurrence – for a total of $3 million of coverage – this does not raise an issue of fact as to whether Securitas procured the $3 million of commercial general liability insurance coverage it was required to procure by the parties’ agreement.

Securitas also failed to raise an issue of fact as to whether Hyatt waived the insurance procurement provision in the parties’ agreement. A waiver, by definition, is the intentional relinquishment of a known right, it must be clear, unequivocal and deliberate. Hyatt’s annual acceptance of the certificates of insurance from Securitas constituted “mere silence” or, at most, “mistake, negligence, or thoughtlessness,” but never amounted to any intentional act “to relinquish a known right”. Securitas’s alternative argument that Hyatt was comparatively negligent does not bar summary judgment in Hyatt’s favor on this claim.

The trial court properly adhered to its original determination on renewal and reargument, since the policy that Securitas submitted in support of its motion for leave to renew and reargue was also a commercial umbrella liability policy, and therefore could not satisfy its contractual obligation to procure $3 million worth of commercial general liability insurance coverage.

To the extent Securitas sought to cure defects in its moving papers, raised by Hyatt in opposition, by submitting the complete policies in reply, this was new evidence submitted in reply that the court properly declined to consider.

ZALMA OPINON

Although this decision seems to be form over substance since Securitas did maintain $3 million in liability insurance, an umbrella policy is not a CGL. An umbrella simply adds (with different terms and condition unless it is a “follow form” policy) and, therefore, is not compliance with the contract terms. If Securitas could not obtain a $3 million limit on a CGL they were unable to fulfill the terms of the contract. Recognizing that they should have immediately advised Hyatt and requested a modification of the contract to read a CGL with a $2 million limit plus a $1 million umbrella.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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