One Insurer Must Reimburse Another for Defense Costs

    The Second Circuit upheld the district court's grant of summary judgment finding that Scottsdale Insurance Company owed a defense to the insured and had to reimburse Greater New York Mutual Insurance Company for fronting the defense costs. Greater N.Y. Mut. Ins. Co. v. Burlington Ins. Co., 2024 U.S. App. LEXIS 10165 (2nd Cir. April 26, 2024). 

    Greater New York brought an action for a declaratory judgment against Scottsdale claiming Scottsdale owed a defense to Greater New York's insured, Park City 3 and 4 Apartments, Inc., in the underlying state case. A contract between Park City and Scottdale's insured, Phoenix Bridging, Inc., established Scottsdale's obligation to defend Park City in the underlying suit as an additional insured on Bridging's policies. In the underlying action for negligence against Park City and Bridging, Park City brought cross-claims against Bridging for breach of contract for failing to designate Park City as an additional insured. No party, however, could produce the contract. 

    The state court determined that the contract did not exist and entered summary judgment against Park City. The contract was later discovered. Greater New York brought this action. The district court determined it was not bound by the state court's decision and granted summary judgment for Greater New York on its duty-to-defend claim against Scottsdale.

    Scottsdale appealed. The Second Circuit first rejected Scottsdale's argument that Greater New York's claim was time-barred. Greater New York sent a tender letter to Scottsdale on November 2013 seeking a defense for Park City. Scottsdale rejected the tender in 2014. Scottsdale argued the six-year statute of limitations expired in 2020, before Greater New York brought this claim in 2022. Under New York law, however, an action for breach of the duty to defend does not occur until the underlying action has concluded and the insurer can no longer defend the insured even if it chooses to do so. The underlying action had not concluded, so Greater New York's claim was timely.

    Scottsdale also argued Greater New York's claim was barred by collateral estoppel, but the argument was not raised until the filing of the reply brief. The argument was therefore waived.

    Finally, Scottsdale argued that if it had a duty to defend, it was not triggered until the contract was produced in a motion to reopen summary judgment against Park City in the underlying action, on April 13, 2022. Scottsdale's duty to defend was triggered, however, by Greater New York's letter to Park City on November 26, 2013, which disclosed the basis for the underlying action and stated that a contract existed between Park City and Bridging that made Park City an additional insured on Bridging's policy with Scottsdale. 

    The judgment of the district court was affirmed.