Assignee of Named Insured Allowed to Pursue Named Insured's Coverage

CGL – ADDITIONAL INSURED – ASSIGNMENT – DECLARATORY JUDGMENT – STANDING
Home Depot U.S.A., Inc. v. National Fire & Mar. Ins. Co.
(2nd Dept., decided 10/14/2008)

An employee of subcontractor Westward Contracting was injured while working on a project in which Home Depot was the general contractor. The worker sued other parties and Home Depot, which brought a third-party action against Westward for indemnification and defense. Westward had contractually agreed to procure additional insured coverage for Home Depot. Westward defaulted in the third-party action, and National Union, Westward's CGL insurer, disclaimed coverage to both Westward and Home Depot.

Home Depot and Westward entered into an assignment agreement under which Westward agreed to assign its claims against National Fire to Home Depot in consideration for Home Depot's agreement to "limit any levy or execution or any process of any kind, relating to the Default Judgment against Westward . . . solely to any and all claims or causes of action of whatever nature or kind which Westward might have or possess against" National Fire. Home Depot then commenced this DJ action for itself and as Westward's assignee.

Home Depot moved to compel discovery and National Union cross-moved for summary judgment, contending that Home Depot was not an additional insured under Westward's policy and lacked standing to pursue coverage for Westward as its assignee. Kings Supreme denied Home Depot's motion and granted National Union's cross motion with respect only to Home Depot's claims for additional insured coverage.

In AFFIRMING the lower court's decision in all respects, the Second Department held:

1. National Union established that Home Depot was not entitled to additional insured coverage because it was not named on Westward's policy. In opposition, Home Depot failed to create a question of fact. "The certificate of insurance, relied upon by Home Depot and which expressly stated that 'it is issued as a matter of information only and confers no rights upon the certificate holder,' was insufficient to support Home Depot's contention that it was an additional insured under the policy (see Cendant Car Rental Group v Liberty Mut. Ins. Co., 48 AD3d 397, 398; Metropolitan Heat & Power Co., Inc. v AIG Claims Servs., Inc., 47 AD3d 621, 623; Trapani v 10 Arial Way Assoc., 301 AD2d 644, 647; Penske Truck Leasing Co. v Home Ins. Co., 251 AD2d 478, 479; American Ref-Fuel Co. of Hempstead v Resource Recycling, 248 AD2d 420, 423, 424). "


2. Contrary to National Union's argument, Home Depot, as assignee of Westward, had standing to commence this action seeking a determination of coverage issues as they applied to Westward. "Under New York law, claims are typically transferable (see Quantum Corporate Funding, Ltd. v Westway Indus. Inc., 4 NY3d 211, 216), and National Fire has failed to support its contention that such an assignment was prohibited by Insurance Law § 3420 (see General Obligations Law § 13-101; Grand Crossing, L.P. v U.S. Underwriters Ins. Co., 2007 WL 4591989, 2007 US Dist LEXIS 94244 [SDNY 2007])."


3. The assignment agreement did not extinguish National Union's obligation to indemnify Westward in the underlying third-party action. "Since 'an insurer's obligation to indemnify extends only to those damages the insured is legally obligated to pay, it naturally follows that a release discharging an insured from all liability relieves the insurer from the duty of indemnification because it effectively eliminates any factual or legal grounds on which the duty to indemnify may be based' (Westchester Fire Ins. Co. v Utica First Ins. Co., 40 AD3d 978, 980, quoting McDonough v Dryden Mut. Ins. Co., 276 AD2d 817, 818). Nonetheless, the assignment agreement did not constitute a release of Westward's liability in the underlying personal injury action (compare Westchester Fire Ins. Co. v Utica First Ins. Co., 40 AD3d at 980 with Westervelt v Dryden Mut. Ins. Co., 252 AD2d 877; Erdman v Eagle Ins. Co., 239 AD2d 847, 849)."

This is the first time I can recall a party that was supposed to have been named as an additional insured taking an assignment from the promise-to-procure-insurance-breaching named insured and pursuing that party's coverage from its GL carrier. Interesting idea.