Commercial Landlord Found Entitled to Additional Insured Coverage Under Tenant's Policy But on Excess Basis Only

CGL – ADDITIONAL INSURED – ARISING OUT OF THAT PART OF LEASED PREMISES – PRIORITY OF COVERAGE
L&B Estates, LLC v. Allstate Ins.
(2nd Dept., decided 3/16/2010)

Commercial landlord L&B Estates leased Brooklyn premises to tenant 21st Century Achievers.  As required by the lease, the tenant obtained a CGL policy from Allstate, naming the landlord as an additional insured, but "only with respect to liability arising out of the ownership, maintenance or use of that part of the premises shown in the [d]eclarations as leased to [tenant]."  The Allstate policy's declarations did not mention the sidewalk in front of the premises as having been leased to Century. L&B, the landlord, was covered by its own CGL policy with United National Specialty Insurance Company, and the Allstate and United policies each contained an "other insurance" provision.

In November 2005, a pedestrian allegedly was injured when she tripped and fell as a result of an alleged defect in the sidewalk in front of the leased premises.  She sued both landlord and tenant, and the landlord, L&B, tendered the suit to Allstate for defense and indemnification as an additional insured under the tenant's, Century's, CGL policy.  Allstate rejected the tender on the basis that the injured party's claim did not arise out of the ownership, maintenance or use of "that part of the premises shown in the Declarations as leased to [Century]."  L&B commenced this declaratory judgment action for defense and indemnification coverage from Allstate as an additional insured under Century's policy, as well as damages for breach of contract against Allstate and Century. L&B cross-moved for summary judgment on its complaint against Allstate and Century, and the Kings Supreme (Knipel, J.) granted L&B's cross motion.

In MODIFYING the order appealed from, the Appellate Division, Second Department, held that although L&B was entitled to coverage as an additional insured under Century's policy with Allstate, Allstate's AI coverage was excess to L&B's primary coverage with United and, therefore, Allstate was not obligated to contribute towards L&B's defense or indemnification in the underlying personal injury action under L&B's coverage with United was exhausted:

L&B established its prima facie entitlement to judgment as a matter of law against Allstate by submitting, among other things, the Allstate policy, which established that it was an additional insured with respect to Coddett's claim, and that Allstate had refused to provide coverage. Inasmuch as Administrative Code of the City of New York § 7-210 imposes liability on owners of commercial property for defects in sidewalks, L&B's potential liability arises from its ownership of the premises leased to Century. Since unambiguous terms in an insurance contract are given their plain and ordinary meaning (see Antoine v City of New York, 56 AD3d 583, 584), L & B is an additional insured under the Allstate policy for claims arising from defective conditions on the sidewalk in front of the premises. 

In opposition, however, Allstate established, as a matter of law, that its coverage of L&B under the Allstate policy was excess to the coverage provided to L&B under the United policy. When a policy provides only excess coverage, the duty to defend or indemnify is not triggered until coverage under the primary policy has been exhausted or otherwise terminated (see Great N. Ins. Co. v Mount Vernon Fire Ins. Co., 92 NY2d 682, 686-687; Sport Rock Intl., Inc. v American Cas. Co. of Reading, Pa., 65 AD3d 12, 20; Osorio v Kenart Realty, Inc., 48 AD3d 650, 653). Consequently, upon searching the record, Allstate is entitled to summary judgment declaring that it is not the primary insurer, that the coverage it provided to L&B is excess to that provided by the United policy, and that, therefor, it was not obligated to defend or indemnify L&B in the underlying action unless its obligated [sic] to provide excess coverage is triggered.