tag:blogger.com,1999:blog-4754540220266106237.post7439940468395794567..comments2024-03-17T16:43:50.668-04:00Comments on Coverage Counsel: First Department Upholds Primary Insurer's Coverage Denial Based on Designated Ongoing Operations/Construction ExclusionRoy A. Murahttp://www.blogger.com/profile/06367888044845855898noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-4754540220266106237.post-61812236625391657432009-11-19T15:51:07.822-05:002009-11-19T15:51:07.822-05:00Roy, as you know, I represented State National in ...Roy, as you know, I represented State National in this case. I can't agree with your commentary that "the Insurance Law § 3420(d) argument of untimeliness American was making against State was being made as much on behalf of S&W as for itself." Since S&W was fully indemnified by American, the 3420(d) claim was American's alone since only American stood to gain from it. As for your reference to S&W as American's "subrogee," on which you base this commentary, I leave you with my argument on that issue in my reply memorandum of law before the trial court(American abandoned its subrogee argument on appeal):<br /><br />American Guarantee’s claim that it proceeds as S&W’s subrogee is of no moment. In each case on which State National relies involving § 3420(d)’s applicability, the insurer was naturally seeking recovery for amounts it had expended or might expend on its insured’s behalf, and thus, by American Guarantee’s definition, at least, qualified as the insured’s “subrogee.” Nevertheless, in each case, the courts found that the insurer was not entitled to “stand in the shoes” of the insured with regard to § 3420(d).<br />None of those cases discuss whether their finding in this regard stems from the fact that the insurer does not, in fact, proceed as the insured’s subrogee under such circumstances, or that equitable principles involving § 3420(d)’s intent dictate that, despite proceeding as the insured’s subrogee, that equitable doctrine should not apply. Either way, however, the cases establish that an insurer seeking recovery for amounts expended on its insured’s behalf simply may not rely on § 3420(d). <br />For what it is worth, there is support for both rationales. First, “[s]ubrogation is an equitable principle [that] entitles an insurer to ‘stand in the shoes’ of its insured to seek indemnification from third parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse.’” Fed. Ins. Co. v. N. Am. Specialty Ins. Co., 47 A.D.3d 52, 62, 847 N.Y.S.2d 7 (1st Dep’t 2007) (emphasis added) (quoting N. Star Reins. Corp. v. Cont’l Ins. Co., 82 N.Y.2d 281, 294, 604 N.Y.S.2d 510 (1993)). Thus, where the loss for which the insurer seeks recovery resulted solely from the insured’s own wrongdoing, e.g., violating the Labor Law, rather than that of the party against whom the insurer seeks recovery, the insurer may not recover as a subrogee. Id. Since that is the case here, American Guarantee may not proceed against State National as S&W’s subrogee.<br />Even if subrogation might otherwise apply, however, it is, as quoted above, “an equitable principle” and thus may not apply under circumstances where other equities militating against its application outweigh it. Thus, for example, the courts created the anti-subrogation rule so that an insurer otherwise subrogated to its insured’s rights may not proceed against another party it insures for the same loss due to the conflicts of interest that may arise. See, e.g., N. Star Reins. Corp. v. Cont’l Ins. Co., 82 N.Y.2d 281, 294-95, 604 N.Y.S.2d 510 (1993). Likewise here, applying § 3420(d) would be inequitable because it would be inconsistent with that statute’s intent and come at the expense of an insurer whose policy actually excludes coverage.<br />As stated above, however, whatever the rationale may be, the courts have made it clear that no insurer, no matter the consequences, may reap the benefit of § 3420(d).max gershweirnoreply@blogger.com