Vigilant Insurance Company v. Travelers Property Casualty Company of America

Filing 73

OPINION AND ORDER re: 46 MOTION for Summary Judgment . filed by Travelers Property Casualty Company of America, 45 MOTION for Summary Judgment , filed by Vigilant Insurance Company. For the reasons set forth above, the parties' motions for summary judgment are resolved as follows: Travelers' motion is DENIED in full; Vigilant's motion is GRANTED to the extent the Court finds that the Payment was not voluntary and that it was not an obligation fo r which Vigilant was liable, and DENIED in all other respects. The Clerk of Court is directed to terminate the motions at docket entries 45 and 46. The parties are further ORDERED to appear for a conference on Thursday, April 20, 2017, at 3:00 p.m., in Courtroom 618 at the Thurgood Marshall U.S. Courthouse, 40 Foley Square, New York, New York, to discuss setting a trial on the issue of the reasonableness of the settlement. (Status Conference set for 4/20/2017 at 03:00 PM in Courtroom 618, 40 Centre Street, New York, NY 10007 before Judge Katherine Polk Failla.) (Signed by Judge Katherine Polk Failla on 3/21/2017) (tro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------X
:
VIGILANT INSURANCE CO.,
:
:
:
Plaintiff,
:
v.
:
:
TRAVELERS PROPERTY CASUALTY CO. OF :
AMERICA,
:
:
Defendant. :
:
------------------------------------------------------ X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: March 21, 2017
______________

15 Civ. 144 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:
The underlying personal injury action that begat this coverage lawsuit
was settled some two and one-half years ago; the settlement included, in
relevant part, contributions totaling $5.3 million from various insurers,
including both parties to this litigation. Contemporaneous with that
settlement, Plaintiff Vigilant Insurance Co. (“Vigilant”) advised Defendant
Travelers Property Casualty Company of America (“Travelers”) that it would
seek to recover, through equitable subrogation, the $650,000 that Vigilant had
paid towards that settlement (the “Payment”). Vigilant made good on its
promise in filing this action, and the parties have now filed cross-motions for
summary judgment. In brief, Vigilant seeks recovery of the Payment on the
grounds that it contributed to the settlement only because of Travelers’
improper refusal to acknowledge priority of coverage, while Travelers retorts
that Vigilant overreacted and made a voluntary, unreasonable payment for
which there is no basis for recovery. For the reasons set forth in the remainder

of this Opinion, the Court grants in part and denies in part the motions; it
finds that the Payment was not voluntarily made, and that it was not an
obligation for which Vigilant was liable, but also finds a genuine dispute as to
whether the settlement was reasonable.
BACKGROUND 1
A.

Factual Background
1.

The Accident at the Buffalo Zoo

In October 2006, the Zoological Society of Buffalo (the “Zoo”) entered into
a General Construction Contract (the “Contract”) with a general contractor,
Manning Squires Hennig Co., Inc. (“MSH”), for the construction of a South
American Rainforest Exhibit (the “Project”) at the Zoo. (Pl. 56.1 ¶ 6; Def. 56.1
¶¶ 2-3, 7). Of note, the Contract required MSH to indemnify and hold the Zoo
harmless “[t]o the fullest extent permitted by law” for, among other things,
bodily injury caused in whole or in part by any negligent act or omission of

1

The facts in this Opinion are drawn from the parties’ submissions in connection with
the cross-motions for summary judgment, including Vigilant’s Local Rule 56.1
Statement (“Pl. 56.1” (Dkt. #54)), Travelers’ opposition to this statement (“Def. 56.1
Opp.” (Dkt. #62)), Travelers’ own Rule 56.1 Statement (“Def. 56.1” (Dkt. #51)), and
Vigilant’s opposition to this statement (“Pl. 56.1 Opp.” (Dkt. #63)). In addition, the
Court has drawn on various declarations and affidavits from attorneys and witnesses,
along with the exhibits thereto (cited using the convention “[Name] Decl.” (Dkt. #47, 48,
52, 55, 58, 59, 60, 64, 67, 68)). In many cases, the parties have marked the same
documents as exhibits; in such instances, the Court will provide only one cite to the
document.
Citations to a party’s Rule 56.1 Statement incorporate by reference the documents cited
therein. Where facts stated in a party’s Rule 56.1 Statement are supported by
testimonial or documentary evidence, and denied with only a conclusory statement by
the other party, the Court finds such facts to be true. See Local Civil Rule 56.1(c), (d).
For convenience, the Court will refer to Vigilant’s brief in support of its motion for
summary judgment as “Pl. Br.” (Dkt. #53), Travelers’ opposition brief as “Def. Opp.”
(Dkt. #61), and Vigilant’s reply as “Pl. Reply” (Dkt. #70). Similarly, the Court will refer
to Travelers’ brief in support of its motion as “Def. Br.” (Dkt. #50), Vigilant’s opposition
brief as “Pl. Opp.” (Dkt. #56), and Travelers’ reply brief as “Def. Reply” (Dkt. #69).

2

MSH or one of its subcontractors. (Schmidt Decl., Ex. D, § 3.18). The Contract
further obligated MSH to procure insurance for the project, specifically, (i) an
Owners and Contractors Protective Liability (“OCP”) Policy in the name of the
Zoo; as well as (ii) a Commercial General Liability (“CGL” or “GL”) policy and (iii)
an Umbrella/Excess Liability policy in the name of MSH that provided coverage
to the Zoo as an additional insured on a primary and non-contributory basis.
(Pl. 56.1 ¶¶ 8-11; Def. 56.1 ¶ 7).
MSH engaged CarvedRock LLC (“CarvedRock”), a specialty concrete
company, as a subcontractor on the project in December 2006. (Def. 56.1 ¶ 8).
The subcontract contained, in relevant part, an indemnification provision in
favor of both MSH and the Zoo. (Id.; see also Schmidt Decl., Ex. E, ¶ 21). It
further required CarvedRock to add MSH and the Zoo to CarvedRock’s liability
insurance policies as additional insureds on a primary and non-contributory
basis. (Schmidt Decl., Ex. E, ¶ 22).
On April 16, 2008, a laborer on the Project, David Oldread, was seriously
injured when he fell from a scaffold while working. (Pl. 56.1 ¶ 2; Def. 56.1 ¶ 9).
According to a report circulated in April 2014 by Oldread’s counsel, the April
16 accident (the “Accident”) caused severe injuries to Oldread’s neck, midback, lower back, left shoulder, and left side; required numerous medical
procedures; and left him totally disabled. (Swift Decl., Ex. F).
On April 23, 2009, Oldread commenced an action in New York State
Supreme Court, Erie County, captioned David Oldread and Laura Oldread v.
CarvedRock, LLC and Zoological Society of Buffalo, Inc., Index No. 4772/2009

3

(the “Oldread Action”). (Pl. 56.1 ¶¶ 1-2; Def. 56.1 ¶¶ 5, 9-11). The complaint
in the Oldread Action (the “Oldread Complaint”) asserted causes of action for
negligence and for violations of the New York Labor Law (the “NYLL”). (Pl. 56.1
¶¶ 2-3; Def. 56.1 ¶ 11). 2

2

A bill of particulars filed in connection with the Oldread Complaint, as well as a
Memorandum Decision dated March 28, 2014, from the Honorable Tracey A. Bannister,
Justice of the Supreme Court of the State of New York, Erie County, clarify that the
Oldreads’ claims were brought under NYLL §§ 200, 240(1), and 241(6). (Schmidt Decl.,
Ex. A, C).
NYLL Section 200 pertains to the general duty to protect the health and safety of
employees, and provides in relevant part:
All places to which this chapter applies shall be so constructed,
equipped, arranged, operated and conducted as to provide
reasonable and adequate protection to the lives, health and safety
of all persons employed therein or lawfully frequenting such places.
All machinery, equipment, and devices in such places shall be so
placed, operated, guarded, and lighted as to provide reasonable
and adequate protection to all such persons. The board may make
rules to carry into effect the provisions of this section.
NYLL Section 240(1) provides, in relevant part:
All contractors and owners and their agents, except owners of one
and two-family dwellings who contract for but do not direct or
control the work, in the erection, demolition, repairing, altering,
painting, cleaning or pointing of a building or structure shall
furnish or erect, or cause to be furnished or erected for the
performance of such labor, scaffolding, hoists, stays, ladders,
slings, hangers, blocks, pulleys, braces, irons, ropes, and other
devices which shall be so constructed, placed and operated as to
give proper protection to a person so employed.
NYLL Section 241(6) provides:
All areas in which construction, excavation or demolition work is
being performed shall be so constructed, shored, equipped,
guarded, arranged, operated and conducted as to provide
reasonable and adequate protection and safety to the persons
employed therein or lawfully frequenting such places. The
commissioner may make rules to carry into effect the provisions of
this subdivision, and the owners and contractors and their agents
for such work, except owners of one and two-family dwellings who
contract for but do not direct or control the work, shall comply
therewith.

4

2.

The Zoo’s Potential Sources of Coverage

At the time of the Accident, the Zoo arguably had coverage under a
number of insurance policies issued in favor of entities involved in the Project.
These included:


An OCP Policy issued by Travelers to the Zoo (the
“Travelers OCP Policy”), covering the policy period from
October 2, 2007, to October 2, 2008, with a limit of $2
million per occurrence for bodily injury liability coverage
(Def. 56.1 ¶ 14);



A CGL Policy issued by Travelers to MSH (the “Travelers
GL Policy”), on which the Zoo was listed as an additional
insured, covering the policy period from October 1, 2007,
to October 1, 2008, with a limit of $1 million per
occurrence for bodily injury liability coverage (Pl. 56.1
¶ 9; Def. 56.1 ¶¶ 16, 17);



A Customarq Series Museums and Cultural Institutions
Policy issued by Vigilant to the Zoo (the “Vigilant Policy”),
covering the policy period from May 23, 2007, to May 23,
2008, with a limit of $1 million per occurrence and $2
million in the aggregate for bodily injury liability coverage
(Pl. 56.1 ¶ 12; Def. 56.1 ¶ 18); 3



An Umbrella Prime Commercial Liability Policy issued by
National Union Fire Insurance Company of Pittsburgh,
PA (a division of the American International Group, or
“AIG”) to MSH (the “AIG-MSH Umbrella Policy”) covering
the policy period from October 1, 2007, to October 1,
2008, with a limit of $10 million per occurrence for bodily
injury liability coverage (Def. 56.1 ¶ 22; see also Pl. 56.1
Opp. ¶ 22 (noting AIG’s subsequent disclaimer of
coverage)); 4

3

An “Other Insurance” provision in the Vigilant Policy stated that the coverage provided
under that policy was excess to (i.e., subsequent in priority to) any insurance provided
to the Zoo under a contract, or under any insurance policy where the Zoo was included
as an insured. (Schmidt Decl., Ex. L at V2255-56).

4

An “Other Insurance” provision in the AIG-MSH Umbrella Policy clarified that “[i]f other
valid and collectible insurance applies to damages that are also covered by this policy,
this policy will apply excess of the Other Insurance. However, this provision will not

5



A Commercial Excess and Umbrella Policy issued by
Federal Insurance Company to the Zoo (the “Federal
Excess Policy”), covering the period from May 21, 2007,
to May 21, 2008, with a limit of $4 million per occurrence
(Def. 56.1 ¶ 29); 5



A CGL Policy issued by The Burlington Insurance
Company (“Burlington”) to CarvedRock (the “Burlington
CGL Policy”), covering the period from September 26,
2007, to September 26, 2008, with a limit of $1 million
per occurrence and $2 million in the aggregate for bodily
injury liability coverage (Def. 56.1 ¶ 31); and



A Prime Express Commercial Excess Liability Policy
issued by AIG to CarvedRock (the “AIG-CarvedRock
Excess Policy”), covering the period from September 27,
2007, to September 27, 2008, with a limit of $5 million
per occurrence. (Def. 56.1 ¶ 32).
In May 2009, after receiving notice of the Oldread Action, Vigilant

tendered a claim on behalf of the Zoo to Travelers under both of the Travelers
policies. (Pl. 56.1 ¶ 19 (stating a May 5, 2009 tender date); Def. 56.1 Opp. ¶ 19
(stating a May 15, 2009 tender date)). On May 20, 2009, Travelers agreed to
defend and indemnify the Zoo under the Travelers OCP Policy. (Pl. 56.1 ¶ 20;
see also Schmidt Decl., Ex. P at 15 (“We have received tender for Chubb as [the
Zoo]’s carrier and we have accepted their tender providing coverage under the
OCP policy on this file.”)). Vigilant closed its claim file after Travelers accepted
the tender, and did not pay substantive attention to the matter for the next five
years. (Pl. 56.1 ¶ 21).

apply if the Other Insurance is specifically written to be excess of this policy.” (Schmidt
Decl., Ex. V, Part VI.L).
5

This policy applied by its terms to cover losses exceeding the limits of several specified
underlying insurance policies, including the Vigilant Policy. (See Schmidt Decl., Ex. W
at V2467). Both Vigilant and Federal are members of The Chubb Corporation (“Chubb”)
group of insurance companies.

6

3.

The Western District of New York Coverage Action

As it happened, Travelers’ involvement in the matter predated the Zoo’s
May 2009 tender. MSH was also insured by Travelers, and had advised
Travelers of the Accident on or about April 22, 2008. (See Schmidt Decl., Ex. P
at 2 (Travelers claim notes); id., Ex. NNN (May 15, 2009 email from Chubb to
Travelers referencing Travelers’ prior acceptance of defense and indemnification
of the Zoo under the Travelers CGL Policy); cf. Swift Decl., Ex. H at V731
(Chubb claim note reflecting that MSH “picked up the [defense and
indemnification] of [the Zoo]”)). Early on, Travelers assessed the Accident
thusly:
This file is for GL exposure of MSH and any direct claim
should be barred by [workers’ compensation] as we will
argue that MSH is general employer. The real exposure
on this claim is that which the owner [i.e., the Zoo] faces
and we do know (from a different file) that we do have
OCP policy for the owner.
(See, e.g., Schmidt Decl., Ex. P at 11 (emphasis and alterations added); see also
id. at 4-5). Subsequently, Travelers appointed staff counsel, Gary O’Donnell of
the Law Offices of John Wallace (and formerly of the Law Office of Laurie G.
Ogden), to represent the Zoo. (Id. at 15).
Travelers evaluated other possible sources of insurance coverage,
especially policies issued to the subcontractor CarvedRock. In April, June, and
August of 2008, Travelers tendered a claim for the defense and indemnification
of the Accident to Burlington, the issuer of the CarvedRock CGL Policy. (See,
e.g., Schmidt Decl., Ex. F (correspondence from Burlington in 2008 and 2009
regarding coverage)). When Burlington disclaimed coverage, the Zoo brought a
7

declaratory judgment action on January 14, 2010, against CarvedRock and
Burlington in the United States District Court for the Western District of New
York, seeking coverage under the Burlington CGL Policy. See Zoological Soc’y
of Buffalo, Inc. v. CarvedRock, LLC, No. 10 Civ. 35 (RJA) (HKS) (the “WDNY
Coverage Action”). 6
The Zoo contended that CarvedRock’s subcontract with MSH required
CarvedRock to name the Zoo as an additional insured on the Burlington CGL
policy, and thus that the Zoo was covered under that policy. (WDNY Dkt. #1). 7
For its part, Burlington disclaimed coverage based on the absence of any
written agreement naming the Zoo as an additional insured on its CGL Policy.
(WDNY Dkt. #1, 6). Burlington also opposed what it perceived to be the Zoo’s
efforts to “re-write the policy to extend coverage not only to those ‘with whom’
CarvedRock agreed, but also to those ‘for whom’ CarvedRock agreed” to provide
coverage. (WDNY Dkt. #90-16 at 6-7 (emphases added)).
In January 2014, the Zoo and Carved Rock brought cross-motions for
summary judgment (WDNY Dkt. #89, 90); the motions were referred to United
States Magistrate Judge H. Kenneth Schroeder, Jr. (WDNY Dkt. #29, 87 (orders
of referral)). On May 21, 2014, Judge Schroeder issued a Report and
Recommendation to United States District Judge Richard J. Arcara,

6

References to docket entries in this litigation are cited using the convention “WDNY
Dkt. [ ].”

7

CarvedRock, in turn, brought a third-party complaint against its insurance broker,
which complaint was then dismissed for lack of personal jurisdiction. See Zoological
Soc’y of Buffalo, Inc. v. CarvedRock, LLC, No. 10 Civ. 35 (RJA) (HKS), 2011 WL 6329929,
at *10 (W.D.N.Y. Oct. 12, 2011), report and recommendation adopted, 2011 WL 6329872
(W.D.N.Y. Dec. 19, 2011).

8

recommending that the “Buffalo Zoo’s motion, be denied and Burlington’s
motion, be granted in so far as it seeks judgment declaring that the Buffalo Zoo
is not an additional insured under the Burlington policy issued to
CarvedRock.” (WDNY Dkt. #96 at 10 (internal docket citations omitted)).
While recognizing a lack of unanimity in the case law, Judge Schroeder
concluded,
[i]n the instant case, the [Burlington] CGL policy
provides additional insured coverage to organizations
with whom CarvedRock agreed, in a written contract, to
add such organization as additional insured on
CarvedRock’s policy. … [T]his Court finds that the
language in the Burlington policy clearly and
unambiguously requires that the named insured
execute a contract with the party seeking coverage as
an additional insured. As there is no dispute that
CarvedRock did not enter into a written contract with
the Buffalo Zoo, CarvedRock’s agreement in its contract
with MSH to procure coverage for the Buffalo Zoo is
insufficient to afford it coverage as an additional
insured under the plain language of the Burlington
policy.
(Id. at 9-10). However, the court denied, as beyond the scope of the litigation,
Burlington’s cross-motion for summary judgment declaring that it did not owe
coverage to CarvedRock with respect to the cross-claims asserted by the
Buffalo Zoo for contractual indemnity and breach of contract in the Oldread
Action. (Id. at 10).
The Zoo appealed the Report and Recommendation to Judge Arcara, who
adopted it in full. See Zoological Soc’y of Buffalo, Inc. v. CarvedRock, LLC,
No. 10 Civ. 35 (RJA), 2014 WL 3748545, at *1 (W.D.N.Y. July 29, 2014).
(WDNY Dkt. #102). The District Court “agree[d] with Magistrate Judge

9

Schroeder that those cases which require that there be a contract between the
named insured and the putative insured more accurately interpret the
endorsement” in the Burlington CGL Policy. Id. at *2. Judgment was then
entered denying the Zoo’s motion for declaratory relief on July 29, 2014.
(WDNY Dkt. #103). The Zoo elected not to appeal that decision to the United
States Court of Appeals for the Second Circuit.
4.

The Resolution of the Summary Judgment Motions and the
Setting of a Trial Date in the Oldread Action

The Oldread Action proceeded concurrently with the WDNY Coverage
Action. Of significance to the instant motion is a Memorandum Decision dated
March 28, 2014, and filed on April 3, 2014, in which Judge Bannister resolved
cross-motions for summary judgment brought by Oldread, CarvedRock, and
the Zoo. (Schmidt Decl., Ex. C). As summarized by Judge Bannister, (i) the
Zoo sought summary judgment against Oldread on his various claims, and in
the alternative sought contractual indemnification from CarvedRock;
(ii) CarvedRock sought summary judgment against Oldread on the grounds
that he was the “sole proximate cause” of his injuries or was a “recalcitrant
worker,” and further claimed that Oldread was a “special employee” of
CarvedRock who could not bring a lawsuit against it in light of the Workers’
Compensation Law; and (iii) Oldread sought summary judgment in his favor on
all claims. (Id. at 2).
After summarizing the events leading up to Oldread’s fall from the
scaffolding, Judge Bannister considered whether Oldread could be said to have
been either the sole cause of his injuries or a special employee of CarvedRock.
10

She first addressed NYLL § 240(1), which required contractors (like
CarvedRock) and owners (like the Zoo) to provide workers with scaffolding and
other devices “so constructed, placed and operated as to give proper protection
to a person so employed.” N.Y. Labor Law § 240(1); see generally Blake v.
Neighborhood Hous. Servs. of N.Y. City, Inc., 1 N.Y.3d 280, 286-90 (2003)
(discussing “strict” or “absolute” liability under NYLL § 240(1), and concluding
that imposition of liability was contingent on finding that statutory violation
was proximate cause of injury, among other things). Under this statute,
negligence would not furnish a defense, although contractors and owners
would not be liable where an employee’s action was the “sole proximate cause
of the injury.” (Schmidt Decl., Ex. C at 8; see also id. at 8-13). 8 Reviewing the
evidence under the burden-shifting framework adopted by the Appellate
Division, Fourth Department, Judge Bannister concluded that Oldread had
demonstrated CarvedRock’s and the Zoo’s violation of § 240(1) with respect to
the manner in which the scaffolding was kept and the absence of protection
from falling concrete debris, and, further, that these defendants had not
demonstrated that Oldread was the sole proximate cause of his injuries. (Id. at
11-14 (citing Kin v. State of N.Y., 956 N.Y.S.2d 731 (4th Dep’t 2012)).
Judge Bannister then considered Oldread’s claims that violations by
CarvedRock and the Zoo of certain provisions of the Industrial Code (contained

8

See also Ronquillo v. N.Y. Botanical Garden, No. 13 Civ. 9115 (ER), 2016 WL 7387966,
at *3 (S.D.N.Y. Nov. 17, 2016) (“This statutory duty is non-delegable and an owner or
contractor is liable for a violation even if the job was performed by an independent
contractor over which it exercised no supervision or control.” (citing Ross v. CurtisPalmer Hydro-Elec. Co., 81 N.Y.2d 494, 500 (1993))).

11

in Title 12 of the New York Code, Rules and Regulations (“NYCRR”)), resulted in
liability under NYLL § 241(6). 9 While conceding that the proffered violations of
rules regarding scaffolding plank supports and mesh screening could support
liability under this provision, the court found questions of fact regarding the
effect, if any, of the absence of these items from the job site and the
comparative negligence, if any, of Oldread. (Schmidt Decl., Ex. C at 14-15).
Turning to Oldread’s claims under NYLL § 200 and common-law
negligence, the court granted summary judgment in favor of the Zoo, finding no
evidence that the Zoo exercised control or supervision over Oldread’s work.
(Schmidt Decl., Ex. C at 15). It denied CarvedRock’s motion in this regard,
however, finding that as to CarvedRock, “those claims remain viable.” (Id.).
Relatedly, Judge Bannister denied Oldread’s and CarvedRock’s cross-motions
for summary judgment concerning Oldread’s status as CarvedRock’s “special
employee,” finding questions of fact concerning the degree to which Oldread
was controlled by CarvedRock or MSH. (Id. at 15-16). On April 24, 2014,
Judge Bannister issued an order summarizing her decision. (Swift Decl., Ex. B
(order dated April 23, 2014, that, among other things, granted summary
judgment in favor of Oldread on the “[NYLL] § 240(1) claim against defendant

9

The New York Court of Appeals has indicated that the elements of a claim under
§ 241(6) are (i) the plaintiff was engaged in “constructing or demolishing buildings or
doing any excavation in connection therewith”; (ii) the defendant is a contractor, owner
or agent who is charged with the duty to comply with the statute; (iii) there exists a
specific Industrial Code Rule that applies to the fact pattern under consideration;
(iv) the rule was violated; (v) the violation constitutes the failure to use reasonable care,
i.e., negligence; and (vi) the negligence is committed by some party to, or a participant
in, the construction project. Rizzuto v. L.A. Wenger Contracting Co., 91 N.Y.2d 343,
349-51 (1998).

12

CarvedRock, Inc. pending a determination that CarvedRock was not plaintiff
David Oldread’s special employer,” and denied “defendant CarvedRock, lnc.’s
motion for summary judgment on the issue of ‘special employment’ ... with
leave to renew based upon new information that could not reasonably be
discovered before”)). 10
Judge Bannister found valid the contractual provision between MSH and
CarvedRock that required the latter to indemnify the Zoo for any claims arising
out of CarvedRock’s acts or omissions causing injury to a person. (Schmidt
Decl., Ex. C at 16). She observed, however, that her prior findings of liability
under § 240, and possibly under § 241(6), implicated non-delegable duties on
the part of the Zoo to Oldread. (Id. at 17).
The Zoo had thus been found to be liable to Oldread. The trial would
simply resolve the issues of (i) how much Oldread could recover against it
and/or CarvedRock; (ii) whether the record at trial would support CarvedRock’s
“special employer” defense; and (iii) whether there would be any
indemnification rights against CarvedRock and in favor of the Zoo.

10

The “special employment” determination had significance for two coverage issues. First,
if Oldread had been found to be a special employee of CarvedRock, his claims against it
would have been barred by the Workers’ Compensation Law. Second, such a finding
might have foreclosed a common-law indemnification claim by the Zoo against
CarvedRock — which, as of April 2014, had no assets. (See also Schmidt Decl., Ex. P at
67 (“There is a pending critical issue which the judge ruled was a question of fact and
that was whether [CarvedRock] was a special employer of the plaintiff. If they aren’t
then we will have a viable common law claim against them; if they are they get
dismissed from the direct case and become a third-party defendant.”)).
CarvedRock renewed its “special employment” motion in July 2014, on the basis of
information obtained during depositions that month. (Chanin Decl., Ex. 3). The motion
remained pending on Judge Bannister’s docket while settlement efforts were ongoing.

13

5.

The Oldread Demand Letter and Its Responses

On April 29, 2014, “per the instructions of Judge Bannister,” counsel for
Oldread sent a 29-page settlement proposal to counsel for CarvedRock and for
the Zoo (the “Demand Letter”). (Swift Decl., Ex. F). This comprehensive
submission outlined the bases for Oldread’s pretrial settlement demand of
$10.5 million, comprising $2.1 million for future medical expenses, $0.3
million for reimbursement of past medical expenses (most of which had been
covered by workers’ compensation and were subject to a lien), $2.2 million in
lost earnings, $1.6 million for past pain and suffering, $3 million for future
pain and suffering, $0.5 million in derivative claims for Oldread’s wife, and
adjustments for statutory interest and operation of Article 50-B of the Civil
Practice Law and Rules. (Id.). Eventually, trial in the matter was set for
September 19, 2014, and a pretrial mediation was scheduled for August 8,
2014. (Chanin Decl., Ex. 6).
The Zoo was faced with a sympathetic set of plaintiffs, an aggressive
plaintiffs’ counsel, and a group of insurance carriers whose activities had
begun to resemble a game of chicken. As detailed supra, Burlington had by
this time moved for a declaratory judgment finding that the Zoo was not an
additional insured on its CGL Policy. (WDNY Dkt. #90). Its efforts would soon
bear fruit; the Magistrate Judge accepted these arguments in his May 2014
recommendation, and the District Judge adopted that recommendation in full
in July 2014. (WDNY Dkt. #96, 102).

14

AIG followed suit. By letter dated May 29, 2014, AIG advised its insured,
MSH, that there was no coverage under the AIG-MSH Umbrella Policy because
(i) the primary-level policy (i.e., the Travelers CGL Policy) had not been
exhausted or did not apply to the Oldread claim, and (ii) the policy by its terms
did not apply to any liability arising under a project insured under a “wrapup” 11 or any similar insurance plan. (Schmidt Decl., Ex. M). Instead, AIG
observed, “there is coverage under an OCP policy issued to [the Zoo] by
[Travelers].” (Id.; see also id. (June 20, 2014 letter from AIG to MSH reiterating
lack of coverage under the Umbrella Policy)). Separately, by letter dated
July 18, 2014, AIG advised its other insured, CarvedRock, that the AIGCarvedRock Excess Policy, as a “follow-form” policy, 12 would not provide
coverage if Burlington, the issuer of the underlying primary policy, succeeded
in its arguments that (i) it had no obligation for any contractual
indemnification claims in the absence of a written agreement for same and/or

11

A wrap-up policy, sometimes referred to as an owner-controlled insurance program
(“OCIP”) or a contractor-controlled insurance program (“CCIP”), is often used in large
construction projects, and involves the developer, general contractor, and all of the
subcontractors being listed as named insureds under a single policy that covers a single
project.
The record contains evidence that AIG’s decision to deny coverage based on the
existence of a “wrap-up” policy was flawed, and both parties to this litigation have
suggested that it stemmed from a mistaken belief that the Travelers OCP Policy was in
fact an OCIP policy. Travelers, in particular, has ascribed significance to the fact that
both parties to this litigation believed AIG to be in error. (See generally Def. Br. 6-7 n.7
and record cites listed therein). That said, the record is also clear that claims personnel
from Travelers and Chubb/Vigilant were unable to persuade their AIG counterparts of
their error. (See, e.g., Swift Decl., Ex. H at V79 (“We respectfully disagree with your
conclusion that the OCIP policy issued to the Zoo does not constitute a wrap-up policy
or similar rating plan.”)). As discussed infra in this Opinion, the Court does not believe
that any error by AIG in this regard (a point this Court does not resolve) rendered
Vigilant’s conduct “voluntary.”

12

Broadly speaking, a follow-form excess liability policy provides excess coverage subject
to all of the terms and conditions of the primary policy beneath it.

15

(ii) coverage should be denied under the Burlington CGL Policy on a “special
employer” theory. (Swift Decl., Ex. L). 13 What this meant as a practical matter
was that, barring a change in position by AIG or Burlington, or additional
litigation to resolve the coverage disputes, the Zoo had $8 million in coverage
available to it for the Accident, comprising the Travelers OCP Policy (with a $2
million policy limit), the Travelers CGL Policy (with a $1 million policy limit),
the Vigilant Policy (with a $1 million policy limit), and the Federal Excess Policy
(with a $4 million policy limit).
On July 28, 2014, staff counsel Gary O’Donnell prepared a confidential
Pretrial Report concerning the Oldread Action that was submitted to Travelers.
(Chanin Decl., Ex. 6). 14 O’Donnell reviewed the background and procedural
posture of the case, the current resolution strategy (noting, in its present
procedural posture, that “this is a case to settle”), the venue and judicial
considerations, the anticipated proof at trial, and an evaluation of liability. In
the latter category, he included an extensive analysis, which, among other
things, discussed the various bases on which coverage might (and might not)
be available.

13

AIG had previously advised Travelers in September 2011 that the AIG-CarvedRock
Excess Policy “may afford additional insured coverage to [the Zoo].” (Schmidt Decl.,
Ex. G).

14

Preliminary to that report, a colleague of O’Donnell’s had reviewed awards by juries in
Erie County for pain and suffering given to plaintiffs with comparable injuries. “In
conclusion,” counsel observed after detailing these awards, “the jury verdict search
render a rough approximation closer to $3M in past and future pain and suffering on
similar facts,” in comparison to the $4.6 million pain and suffering component of the
Demand Letter. (Chanin Decl., Ex. 10).

16

At that point, Travelers decided to bring Vigilant back to the table after a
five-year absence. The next day, July 29, 2014, Gerry Doak, a Senior Claim
Representative at Travelers, emailed a copy of the Demand Letter to an
individual at Chubb (which managed claims for Vigilant) with the following
transmittal:
This is a [NYLL] 240 case with a $10.5M demand.
Mediation is 8/8, trial in mid Sept. Erie County. We
have $2M for the Zoo on an OCP policy. There is also
$1M on the MSH policy and a $10M excess policy with
AIG. There are priority of coverage issues that need to
be addressed and Chubb as the primary carrier for the
Zoo needs to be part of those discussions. I have copied
in the AIG adjuster and I will send you a copy of
counsel’s Pretrial report.
(Swift Decl., Ex. H at Vl263; see also Schmidt Decl., Ex. P at 76 (Doak claim
note of communications with Deborah Swift at Chubb and David Feit at AIG)).
On July 30, 2014, Deborah Swift, an Assistant Vice President and Claims
Regional Technician at Chubb, was assigned to handle the matter. (Swift
Decl., ¶ 27).
6.

The Run-Up to the August 8 Mediation

Nine days remained until the mediation. On July 30, 2014, Swift
reached out to Doak to obtain information and documents regarding the
Oldread Action, including information concerning coverage; in a conversation
later that day, Doak advised Swift orally of $3 million in coverage under the
primary Travelers policies, but agreed to confirm this figure in writing. (Swift
Decl., Ex. H at V923 (claim note memorializing conversation)). One week later,
on August 6, 2014, Swift emailed Doak concerning a conversation that she had

17

had with Oldread’s counsel. (Id. at V732-33). Anticipating additional
communications with Oldread’s counsel, Swift sought Travelers’ position
regarding priority of coverage, and offered her view that “Travelers’ OCP and GL
policies must be exhausted before the primary Vigilant policy is called upon to
respond.” (Id. at V733; see also id. at V921-24 (Swift coverage analysis); Swift
Dep. 48-49 (“I concluded that after the exhaustion of the Travelers OCP and
CGL policies, to the extent that the AIG umbrella policy was not amended as
required by the contract to be primary, that Vigilant would come next. Had the
AIG policy been amended to reflect primary and non-contributory [coverage]
where required by contract, that policy would have come next.”)). The next
day, August 7, 2014, Doak responded, “I can confirm that the OCP policy is
primary but I cannot confirm anything beyond that.” (Swift Decl., Ex. H at
V732; see also id. at V731 (recording second communication from Travelers to
same effect, i.e., that there was no position concerning the CGL Policy)).
Swift also communicated with David Feit, the claims examiner for AIG,
addressing the AIG-MSH Umbrella Policy; he advised her on August 7, 2014,
that “the Zoo has not tendered [any claim arising from the Accident] to AIG or
MSH.” (Swift Decl., Ex. H at V727; see also id. at V711, V717, V724 (references
to AIG disclaiming coverage under AIG-CarvedRock Excess Policy because of
absence of tender by Chubb and excess status of AIG policy)). 15

15

This information was repeated in a letter from AIG to Vigilant dated August 8, 2014, in
which AIG advised that there was no coverage for the Zoo under the AIG-MSH Umbrella
Policy, because (i) the policy did not apply to any liability arising under a project
insured under a “wrap-up” or any similar insurance plan, (ii) the notice of claim was

18

Later that morning, Swift emailed the following to Doak and Feit:
It is my understanding that [the Zoo] is an additional
insured under both the [Travelers’ CGL Policy and the
AIG-MSH Umbrella Policy], which is what was required
in the contract with [MSH].
Vigilant tendered the defense and indemnity of [the Zoo]
to Travelers on May 15, 2009 to which Travelers agreed
on May 20, 2009 under the OCP policy issued to [the
Zoo] as required by its contract with [MSH]. The
Travelers OCP policy is primary, however, [the Zoo] is
still an insured under both the Travelers GL and AIG
Umbrella policies that were issued directly to [MSH] and
is entitled to coverage under both policies.
Given that Travelers assumed the defense and
indemnity of [the Zoo], a third-party complaint was not
filed against [MSH] under which [the Zoo] could assert
the appropriate claims for contractual indemnity and
breach of contract for failure to procure insurance as
agreed to in the contract. Clearly both the OCP and GL
policies were issued by Travelers. If the position all
along was that the GL policy was not going to apply in
accordance with the contract, then regardless of the fact
that [MSH] is Travelers[’] named insured under the GL
policy, a third-party complaint should have been filed
against them to protect [the Zoo]’s contractual
indemnity and breach of contract claims rather than
putting them in a position to have to file such claims
after the underlying case was either settled or tried to
verdict.
At a minimum, unless defense counsel was advised that
the policies referenced above were going to apply to [the
Zoo] on a primary and non-contributory basis as
required by the contract, he should have taken
measures to protect [the Zoo]’s interests and ensure
that appropriate contractual indemnity and breach of
contract claims were asserted.
Unless this matter settles at the mediation tomorrow
within the limit of the Travelers and Burlington policies,
late, and (iii) the primary-level insurance policies had not been exhausted. (Swift Decl.,
Ex. M).

19

measures will be have to be taken to protect [the Zoo]’s
interests in terms of the contractual indemnity and
breach claims.
(Swift Decl., Ex. H at V726). Later that day, Swift sent a similar email to Doak
and Feit (i) expressing concern that MSH might have obtained the required
insurance coverage without proper endorsements in favor of the Zoo;
(ii) requesting that counsel for the Zoo immediately file a third-party complaint
for coverage against MSH; (iii) reminding Doak and Feit that a successful
indemnification claim against MSH would implicate the Travelers CGL and the
AIG-MSH Umbrella Policies “up to the limits of each policy”; (iv) disputing AIG’s
contentions of late notice; and (v) pointing out perceived errors of fact in AIG’s
decision to disclaim coverage based on the Travelers OCP Policy being viewed
as a “wrap-up” policy. (Id. at V253-54). Separately, Swift advised counsel for
Oldread that Chubb, Travelers, and AIG were “sorting out priority of coverage.”
(Id. at V718). 16
7.

The Post-Mediation Settlement Efforts and Eventual
Settlement

The August 8 mediation, helmed by court-appointed mediator James
Morris, was unsuccessful, in large measure because of continuing disputes
among the carriers concerning priority of coverage and indemnification issues.
(See generally Swift Decl., Ex. H at V242-43 (noting then-current offer of $2.5

16

During an internal roundtable discussion with staff counsel that also took place on
August 7, 2014, Travelers claims personnel identified the principal coverage issues to
include “liability apportionment, special employment and priority of coverage.”
(Schmidt Decl., Ex. P at 81). An attendee at the roundtable suggested that Travelers
“agree to disagree on those issues and focus more on resolving the case with the
plaintiff with all carriers and parties reserving their rights on all issues.” (Id.).

20

million versus then-current demand of $9.5 million), V247 (outlining coverage
positions); see also Ex. K (Oldread confidential mediation submission); Schmidt
Decl., Ex. P at 81-82 (Doak notes concerning mediation)). In a file note, Swift
expressed concern that if CarvedRock’s renewed motion on the “special
employer” issue were to succeed, the Zoo’s potential liability might exhaust the
two Travelers Policies, the Vigilant Policy, and the Federal Excess Policy; in her
estimation, $5 million under the AIG-MSH Umbrella Policy might be available
of AIG could be persuaded of the error of its “wrap-up” position, though all $10
million would be available if MSH were found to be liable under a contractual
indemnity theory. (Swift Decl., Ex. H at V242-43). She also recorded Travelers’
positions that the CGL Policy was (i) concurrent in priority with the Vigilant
Policy and (ii) not being offered as part of the settlement. (Id. at V247, V24445; see also Schmidt Decl., Ex. P at 92 (Doak notes: “I had made it clear to all
attending that I did not have any authority from the [Travelers CGL Policy] nor
could I commit that that coverage was primary.”)).
Thereafter, both the mediator Morris and counsel for Oldread undertook
a form of “shuttle diplomacy” with the individual carriers. (See, e.g., Swift
Decl., Ex. H at V148-50, V242-43, V246). Separate from their efforts, Swift
emailed Doak and O’Donnell on August 11, 2014, to see if Travelers would
contribute any money from the CGL Policy, and discussed the possibility of an
action against AIG to recover the Vigilant policy limit. (Id. at V176-77). In that
communication, Swift inquired into the appointment of a claims examiner for
MSH (on the theory that Doak’s work was on behalf of the Zoo), and the filing

21

of the third-party complaint against MSH. Doak responded later that day that
“[n]o decision has been made” on the Travelers CGL Policy. (Id. at V175). Swift
in turn reminded him that if the CGL Policy “isn’t offered, we [Vigilant] aren’t
putting up our primary. It has to be both.” (Id.). Doak confirmed that he
“[u]nderstood.” (Id.).
On August 14, 2014, O’Donnell advised the Zoo of developments in the
Oldread Action. (Swift Decl., Ex. H at V170-71). Of potential significance to
the instant motion, O’Donnell related that:




Judge Bannister’s April 2014 resolution of the summary
judgment motions had left open the issue of whether the
Zoo could recover against CarvedRock in indemnity;



O’Donnell’s firm was defending the Zoo on the Travelers
OCP policy only. While the firm believed that the Zoo was
an additional insured on the Travelers CGL and the AIGMSH Umbrella Policies, “Travelers has not committed this
additional $1M [CGL] policy to a settlement of the case,”
and AIG had in fact disclaimed coverage under the
Umbrella Policy; 17



The Zoo had its own excess coverage under the Vigilant
and Federal Policies; and



17

“[V]ery little progress” had been made during the August
8 mediation because of “unresolved liability issues and
differences of opinion among the parties as to insurance
coverage primary and sharing”;

While staff counsel was working to avoid the Zoo being
assessed with an individual financial obligation, “it has
recently become apparent that the Travelers $2M OCP
policy … will not be sufficient to resolve this case and that
additional contributions will be necessary either from
Travelers, AIG and/or CarvedRock’s insurers.”
Cf. O’Donnell Dep. 187: “Even at this time it was my belief that one million on the MSH
[CGL] policy was still available. I thought Gerry [Doak] just had to get permission to
release it. That was my understanding.”

22

(Id.).
From August 15 through August 21, 2014, representatives of the affected
carriers continued to discuss the parameters of a global resolution to meet
Oldread’s demand, then $9.3 million and later reduced to $8.3 million. (See,
e.g., V144-47). Emails between and among Swift, Doak, Feit, and O’Donnell
reflected that Burlington was willing to contribute $1 million, AIG was willing
to contribute $1 million, and AIG was open to releasing additional funds under
the AIG-CarvedRock Excess Policy on a 50-50 basis to match funds
contributed by Travelers and/or Chubb. (Id. at V144; see also id. at V136).
O’Donnell also responded to Swift’s request for a third-party complaint against
MSH with an August 18, 2014 email outlining his strategic decisions for not
filing such an action. (Id. at V138-39; but cf. Chanin Opp. Decl., Ex. E
(discussing staff counsel’s inability to bring a claim against MSH because of
conflict issues occasioned by prior representation of MSH)).
During this same time period, Doak prepared a Construction Large Loss
Report (the “CLLR”), dated August 19, 2014, for internal dissemination within
Travelers. (See Chanin Decl., Ex. 7; Doak Dep. 159-62). In the “Coverage”
section of the CLLR, Doak noted, among other things, that (i) coverage was
afforded under the Travelers OCP Policy, which was primary and noncontributory to the Travelers CGL Policy; (ii) the CGL Policy claim file was
closed, but Doak had confirmed that the Zoo had been listed as an additional
insured on the policy; and thus (iii) the CGL Policy would be “next in line for
the coverage for the Zoo.” (Chanin Decl., Ex. 7 at T72; see also id. (“Travelers

23

provides the next layer of coverage under the GL policy issued to MSH where
the Zoo is named as an additional insured, … which carries a $1M limit.”)).
Despite Doak’s definitive internal coverage analysis, Swift’s efforts to
obtain clarity on this issue from him were singularly unavailing. (See, e.g.,
Swift Decl., Ex. H at V78, V80). Doak continued to demur to Swift concerning
the priority of coverage of the Travelers CGL Policy. (Id. at V144 (making “no
commitment” on the Travelers CGL Policy); see also id. at V132 (memorializing
Swift request to Doak on priority of coverage; noting adjournment of pretrial
conference “because all parties are waiting for Travelers to make a decision on
the $1 million [Travelers CGL Policy]”; and recording Doak’s comment that
decision was “above [his] pay band”)). And Feit continued to take the position
that the MSH-AIG Umbrella Policy applied, if at all, after the Vigilant Policy.
(Id. at V79). In consequence, Swift reiterated her request for a third-party
complaint to be filed against MSH. (Id. at V74-75; see also Schmidt Decl.,
Ex. P at 94).
Doak responded to Swift’s email on August 25, 2014. (Swift Decl., Ex. H
at V74). He related Travelers’ view that “$4M is enough for this case and that
any additional money should come from AIG/Carved Rock” (id.); he remained
silent on the priority vel non of the CGL Policy (id. at V68). 18 Doak further

18

At an internal roundtable discussion at Travelers on August 21, 2014, Doak had argued
for some contribution from the Travelers CGL Policy, since Chubb was offering to match
any such contributions with contributions from the Vigilant Policy. His arguments were
rejected by the other attendees, who believed that the $2 million offered under the OCP
Policy was more than adequate. (Doak Dep. 73-74). At the same meeting, Doak
suggested acknowledging Travelers’ primacy of coverage. This issue, however, was not
resolved. (Id. at 75 (“Once we determined that the amount of money that we had offered
sufficiently covered the zoo’s exposure, the issue was never fully fleshed out.”); see also

24

noted that staff counsel for the Zoo was being replaced because of a conflict.
(Id. at V74; see also id. at V69-70). The new counsel was Joseph Matteliano.
(Id. at V69-70).
That same day, Swift delineated her concerns about the litigation
positions of her Travelers and AIG counterparts:
I do not disagree with you regarding the need for AIG to
resolve this for the additional amount needed under the
[AIG-CarvedRock Excess Policy], but the fact remains,
at this point, they are only willing to concede to a 50/50
split based on the direct [NYLL § 240] claims. By taking
its current position, Travelers is running the risk of
losing Burlington and AIG’s contributions under the
Carved Rock policies should they succeed on the special
employee motion. In doing so, the [Vigilant and Federal
Excess Policies] for the Zoo will be exposed if a damages
award exceeds the $2M [Travelers OCP] and $1M
[Travelers CGL] policies. Further, and more
importantly, given that the total coverage available to
the Zoo is at most $8 million (not including AIG’s excess
policy given their coverage disclaimer which remains
disputed) by allowing this case to proceed to trial,
Travelers is putting the Zoo in a position in which it is
at risk of exposure beyond available policy limits.
We also need to discuss the priority of coverage issue
unless Travelers will agree that to the extent that a
damages award exceeds the current offer the [Travelers
CGL] policy will apply on a primary and noncontributory basis before the Vigilant policy.
(Id. at V55).
Later that morning, Swift was contacted by Feit at AIG to discuss, among
other things, “Travelers[’] sudden refusal to offer any additional money.” (Swift

id. at 77 (“We never told Chubb we provided primary coverage on the [Travelers CGL
Policy] because we felt the contribution on behalf of the zoo was more than adequate to
cover their exposure.”)).

25

Decl., Ex. H at V52). She was also contacted by counsel for Oldread, who
advised her of (i) a settlement conference scheduled for the following day and
(ii) counsel’s belief that the intransigence of AIG and Travelers was blocking
settlement of the matter. (Id. at V49-50). That afternoon, Swift participated in
a conference call with Doak, Feit, and Matteliano, to discuss trial and
settlement strategies. (Id. at V47). Again — and despite vocal opposition from
AIG and Vigilant — Travelers refused to put up money from the CGL Policy,
even though AIG agreed to match any such money. (Id.). And again, Swift
discussed a third-party indemnification action against MSH that would be
designed to get around AIG’s arguments disclaiming coverage under the AIGMSH Umbrella Policy. (Id. at V44-45).
Swift, Doak, and Feit learned on August 27, 2014, that a second
settlement conference in the Oldread Action had failed. (Swift Decl., Ex. H at
V35). Swift asked Doak whether Travelers would offer anything beyond the $2
million limit on the OCP Policy; Doak answered in the negative. (Id. at V34). In
response, Swift advised that, to protect the Zoo, Vigilant might “settle this
without them and sue them after the fact to recover what’s been paid under the
Vigilant policy.” (Id. at V38). As a final compromise, Swift offered to match
contributions from the Vigilant Policy and the Travelers CGL Policy on a 50-50
basis, but Travelers refused. (Id.).
Swift participated in discussions on August 28 with counsel for Oldread,
with a second AIG claims representative, and with mediator Morris (who
related, among other things, that he had been contacted by the trial judge

26

regarding her desire for a settlement in the neighborhood of $5 million). (Swift
Decl., Ex. H at V29-31, V38-39). The product of the many discussions between
and among carriers was a settlement of $5.3 million, comprising $2 million
from the Travelers OCP Policy, $1 million from Burlington, $1.65 million from
AIG, and $650,000 from Vigilant.
On August 29, 2014, attorney Joseph Matteliano appeared on behalf of
the Zoo with others before Judge Bannister in order to place on the record the
settlement in the matter. (See Chanin Opp. Decl., Ex. A). That same day, Swift
advised Doak of the settlement, and requested confirmation that Travelers
would reimburse Vigilant for the Payment. (Swift Decl., Ex. H at V25). Two
weeks later, on September 10, 2014, Doak responded with Travelers’ position
that the $650,000 paid by Vigilant was a “voluntary payment.” (Id. at 21).
B.

Procedural History
Vigilant filed an action for declaratory relief in New York State Supreme

Court, New York County, on December 12, 2014. (Dkt. #1). The matter was
removed to this Court on January 8, 2015. (Id.). After an extensive period of
discovery, the parties filed cross-motions for summary judgment on March 14,
2016. (Dkt. #45-46). Opposition memoranda were filed on April 13, 2016 (Dkt.
#56, 61), and briefing concluded with the filing of reply memoranda on April
28, 2016 (Dkt. #69-70).

27

DISCUSSION
A.

Summary Judgment Under Fed. R. Civ. P. 56
Rule 56(a) instructs a court to “grant summary judgment if the movant

shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 19 “When
ruling on a summary judgment motion, the district court must construe the
facts in the light most favorable to the non-moving party and must resolve all
ambiguities and draw all reasonable inferences against the movant.” Pace v.
Air & Liquid Sys. Corp., 171 F. Supp. 3d 254, 262 (S.D.N.Y. 2016) (quoting
Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003)). And
where, as here, “‘parties file[ ] cross-motions for summary judgment[,] ... each
party’s motion must be examined on its own merits, and in each case all
reasonable inferences must be drawn against the party whose motion is under
consideration.’” Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 822 F.3d

19

The 2010 Amendments to the Federal Rules of Civil Procedure revised the summary
judgment standard from a genuine “issue” of material fact to a genuine “dispute” of
material fact. See Fed. R. Civ. P. 56, advisory comm. notes (2010 Amendments) (noting
that the amendment to “[s]ubdivision (a) … chang[es] only one word — genuine ‘issue’
becomes genuine ‘dispute.’ ‘Dispute’ better reflects the focus of a summary-judgment
determination.”). As of this past year, the Second Circuit continues to use both
formulations. Compare, e.g., Smith v. Barnesandnoble.com, LLC, 839 F.3d 163, 166 (2d
Cir. 2016) (“The moving party bears the burden to demonstrate the absence of any
genuine issues of material fact.”), with, e.g., Harris v. Miller, 818 F.3d 49, 54 (2d Cir.
2016) (“[W]e conclude that there are genuine disputes of material fact[.]”). Indeed, the
Circuit sometimes uses the terms interchangeably within the same decision. Compare,
e.g., Cross Commerce Media, Inc. v. Collective, Inc., 841 F.3d 155, 162 (2d Cir. 2016)
(“[T]here is a genuine dispute of material fact[.]”), with, e.g., id. at 168 (“We therefore
think that [the nonmovant] has raised a genuine issue of material fact[.]”). This Court
uses the post-amendment standard, but continues to be guided by pre-amendment
Supreme Court and Second Circuit precedent.

28

620, 631 n.12 (2d Cir. 2016) (quoting Morales v. Quintel Entm’t, Inc., 249 F.3d
115, 121 (2d Cir. 2001)).
Thus, “[a] motion for summary judgment may properly be granted … only
where there is no genuine issue of material fact to be tried, and the facts as to
which there is no such issue warrant the entry of judgment for the moving
party as a matter of law.” Rogoz v. City of Hartford, 796 F.3d 236, 245 (2d Cir.
2015) (quoting Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010)). In
determining whether summary judgment is merited, “[t]he role of a court … is
not to resolve disputed issues of fact but to assess whether there are any
factual issues to be tried, while resolving ambiguities and drawing reasonable
inferences against the moving party.” NEM Re Receivables, LLC v. Fortress Re,
Inc., 173 F. Supp. 3d 1, 5 (S.D.N.Y.) (internal quotation mark and citation
omitted), reconsideration denied, 187 F. Supp. 3d 390 (S.D.N.Y. 2016).
A party moving for summary judgment “bears the initial burden of
demonstrating ‘the absence of a genuine issue of material fact.’” ICC Chem.
Corp. v. Nordic Tankers Trading A/S, 186 F. Supp. 3d 296, 301 (S.D.N.Y. 2016)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). “[A] fact is material
if it ‘might affect the outcome of the suit under the governing law.’” Royal
Crown Day Care LLC v. Dep’t of Health & Mental Hygiene of City of N.Y., 746
F.3d 538, 544 (2d Cir. 2014) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)). And “[a] dispute is genuine ‘if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.’” Fireman’s
Fund Ins. Co., 822 F.3d at 631 n.12 (quoting Anderson, 477 U.S. at 248).

29

If the movant satisfies its initial burden, then “the adverse party must set
forth specific facts showing that there is a genuine issue for trial.” Anderson,
477 U.S. at 250 (internal quotation marks and citation omitted). To make this
showing, a summary-judgment “opponent must do more than simply show that
there is some metaphysical doubt as to the material facts.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, that
opponent must adduce “evidence on which the jury could reasonably find for”
him. Anderson, 477 U.S. at 252.
B.

Analysis
1.

Overview

One consequence of bringing this lawsuit is that Vigilant has obtained
the clarification it sought throughout July and August of 2014: Travelers
acknowledges not merely that the Zoo was subject to coverage over the
Travelers OCP and CGL Policies, but that the latter policy had priority of
coverage vis-à-vis the Vigilant Policy. (See Def. Br. 4 (“Travelers does not
dispute that as between those two policies the Travelers CGL policy is primary
and non-contributory.”)). Accordingly, the Court will not engage in the
coverage analysis that was initially sought in Vigilant’s complaint, but will
rather accept, as given, the facts that (i) the Zoo was subject to coverage under
all three policies, and (ii) the two Travelers policies had primacy of coverage to
the Vigilant Policy.
The parties’ summary judgment motions are two sides of the same
coverage coin. To Travelers, the $650,000 contribution from Vigilant that

30

sealed the Oldread settlement deal was both voluntary and unreasonable in
relation to the value of the case. Travelers posits various sources of coverage
that were available to the Zoo and that would have more than adequately
covered the true settlement value (and even the actual settlement value) of the
Oldread Action. Vigilant presses the antipodal view: Travelers’ unjustified
refusal to take a position on the priority vel non of its CGL Policy, and its
related decision to offer only the policy limits of the OCP Policy, compelled
Vigilant to offer a substantial portion of the policy limits of the Vigilant Policy,
lest Vigilant and the Zoo be subjected to a substantially higher damages award
after trial.
New York insurance law is not perfectly consistent on equitable
subrogation and the voluntary payment doctrine. However, after considering
the relevant cases and the facts confronting Vigilant when it made its decision
to contribute to the Oldread settlement, the Court is confident that no
reasonable jury could find that Vigilant’s payment was voluntary. Less clear,
however, is the issue of reasonableness: While Vigilant offers many reasons
why the settlement figure (and, more specifically, its contribution to that figure)
was reasonable, the contemporaneous documents and certain testimony
proffered in this litigation raise a genuine dispute of material fact as to
reasonableness.
2.

The Voluntary Payment Doctrine and Equitable Subrogation
Under New York Law

The parties agree that New York law governs. (See Pl. Br. 18-21; Def.
Br. 17-21, 23). More than a century ago, the New York Court of Appeals found
31

that “[a] mere volunteer or intermeddler will not be substituted in the place of a
person whose rights he seeks to acquire, simply because he has paid a debt, or
discharged an obligation, for which that person was responsible.” Koehler v.
Hughes, 148 N.Y. 507, 511 (1896). The voluntary payment doctrine thus “bars
recovery of payments voluntarily made with full knowledge of the facts, and in
the absence of fraud or mistake of material fact or law.” Dillon v. U-A Columbia
Cablevision of Westchester, 100 N.Y.2d 525, 526 (2003); see generally 23 N.Y.
JUR. 2D, Contribution, Indemnity, and Subrogation § 174 (Feb. 2017).
The voluntary payment doctrine also places a significant limit on the
doctrine of equitable subrogation, which provides generally that “where the
‘property of one person is used in discharging an obligation owed by another or
a lien upon the property of another, under such circumstances that the other
would be unjustly enriched by the retention of the benefit thus conferred, the
former is entitled to be subrogated to the position of the obligee or lien-holder.’”
First Franklin Fin. Corp. v. Beniaminov, 42 N.Y.S.3d 46, 48 (2d Dep’t 2016)
(quoting King v. Pelkofski, 20 N.Y.2d 326, 333 (1967) (internal quotation marks
omitted in King)). In particular, “[a]n insurer which pays a loss for which it is
not liable thereby becomes a mere volunteer, and is not entitled to subrogation,
in the absence of an agreement therefor.” Nat’l Union Fire Ins. Co. v. Ranger
Ins. Co., 599 N.Y.S.2d 347, 348-49 (4th Dep’t 1993) (quoting 16 COUCH ON
INSURANCE 2D § 61:55, at 137-38 (rev. ed.)) (collecting cases) (alteration added);
see also Koehler, 148 N.Y. at 511 (“One cannot ask for subrogation with

32

success, unless either he or his property was in some way lawfully answerable
for the claim paid[.]”). 20
The Second Department has discussed the interplay of the voluntary
payment and equitable subrogation doctrines:
The equitable doctrine of subrogation “is ‘applicable to
cases where a party is compelled to pay the debt of a
third person to protect his own rights, or to save his own
property’” (Gerseta Corp. v. Equitable Trust Co. of N.Y.,
241 N.Y. 418, 426, 150 N.E. 501 [(1926)], quoting Cole
v. Malcolm, 66 N.Y. 363, 366 [(1876)]). However, while
the scope of subrogation is broad, it cannot be invoked
where the payments sought to be recovered are
voluntary (see Bermuda Trust Co. v. Ameropan Oil Corp.,
266 A.D.2d 251, 698 N.Y.S.2d 691 [(1999)]; Cohn v.
Rothman-Goodman Mgt. Corp., 155 A.D.2d 579, 580,
547 N.Y.S.2d 881 [(1989)]). A party seeking subrogation
can establish that its payments were not voluntary
either by pointing to a contractual obligation (see
Hamlet at Willow Cr. Dev. Co., LLC v. Northeast Land
Dev. Corp., 64 A.D.3d 85, 106, 878 N.Y.S.2d 97 [(2009)])
or to the need to protect its own legal or economic
interests (see Gerseta Corp. v. Equitable Trust Co. of
N.Y., 241 N.Y. at 426, 150 N.E. 501). When invoking
the latter ground, however, the party seeking
subrogation must show that the act is not merely
helpful but necessary to the protection of its interests
(see Cohn v. Rothman-Goodman Mgt. Corp., 155 A.D.2d
at 580, 547 N.Y.S.2d 881).
Broadway Houston Mack Dev., LLC v. Kohl, 897 N.Y.S.2d 505, 506 (2d Dep’t
2010); see also Markel Ins. Co. v. Am. Guarantee & Liab. Ins. Co., 974 N.Y.S.2d
569, 572 (2d Dep’t 2013).
20

A leading treatise on insurance law observes that it may be more appropriate to refer to
an insurer’s right to recover the payments from another insurer that covered the risk as
“contribution” instead of subrogation. Steven Plitt et al., 16 COUCH ON INS. § 222:2 (3d
ed.) (hereinafter, “COUCH”). However, since the case law does not always make this
distinction, the Court will use equitable subrogation to refer both to actions by an
insurer against a third party responsible for a loss and to those by one insurer against
another.

33

Equitable subrogation cases involving one insurer seeking recovery from
another are few and fact-dependent. In some cases, the rationale for
concluding that a payment was voluntary seems obvious, as where the insurer
made a payment for a risk not covered by its policy or in excess of policy limits.
See, e.g., Gov’t Emp. Ins. Co. v. RLI Ins. Co., 20 N.Y.S.3d 411, 412-13 (2d Dep’t
2015) (rejecting effort by primary carrier to recover settlement payment in
excess of its policy limits from excess carrier, concluding that payment was
voluntary); Ranger Ins. Co., 599 N.Y.S.2d at 348 (“Because National was not
obligated under its policy of insurance, it became a volunteer with no right to
recover the monies it paid on behalf of its insured.”); see also Merchants Mut.
Ins. Grp. v. Travelers Ins. Co., 806 N.Y.S.2d 813, 815-16 (4th Dep’t 2005)
(concluding that an insurer who assumed the defense and indemnification of
an insured when there was no obligation to do so was not entitled to recover
monies paid out on that insured’s behalf, absent a showing that insured was
acting under a “mistake of material fact or law”); Travelers Ins. Co. v. Nory
Constr. Co., 708 N.Y.S.2d 252, 254-44 (Sup. Ct. Monroe Cty. 2000) (finding, in
action by insurer against third-party contractor, payments in excess of
acknowledged coverage limits to be voluntary); cf. Liberty Mut. Ins. Co. v.
Fireman’s Fund Ins. Cos., 529 N.Y.S.2d 956, 957-58 (Sup. Ct. Nassau Cty.
1988) (rejecting voluntariness challenge based on comparative knowledge,
concluding in relevant part that “Federal, at the time of settlement, did not
‘know’ that Atlantic’s excess coverage was first tier and, thus would not be
applied pro rata with Federal’s”).

34

Other decisions have focused on whether the insurer’s payment was
truly “voluntary.” See, e.g., Royal Indem. Co. v. Wyckoff Heights Hosp., 953 F.
Supp. 460, 466-67 (S.D.N.Y. 1996) (“Royal had a legitimate interest for making
the payment, as settlement of the state court action was valued at $3 million
and a jury could have reasonably returned liability up to $8 million, thereby
exposing Royal to significant liability under the Policy. Thus, Royal is not a
volunteer and is not precluded from reimbursement.” (internal citations
omitted)); Admiral Ins. Co. v. Am. Empire Surplus Lines Ins. Co., 947 N.Y.S.2d
442, 444-46 (1st Dep’t 2012) (rejecting efforts by subcontractor’s primary
carrier to avoid settlement payment made by contractor’s excess carrier based
on “voluntary payments” clause of primary carrier’s policy); U.S. Fire Ins. Co. v.
CNA & Transcon. Ins. Co., 752 N.Y.S.2d 765, 766-67 (4th Dep’t 2002) (finding
that payment by excess carrier was not voluntary where made after primary
carriers refused to pay into settlement); Merchants Ins. Grp. v. Estate of Geralis,
803 N.Y.S.2d 19 (table), 2005 WL 1704129, at *3 (Sup. Ct. Suffolk Cty. May 10,
2005) (“It has not been disputed that Progressive settled the underlying claims
against Geralis, within the policy limits, to protect its insured, who would have
been defenseless based upon State Farm’s denial of coverage and disclaimer of
liability. By settling the claim of the other vehicle’s driver for less than the
policy limits, Progressive also served the interests of both itself and State Farm,
who never objected to the terms of the settlements. Under these

35

circumstances, Progressive’s payment was not voluntary, and Progressive has a
right of equitable subrogation against State Farm.”). 21
3.

Vigilant’s Contribution to the Oldread Settlement Was Not
Voluntary

The Court agrees that
[f]or purposes of the rule that an insurer’s payment to
an insured must be made under obligation rather than
as a volunteer in order for the insurer to become
subrogated, public policy supports a narrow
interpretation of the insurer’s “volunteer” status [and
thus] a liberal application in favor of finding that the
insurer who pays is entitled to subrogation.
COUCH, § 223:26. It thus considers what Vigilant knew at the time it
contributed to the Oldread settlement against this public policy backdrop.
On July 29, 2014, when Chubb was invited by Gerry Doak at Travelers
to address “priority of coverage issues” (Swift Decl., Ex. H at V1263), the
possibility that the Zoo would be hit with a damages award that exhausted its
existing coverage was very real. The Oldreads and their counsel had presented
meticulous backup for the $10.5 million settlement figure they proposed, and
Oldread’s then-present and continuing medical issues — as well as their causal
connection to the Accident — were beyond credible dispute. 22 Deborah Swift

21

A separate body of law pertains to bad-faith refusals by a primary carrier to settle a
claim within applicable policy limits, thereby subjecting an excess carrier to liability.
See, e.g., St. Paul Fire & Marine Ins. Co. v. U.S. Fid. & Guar. Co., 43 N.Y.2d 977, 978-79
(1978); Hartford Acc. & Indem. Co. v. Mich. Mut. Ins. Co., 462 N.Y.S.2d 175, 178 (1st
Dep’t 1983), aff’d, 61 N.Y.2d 569 (1984). No such claim is raised by Vigilant in this
case.

22

Countering this evidence was the defense argument that these injuries were the product
of pre-existing conditions, an argument made principally through the testimony of Dr.
David Hootnick. However, Dr. Hootnick’s testimony existed in tension with other
defense experts, including defense vocational expert Alan Winship. (See Schmidt Decl.,
Ex. P at 67 (Doak claim note: “We [internal Travelers personnel and staff counsel Gary
O’Donnell] discussed the fact that we are left with the experts that the [co-defendant]

36

had come on board a mere nine days before a court-ordered mediation, and the
September trial date loomed. The Zoo had already been found liable under the
NYLL, and there was no guarantee that a jury would accept its arguments that
CarvedRock was not Oldread’s “special employer,” that CarvedRock was
actually to blame for Oldread’s injuries, or that Oldread’s injuries were not as
severe as he claimed.
At the same time, decisions in two separate litigations were narrowing
the Zoo’s bases for additional coverage. Judge Arcara in the Western District of
New York had adopted Judge Schroeder’s finding that the Zoo was not an
additional insured on the Burlington CGL Policy issued to CarvedRock, and the
Zoo’s counsel had elected not to appeal that decision. Burlington, as it turns
out, had also included an endorsement on the Burlington CGL Policy that
changed the definition of “insured contract” to exclude the subcontract
between MSH and CarvedRock; as a result, Travelers concluded, “if we [the
Zoo] get awarded contractual indemnity from CarvedRock, Burlington won’t
cover that exposure.” (Chanin Decl., Ex. 7 at T74). And as a third concern
involving CarvedRock, Judge Bannister had left open the possibility of

retained, Hootnick for the orthopedic IME and Winship for the [vocational
rehabilitation]. Hootnick says the injuries are not at all related to the accident while
Winship states that the plaintiff has absolute[ly] no working capacity.”). Given the
undisputed evidence that Oldread fell from a scaffolding, and the fact that his injuries
correlated with such a fall, Travelers and staff counsel understandably considered not
calling Dr. Hootnick as a witness at trial, even if that resulted in an adverse inference
charge. (See id. at 83 (“Gary [O’Donnell] and I discussed the possibility of NOT calling
Hootnick and Winship and taking the missing witness charges which means that the
judge will instruct the jury that the defense is not calling these witnesses and it can be
assumed that they’d be negative for the defense. … [Gary] claims it would inflame the
jury for Hootnick to express his opinions when all other doctors support the plaintiff.”)).

37

revisiting her decision on the special employer issue. (See Schmidt Decl., Ex. C
at 16; Chanin Decl., Ex. 3 (renewed motion)). Travelers expressed concern that
“[CarvedRock] may have a valid defense under [Workers’ Compensation]
exclusivity as the special employer and though we have a valid third party
claim against them, they are out of business and there is no coverage for the
contractual indemnity exposure.” (Chanin Decl., Ex. 7 at T74). If CarvedRock
won the special employer motion, the Zoo would lose the ability to bring a
common-law indemnity claim against it.
There was also considerable uncertainty concerning coverage available
under the AIG policies issued to MSH and CarvedRock. Given the resolution of
the WDNY Coverage Action, the AIG-Carved Rock Excess Policy appeared no
longer to be an option. Nor was there any certainty in coverage for the Zoo as
an additional insured under the AIG-MSH Umbrella Policy. To be sure, both
Travelers and Vigilant were confident that AIG had merely confused the OCP
Policy with an OCIP/wrap-up policy. However, David Feit of AIG had professed
equal confidence in AIG’s position that the OCP was itself a “wrap-up policy or
similar rating plan.” (Swift Decl., Ex. H at V79). And with respect to coverage
for the Zoo under the AIG-MSH Umbrella Policy via an indemnification lawsuit
against MSH, no matter how “indisputable” an argument the Zoo had, no
action had been filed in the five years since the filing of the Oldread Action.
Here, too, the Court understands that this inaction was in part a strategic
decision to keep MSH “in the tent” with the Zoo, and focus on obtaining

38

coverage from CarvedRock. 23 However, that gambit had failed in the Western
District of New York, and seemed likely to fail if the renewed special
employment motions were decided in Erie County Supreme Court. In any
event, with trial a few weeks away, the Zoo (and, by extension, Vigilant), could
have no assurance that a judge or arbitrator would later find in their favor with
respect to coverage under the AIG-MSH Umbrella Policy.
Deborah Swift — understandably, properly, and repeatedly — sought
information from Travelers concerning priority of coverage. Her
contemporaneous communications, internally and with others whose policies
were implicated by the Oldread Action, are consistent in their expressions of
concern that the Zoo was facing a damages award that exceeded applicable
policy limits. (See, e.g., Swift Decl., Ex. H at V54-55, V728). But Doak and
Travelers repeatedly refused to commit on this issue, and on the current
record, the only conclusion that can be drawn is that they did so in order to
perpetuate a state of coverage uncertainty, one that would force Vigilant to
contribute from its policy in order to settle the matter and forestall the
possibility of a larger damages award post-trial — what this Court has earlier
in this Opinion termed a game of chicken. 24
23

In part, it was also the product of staff counsel’s conflict of interest.

24

See also Schmidt Decl., Ex. P at 91-92 (Doak claim note of August 13, 2014 internal
Travelers meeting)):
We all agree that the [Travelers CGL Policy] policy should apply
after the OCP based on the primary additional insurance and the
excess language in the [Vigilant Policy]. A real big question here is
the value of the case and on this I have asked counsel to weigh in.
We will need to consider the best strategy before we agree to put
the additional money in play. I have confirmed that we have
advised Chubb that the Zoo is an additional insured on [the

39

Travelers is of course correct that Swift had the ability to perform her
own coverage analysis (see, e.g., Def. Opp. 27), and indeed, Swift had correctly
determined that the Travelers CGL Policy was second in line (Swift Dep. 48-49).
However, Travelers had also concluded that the CGL Policy was second in line,
and had no reason not to share that information with Vigilant under these
circumstances. What is more, despite this conclusion, Travelers refused to
commit any of the CGL Policy to the settlement of the case; the portion of the
settlement that it did pay was the policy limits on the OCP Policy. (See Swift
Decl., Ex. H at V21 (Doak email confirming that Travelers ultimately put up
“the full $2M limits of the OCP policy”); see also Def. 56.1 ¶ 15 (stating that the
Zoo’s defense costs in the Oldread Action were paid under the Travelers OCP
Policy)).
For this reason, Travelers’ current suggestion that it was not required to
disclose its views concerning the primacy of the Travelers CGL Policy because it
was never going to contribute more than the policy limits on the OCP Policy
towards the settlement (see Doak Dep. 60-61), is both contradicted by its staff
counsel (see O’Donnell Dep. 187) and irrelevant. Travelers never stated to
Chubb/Vigilant that it was acknowledging priority of coverage under the CGL
Policy and yet standing firm at a $2 million contribution figure. Instead, for all
intents and purposes, Travelers disclaimed coverage under the CGL Policy.
Because Chubb stepped in to protect its own interests and that of its insured,

Travelers CGL Policy] BUT have not committed any $$ nor have I
agreed on priority of coverage.

40

as required by the Vigilant and Federal Excess Policies, it cannot be said to
have acted as a volunteer. 25
The Court finds support for its conclusion in several decisions from New
York state courts. One is the First Department’s decision in Admiral Insurance
Company v. American Empire Surplus Lines Insurance Company, 947 N.Y.S.2d
442 (1st Dep’t 2012). As with most insurance coverage actions, understanding
the decision requires an understanding of the procedural history of the
underlying personal injury action. Here, an employee of a subcontractor on a
Manhattan construction project was injured at the job site and sued the
general contractor on the project. Id. at 444. The subcontractor-employer was
not brought into the action, even as a third-party defendant. The jury found
the contractor to be solely liable for the injuries and, during the damages phase
of the trial, the primary carrier for the general contractor and the
subcontractor (“AEI”), as well as the excess carrier for the general contractor
(“Admiral”), settled the matter for $2.3 million, with Admiral contributing
$866,887 while reserving its rights to seek contribution from AEI and from the
subcontractor’s excess carrier (Scottsdale Insurance Company, or “Scottsdale”).
Id.

25

Even with the CGL Policy limits of $1 million, the Zoo would be left with only $8 million
in coverage against a $10.5 million settlement demand from the Oldreads. With no
confidence that the AIG-MSH Umbrella Policy would be available in the future, and with
it certainly not available at that time, Chubb had every reason to be concerned even
had Travelers offered to contribute the CGL Policy limit of $1 million. These facts,
among others, made the Payment not voluntary for Vigilant; Travelers’ nowacknowledged priority of coverage with respect to the Travelers CGL Policy made the
Payment, assuming it was reasonable, obligatory for Travelers.

41

In the subsequent coverage action, Admiral argued that AEI should have
contributed the $2 million limits on its primary policy, and that Scottsdale
should have contributed the remainder because the general contractor was an
additional insured on the subcontractor’s policy. 947 N.Y.S.2d at 444.
Scottsdale moved for summary judgment declaring that it had no obligation to
contribute to the settlement, and Admiral and AEI cross-moved, with the
former seeking recovery of its contribution and the latter seeking from Admiral
the money it had paid in excess of its policy limits. Id. at 445. The trial court
granted Scottsdale’s motion, denied Admiral’s motion, and granted in part
AEI’s motion. On appeal, the First Department effectively decided the motions
in reverse, denying Scottsdale’s and AEI’s motions in their entirety and
granting Admiral’s motion to recover a portion of its contribution from both
Scottsdale and AEI. Id.
After finding that the general contractor was an additional insured under
the AEI and Scottsdale policies, the First Department considered whether the
general contractor’s liability constituted liability “arising out of” the operations
of the subcontractor. 947 N.Y.S.2d at 445-46. Answering that question in the
affirmative, the court found that AEI should have contributed the entirety of its
$2 million primary policy limits, and that Admiral and Scottsdale should share
ratably in the remaining $600,000, since both were excess carriers whose
“other insurance” provisions cancelled each other out. Id. at 446-47.
Of note here, the First Department rejected Scottsdale’s contention that
Admiral’s contribution was voluntary:

42

In particular, because Admiral is entitled to equitable
contribution in its own right, without regard to being
subrogated to any rights of its insured, the “voluntary
payments” clause of the Scottsdale policy does not bar
Admiral’s recovery. Nor was Admiral’s participation in
the settlement voluntary so as to preclude it from
seeking contribution. The loss plainly fell within the
scope of Admiral’s coverage of [the general contractor],
and Admiral was obligated to indemnify [the general
contractor] for the portion of the settlement amount for
which it now seeks reimbursement from Scottsdale, i.e.,
the amount in excess of AEI’s primary coverage.
947 N.Y.S.2d at 447. Finally, the court found no material factual disputes
concerning the reasonableness of the underlying settlement. Id.
A similar result obtained in the Fourth Department in United States First
Insurance Company v. CNA and Transcontinental Insurance Company, 752
N.Y.S.2d 765 (4th Dep’t 2002). This, too, was a coverage action that was filed
after the resolution of a personal injury action. In the underlying personal
injury action, the employee of a subcontractor sued the general contractor after
a job-site accident; the general contractor then commenced a third-party action
against the subcontractor. Id. at 766. After the trial court granted a motion for
partial summary judgment on the issue of liability, the case settled for
$1,500,000, contributed by the primary and excess insurers for the general
contractor. Id. The subcontractor had successfully obtained summary
judgment on its contractual indemnity claim, but the trial court had permitted
the general contractor to amend the pleading to include a claim for commonlaw indemnification. Id.

43

The Fourth Department upheld the trial court’s determination that the
subcontractor’s primary carrier was liable for contribution, and specifically
rejected a claim of voluntariness:
We reject defendants’ contention that plaintiff
voluntarily participated in the settlement of the
underlying action and thus no subrogation rights
accrued to plaintiff. Pursuant to the terms of the
insurance policy issued by plaintiff, plaintiff’s obligation
to defend [the general contractor] in the underlying
action arose when the coverage under [the general
contractor’s] policy issued by North River and other
insurance from defendants was exhausted. The
coverage under the policy issued by North River was
exhausted with its $1,000,000 payment toward the
settlement and defendants refused to pay into the
settlement, thus giving rise to plaintiff’s obligation to pay
the remaining $500,000. “Plaintiff did not act as a mere
volunteer in providing its insured with a defense and
paying the [settlement], for it did so only after
defendant[s] refused [to pay].”
752 N.Y.S.2d at 766-67 (emphasis added) (internal citations omitted).
As but one more example, a trial judge in New York State Supreme
Court, Nassau County, rejected a claim of voluntariness in a coverage action
addressing priority of coverage among one primary and two excess carriers.
Liberty Mut. Ins. Co., 529 N.Y.S.2d 956. After reviewing the policies, the court
concluded that Liberty Mutual was the primary carrier, Atlantic Mutual was
the first-tier excess carrier, and Federal was the final-tier excess carrier. Id. at
956. As such, the court found that Atlantic Mutual was not liable in
contribution to Liberty Mutual, but was liable in contribution to Federal:
In the underlying action, the plaintiff suffered loss of a
leg, and the Appellate Division had ordered a new trial
after reversing a defendant’s verdict. Under such
circumstances, there can be no argument that a
44

settlement for $350,000 was not reasonable, or that
Federal was not facing some risk. A 100% plaintiff’s
verdict was a clear possibility where the defendant
backed out of a driveway and struck plaintiff’s
motorcycle. A verdict of $2 million was also possible
where the plaintiff suffered loss of his leg. Indeed, the
Justice presiding in the personal injury action indicated
that a 50% liability finding could result in a million
dollar award for the plaintiff. Furthermore, Federal, at
the time of settlement, did not “know” that Atlantic’s
excess coverage was first tier and, thus would not be
applied pro rata with Federal’s. Atlantic did not admit
second tier coverage ahead of Federal until this motion
for summary judgment. Accordingly, the court finds
that Federal has met its burden of showing that it is
entitled to judgment for $100,000 as a matter of law.
Id. at 957-58; cf. Royal Indem. Co., 953 F. Supp. at 464, 466-67 (rejecting
voluntariness argument where insured refused to pay full amount of its selfinsured retention, and insurer stepped in so as “not to upset the negotiated
settlement and risk a larger jury award” that would have exposed carrier to
significant liability under the policy). So too here.
Travelers offers other arguments in favor of voluntariness, but none can
succeed on this record. Several of these arguments are predicated on the fact
that Travelers had a duty to defend and pay the costs of defending the Zoo,
which duty Travelers argues carried with it a concomitant right to control the
Zoo’s defense, including any settlement offers made on the Zoo’s behalf. (See
Def. Br. 4, 16, 18-19; Def. Opp. 5; Def. Reply 2-4, 6). From this premise,
Travelers argues that (i) its invitation to Swift on July 29, 2014, was only to
participate in discussions concerning priority of coverage; (ii) Swift acted
inappropriately in involving herself in settlement discussions with nonTravelers representatives; (iii) any contributions from Chubb/Vigilant were in
45

derogation of Travelers’ litigation strategy and thus necessarily voluntary.
From a legal perspective, these arguments fail, as made clear in the New York
State cases just discussed. And Travelers lacks support for any contention
that its right to defend the Zoo permitted Travelers to exclude all other carriers
from participating in the litigation, particularly when it tendered the policy
limits of one policy while refusing to commit to priority of coverage on the
second. 26
Travelers’ arguments are flawed factually as well. For starters, the Court
considers it rich for Travelers to seek now to limit the permissible scope of
Swift’s involvement to “priority of coverage” issues, since that was the one area
on which Travelers maintained a resolute silence. Moreover, Travelers did
control the manner in which it sought to defend, and settle, the Oldread
Action. But part of its strategy was dragooning Vigilant to participate in
settlement discussions under the guise of resolving priority of coverage issues,
and then (i) refusing to acknowledge what Travelers knew and what Vigilant
believed, which was that the Travelers CGL Policy was second in line, and
(ii) refusing to advise other carriers of Travelers’ position with respect to the

26

See generally Orion Ins. Co. v. Gen. Elec. Co., 493 N.Y.S.2d 397, 402 (Sup. Ct. Queens
Cty. 1985), aff’d sub nom. U.S. Aviation Underwriters, Inc. v. Gen. Elec. Co., 509
N.Y.S.2d 778 (2d Dep’t 1986):
A contract of insurance places upon an insurer the duties of
defending and indemnifying its insured. Each of these duties
carries with it a corresponding right. Along with the duty to
indemnify comes the right to settle on behalf of the insured and, as
a general rule, the insurer has the right to settle with or without
the insured’s consent.

46

legal or contractual availability vel non of that Policy for contribution towards
the settlement.
Swift sufficiently advised Travelers of her contacts with other claims
personnel, with the mediator, and with Oldread’s counsel, and at no point did
Travelers object to her involvement. 27 To the contrary, the communications
resulting in Swift’s appointment plainly were designed by Travelers to get
Vigilant to the table to discuss contributions from Vigilant’s policy. And, lest
there have been any doubt, Travelers’ appointed counsel appeared in Erie
County Supreme Court on August 29, 2014, to report the settlement, and there
is no indication in the record that counsel advised the court of any impropriety
relating to the fact or the nature of Swift’s participation in settlement
discussions. Swift’s acts did not contravene Travelers’ right to defend, and
certainly were not indicative of voluntary conduct on Vigilant’s part.
Several of Travelers’ other arguments have as their premise that Swift
merely overreacted, thereby rendering Vigilant’s contribution voluntary. (Def.
Br. 19-22, 23; Def. Opp. 6-8). 28 As the cases discussed in this section confirm,
these arguments rely improperly on 20/20 hindsight. The facts were as the
Court has repeatedly described; Swift was eminently reasonable in worrying
about the possibility of no contributions from CarvedRock or either of its

27

Moreover, at least with respect to the mediation, Swift clarifies that she “never made
any proposals or offered any money to [Oldread] at the mediation,” but rather merely
proposed settlement packages to the other claims personnel. (See Pl. 56.1 Opp. ¶¶ 4145).

28

One such comment, referring to “Vigilant’s inexplicable and unwarranted hysteria and
rush to settle” (Def. Opp. 18 n.8), comes uncomfortably close to perpetuating genderbased stereotypes. The Court assumes this was unintentional.

47

insurers and protracted litigation with AIG regarding coverage under either of
its excess policies. And while Travelers repeatedly references an “indisputable”
contractual indemnification claim against MSH (see, e.g., Def. Br. 6 n.7, 7
nn.8-9, 21-22, 24 n.14, 26; Def. Opp. 7, 8, 10, 11, 12 & n.5, 26; Def. Reply 1,
7; Def. 56.1 Opp. ¶ 32), there was not then, and there is not today, any
definitive resolution of that issue. Vigilant repeatedly asked Travelers (who
concededly controlled the defense) to file an indemnification action against
MSH, and Travelers did not do so. In the context of a last-ditch settlement
effort a few weeks before trial, Vigilant was not required to exclude every
theoretical possibility of coverage, nor was it required to gamble on the fact
that this as-yet-unfiled indemnification lawsuit against AIG would succeed
years after the resolution of the Oldread Action. Instead, in discharging its own
obligations to the Zoo, Vigilant was permitted to make a reasonable
determination of liability to itself or its insured on the available facts. Given
the information detailed in the Factual Background section, Vigilant plainly did
so here.
On this record, the Court easily concludes as a matter of law that
Vigilant contributed the $650,000 Payment towards the settlement of the
Oldread Action because it reasonably believed that that payment was
“necessary to the protection of its [legal or economic] interests,” and not
voluntarily. Broadway Houston Mack Dev., LLC, 897 N.Y.S.2d at 506.
Accordingly, Travelers’ motion for summary judgment on the issue of

48

voluntariness is denied, and Vigilant’s motion is granted insofar as it seeks a
finding that the Payment was not made voluntarily. 29
4.

A Genuine Dispute of Material Fact Exists Concerning Whether
the Settlement of Which Vigilant’s Payment Was a Component
Was Reasonable

Vigilant’s contribution to the Oldread settlement was not merely “not
voluntary”; given the now-undisputed priority of coverage, it should have been
paid by Travelers under the CGL Policy, and was thus not an obligation for
which Vigilant was liable. Travelers protests, however, that the Oldread
settlement (particularly as augmented by Vigilant’s $650,000 contribution
thereto) was unreasonable. (See, e.g., Def. Opp. 14-22). As set forth in the
remainder of this section, the Court finds that Travelers has identified genuine
and material factual disputes that preclude summary judgment on this issue.
The Court is guided by the Second Circuit’s decision in Luria Brothers &
Company, Inc. v. Alliance Assurance Co., Ltd., 780 F.2d 1082 (2d Cir. 1986),
which found in the analogous context of an insurer-insured dispute that
the insured need not establish actual liability to the
party with whom it has settled so long as a potential
liability on the facts known to the [insured is] shown to
exist, culminating in a settlement in an amount
reasonable in view of the size of possible recovery and
degree of probability of claimant’s success against the
[insured].
Id. at 1091 (citations omitted) (alterations in original); see also Admiral Ins. Co.,
947 N.Y.S.2d at 447 (“In addition, the existing record, on which there are no

29

Given the resolution of this issue, the Court does not address whether Travelers is
estopped to deny an obligation to indemnify Vigilant under the Travelers CGL Policy.
(See Def. Opp. 22-28).

49

material factual disputes, establishes as a matter of law that the settlement of
the underlying action was reasonable.”); Clarostat Mfg. Co. v. Travelers Indem.
Co., 495 N.Y.S.2d 671, 673-74 (1st Dep’t 1985) (“The record and the Texas
appellate court’s decision clearly indicate the reasonableness of the settlement.
Clarostat’s prospects on retrial were not so favorable as to warrant foregoing an
opportunity both to settle for a forty-five percent reduction in the vacated
judgment and to terminate further attorneys’ fees.”).
Vigilant advances a number of reasons why this Court should find, as a
matter of law, that the Oldread settlement was reasonable, including:


The Oldread settlement demand, which was initially
$10.5 million in April 2014, had reduced only gradually
to $8.3 million as of three weeks before trial (see Swift
Decl., Ex. H at V136 ($9.3 million), V133 ($8.3 million));



Travelers’ June 2014 survey of jury verdicts in Erie
County had concluded that the pain and suffering
component of Oldread’s claim on its own might be worth
$3 million (Chanin Decl., Ex. 10);



Information was received after Travelers had assessed a
$4 million value on the case, including Oldread’s need for
a second cervical fusion operation and the surgical
implantation of wire mesh as a result of an epigastric
hernia (Chanin Decl., Ex. 11);



The Zoo was facing a substantial risk of losing the
contributions offered by AIG and Burlington, as if, for
example, Judge Bannister were to decide CarvedRock’s
renewed special employer motion (see generally Swift
Decl.);



A report from Vigilant’s economics expert, Ronald R.
Reiber, Ph.D., concluded that the settlement value of the
Oldread Action was reasonable, and sought to rebut a
settlement analysis undertaken by Travelers’ expert
witness, Michael J. Vernarelli, Ph.D., that utilized a

50

different methodology for calculating the present value of
the loss (Reiber Decl.);


A retired justice of the Fourth Department, Jerome C.
Gorski, opined in September 2015 that the settlement
was “the product of a back and forth consideration by
experienced attorneys and claims representatives
working with an experienced mediator and trial judge,”
and, at base, that it was reasonable (Chanin Decl.,
Ex. 12);



Judge Bannister (who, Vigilant suggests, was a plaintifffriendly
judge
in
a
plaintiff-friendly
county)
communicated to the mediator, James Morris, that she
was hoping to get the case settled for $5 million (Swift
Decl., Ex. H at V39);



Travelers previously had been willing to split the
settlement with CarvedRock’s insurers on a 50-50 basis,
until it changed course a few days before the actual
settlement of the case, which suggested that a 50-50 split
with those carriers was reasonable (Pl. Opp. 16-24; but
see Def. Reply 10 (contending that the 50-50 split was
proposed in the WDNY Coverage Action));



Deposition testimony from the Zoo’s former trial counsel,
Gary O’Donnell, acknowledged that a $6 million verdict
would likely have been sustained by the Fourth
Department (O’Donnell Dep. 113); and



All of the other defense attorneys and insurance
professionals on the case besides Travelers felt that the
settlement was reasonable (see Pl. Reply 7-8).

Travelers unsurprisingly disagrees, and offers reasons of its own why the
settlement was unreasonably high:


30

Travelers had repeatedly advised Vigilant that the Zoo, as
a negligence-free owner, had a lesser liability exposure
than CarvedRock, such that CarvedRock’s insurers
should have borne a much greater proportion of the
settlement (Def. Br. 22-23); 30
The Court observes that this argument would appear to address more the allocation of
the settlement obligation than the reasonableness of the settlement itself.

51





Travelers argues that Vigilant improperly considered
estimates in various Travelers documents, such as the
June 2014 survey of jury verdicts and the various
iterations of the CLLR, which pertained to the “verdict
value” of the case and not the settlement value (Def.
Opp. 15, 19-20);



Travelers’ expert witness, Dr. Vernarelli, disputed Dr.
Reiber’s methodology and concluded instead that a
reasonable settlement range for the Oldread Action was
“$3,660,336 to $4,371,379 for an average of $4,015,858”
(Reiber Decl., Ex. 2 at 4);



Travelers rebuffs Vigilant’s reliance on the views of the
other counsel and claims professionals, as well as Judge
Bannister, on the grounds that (i) none of these
individuals was tendered as an expert witness on
reasonableness and (ii) discerning reasonableness from
their conduct is impermissible argumentum ad populum
(Def. Opp. 16-18, 20-21);



31

Travelers cites numerous prior statements of Vigilant
concerning the appropriate size of the settlement,
including contemporaneous statements that the case
had a settlement value of $4.5 million. (See Def. Opp. 1415). While, as Vigilant notes, these statements may have
been understated for purposes of communication to
Oldread’s counsel and the mediator (see Pl. Opp. 27-28;
Pl. Reply 11-12), determining the degree to which they
were strategically understated is not something in which
the Court should engage in summary judgment practice;

Perhaps
most
importantly,
Travelers’
claims
representative, Gerry Doak, and its staff counsel, Gary
O’Donnell, testified that the Oldread settlement was too
high. Doak testified at length concerning internal
roundtable discussions at which the participants agreed
that the $2 million policy limits of the Travelers OCP
Policy were sufficient to cover any contribution by the Zoo
to the settlement. (See, e.g., Doak Dep. 60-61, 73-74, 77,
105, 109). He also opined that Chubb/Vigilant had
settled the matter too early. (Id. at 172). 31 O’Donnell, for
See Doak Dep. 172:
We felt that Vigilant should have let the process play out some
more. We felt that they settled the case out from under us. We felt
that the case did not have the value anywhere near what the case

52

his part, consistently valued the case at $3.5 million (see,
e.g., O’Donnell Dep. 209-12), and believed the actual
settlement figure to be “unreasonable” (id. at 168-69). 32
It is clear that “reasonableness” is a range and not a point. And in light of
decisions such as Luria Brothers, the Court believes that Plaintiff’s arguments
for reasonableness have considerable traction. In fact, the Court also
considered whether Travelers was estopped from denying reasonableness by
failing to object when the settlement was reported to Judge Bannister, and
would have appreciated the parties’ further engagement on this issue. (See Pl.
Reply 8 (noting in reply, without providing supporting authorities, that “[i]f
Travelers had believed the amount of the Settlement was too high, it should
have raised its objection then, before the Settlement was consummated”)).
However, the Court finds that the arguments raised by Travelers raise genuine,
material disputes as the reasonableness of the settlement — or, considering the
application from Travelers’ perspective, that Vigilant has raised genuine,
material disputes as to the unreasonableness of the settlement. For this

ultimately settled for. We felt that they did not accurately analyze
the whole MSH excess coverage position. … We felt that based on
the totality of defenses that we could have gotten a better result
had we let the process play out some more.
32

See O’Donnell Dep. 168:
Q. Do you think these people who agreed to the settlement, Chubb,
AIG over the Carvedrock policy, Burlington as Carvedrock’s
insurer, were foolhardy in agreeing to five point three?
A. I’m not going to call them foolhardy. I would just say in my
opinion I wouldn’t have offered it. I would have paid five point three
[i.e., $5.3 million] after the verdict and not beforehand.
Q. Do you think they were being foolish?
A. I think they were being unreasonable.

53

reason, this issue must be decided by a jury, and both parties’ motions are
denied on this point.
CONCLUSION
For the reasons set forth above, the parties’ motions for summary
judgment are resolved as follows: Travelers’ motion is DENIED in full;
Vigilant’s motion is GRANTED to the extent the Court finds that the Payment
was not voluntary and that it was not an obligation for which Vigilant was
liable, and DENIED in all other respects. The Clerk of Court is directed to
terminate the motions at docket entries 45 and 46.
The parties are further ORDERED to appear for a conference on
Thursday, April 20, 2017, at 3:00 p.m., in Courtroom 618 at the Thurgood
Marshall U.S. Courthouse, 40 Foley Square, New York, New York, to discuss
setting a trial on the issue of the reasonableness of the settlement.
SO ORDERED.
Dated:

March 21, 2017
New York, New York

__________________________________
KATHERINE POLK FAILLA
United States District Judge

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