Lexington Ins. Co. v. New York Mar. & Gen. Ins. Co.

Lexington Ins. Co. v New York Mar. & Gen. Ins. Co. 2025 NY Slip Op 30137(U) January 10, 2025 Supreme Court, New York County Docket Number: Index No. 651214/2022 Judge: Melissa A. Crane Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

FILED: NEW YORK COUNTY CLERK 01/10/2025 03:44 PM INDEX NO. 651214/2022 NYSCEF DOC. NO. 302 RECEIVED NYSCEF: 01/10/2025

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY

PRESENT: HON. MELISSA A. CRANE PART 60M

Justice ------------------X LEXINGTON INSURANCE COMPANY, ON ITS OWN BEHALF AND AS SUBROGEE OF TWIN AMERICA, LLC INDEX NO. 651214/2022 AND MARK 'ZEV' MARMURSTEIN,

Plaintiff, MOTION DATE 04/15/2024

MOTION SEQ. -v- NO. 012 NEW YORK MARINE AND GENERAL INSURANCE COMPANY, GREENWICH INSURANCE COMPANY, DECISION + ORDER ON MOTION TWIN AMERICA, LLC, MARK 'ZEV' MARMURSTEIN,

Defendants. ------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 012) 224, 225, 226, 227, 228,229,230,231,232,233,234,235,236,237,238,239,240,241,242,243,244,245,246,247,248, 249,250,251,252,253,254,256,257,258,259,279,280,281,282,283 were read on this motion to/for JUDGMENT - SUMMARY

This case arises from a November 2015 tour bus accident in California. The accident

allegedly injured various people, caused significant property damage, and resulted in various

lawsuits against the tour operators and tour bus owners (the consolidated underlying litigation,

Kfouri v CS Global SF, No. CGC-16-551098 [San Francisco Super. Ct.]). Ultimately, the

underlying litigation settled for $10.5 million. Plaintiff Lexington Insurance Co. (Lexington), an

insurer that provided umbrella coverage to defendants Twin America, LLC (Twin) and Mark

'Zev' Marmurstein (collectively, "Twin defendants"), brought this action to recover $2.5 million

that it paid, subject to a reservation of rights, towards the settlement.

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Plaintiff seeks to recoup that $².5 million from the only remaining defendant in this

action, Twin, under theories of common law indemnification, breach of contract, and declaratory

relief.

Background

The insurance coverage in the underlying litigation was arranged in two "towers," as

illustrated by the graph below: (1) the insurance policies issued to the nonparty tour bus owners;

and (2) the insurance policies issued to the vicariously liable defendants [the Twin defendants]

!Ji)

Lexington Umbrella

Gotham Excess Axis Excess

NY Marine Twn A1Mrica T -

(amended complaint, NYSCEF Doc No. 43 at 7).

In the first tower, defendant New York Marine and General Insurance Co. (NYM) issued

a $1 million primary policy to the bus owners, and nonparty Gotham Insurance issued a $4

million excess policy to the bus owners. In the second tower, defendant Greenwich Insurance

Co. (Greenwich) issued two $1 million primary policies to Twin, a commercial auto policy (the

auto policy) and a commercial general liability policy (the CGL policy). Also in the second

tower, nonparty Axis Insurance issued a $4 million excess policy to Twin, and plaintiff issued a

$5 million umbrella liability policy to Twin.

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The bus owners' and Twin's respective excess insurers, Gotham and Axis, both

contributed their total $4 million policy limits towards the settlement. Plaintiff paid the

remaining $2.5 million under the umbrella policy it issued to Twin. Both the Greenwich auto

and CGL policies are "fronting" policies with $1 million limits and matching $1 million

deductibles. In this type of policy, the deductibles are the policy limits (see discussion in

decision and order on motion 7 at pgs 11-13 [EDOC 13 7]).

Greenwich did not pay any amount towards the settlement under either of these primary

policies. In addition, neither Twin nor its principal, Marmurstein, paid the Greenwich policies'

deductibles or paid any amount for the settlement. However, Greenwich and Twin entered into a

settlement agreement in April 2021 (Greenwich-Twin America settlement agreement, NYSCEF

Doc No. 61 ). In that stipulation, they "agree[d] that any indemnity payments that New York

Marine and/or Gotham pay on behalf of Twin and/or Marmurstein shall be applied to satisfy the

[$1 million Greenwich auto policy] Indemnity Deductible" (id., ,r 1). None of the other insurers,

including Gotham and NYM, were involved with that Greenwich-Twin agreement.

On January 19, 2023, this Court denied NYM's motion to dismiss based on forum non

conveniens (January 19, 2023 Order, NYSCEF No. 113). On July 7, 2023, this Court denied

dismissal of any claim against Twin but granted Greenwich's motion to dismiss and

Marmurstein's [individual] motion to dismiss (July 7, 2023 Orders, NYSCEF Doc Nos. 136,

137). On July 9, 2024, this Court granted NYM's motion for summaryjudgment, leaving Twin

as the only remaining defendant (July 9, 2024 Order, NYSCEF Doc Nos. 296, 297).

Plaintiff now moves for summary judgment, pursuant to CPLR 3212, on the remaining

causes of action against Twin: (1) common law indemnification to recover $1 million pursuant to

the Greenwich Auto Policy (third cause of action) (NYSCEF Doc No. 43); (2) common law

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indemnification to recover $1 million pursuant to the Greenwich CGL Policy (fourth cause of

action) (id.); (3) declaratory relief stating ''that neither of the Greenwich deductibles, and neither

of the limits of the Greenwich policies, were satisfied or exhausted, in whole or in part, by any

defense and/or indemnity payments made, or to be made, by New York Marine and/or Gotham

in connection with the Consolidated Underlying Actions" (fifth cause of action) (id.); and (4)

breach of contract pursuant to Condition J.3 of the Lexington umbrella policy's "scheduled

underlying insurance" (sixth cause of action) (id.).

Twin also cross-moves for summary judgment pursuant to CPLR 3212 on all the above.

TWIN'S RELEVANT INSURANCE POLICIES

The Greenwich Auto Policy

The Greenwich Auto Policy provides, in Section II ["Liability Coverage"], that "We

[Greenwich] will pay all sums an 'insured' legally must pay as damages because of 'bodily

injury' or 'property damage' to which this insurance applies, caused by an 'accident' and

resulting from the ownership, maintenance or use of a covered 'auto'" (Greenwich Auto Policy,

NYSCEF Doc No. 59 § II [A] [Auto Policy]). That section further states that:

"We [Greenwich] have the right and duty to defend any 'insured' against a 'suit' asking for such damages .... We may investigate and settle any claim or 'suit' as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements"

The Auto policy includes $1 million liability coverage and a $1 million deductible per

accident (see id. at 74 [ENDORSEMENT #001]).

The Greenwich CGL Policy

The CGL policy states, in Section 1 (a):

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"We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' or 'property damage' to which this insurance does not apply. We may, at our discretion, investigate any 'occurrence' and settle any claim or 'suit' that may result. But: (1) The amount we will pay for damages is limited as described in Section III - Limits Of Insurance"

(Greenwich CGL Policy, NYSCEF Doc No. 60 [CGL policy]).

The CGL policy refers, in Section III [Limits of Insurance], to the Declarations page.

The Declarations page provides that the liability limits are $1 million per occurrence, and the

"Deductible Liability Insurance Endorsement" provides that the deductible is $1 million per

occurrence (id. at 77). That Endorsement states:

"A. Our obligation to pay damages or medical expense on your behalf applies only to the amount of damages in excess of any deductible amount stated in the Schedule above as applicable to such coverages.

D. The applicable limits of insurance shall be reduced by the amount of any damages or medical expense included within the deductible amount"

(id. at 77-78).

The CGL policy also includes the following coverage exclusion for:

"'Bodily injury' or 'property damage' arising out of the ownership, maintenance, use or entrustment to others of any ... 'auto' ... owned or operated by or rented or loaned to any insured.

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the 'occurrence' which caused the 'bodily injury' or 'property damage' involved the ownership, maintenance, use or entrustment to others of any ... 'auto' ... that is owned or operated by or rented or loaned to any insured"

(id., § 2 [g]).

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The Greenwich "Large Deductible Program Agreement"

Under the "Large Deductible Program Agreement" (Greenwich Large Deductible

Program Agreement, NYSCEF Doc No. 58 [Notice of Election #3]), the Greenwich policies each

had a $1 million retention and a $1 million deductible. The Program Agreement states that the

"Claims Service Company [Greenwich] will handle and pay claims in accordance with the policy

provisions and will bill the Insured for Paid Losses within the Insured's Retention described

herein ... " (id., § B [l]).

The Lexington Umbrella Policy

Lexington issued a $5 million commercial umbrella policy to Twin (Lexington Policy,

Doc No. 27 [Lexington policy]). The Lexington policy provides coverage for bodily injury and

property damage that exceeds the "Retained Amount." The Retained Amount means "The total

applicable limits of 'scheduled underlying insurance' (plus any 'Self-Insured' retention

applicable thereto) and any applicable 'other insurance' providing coverage to [Twin America]"

(id., § V [W]-[X]; see also id., § IV [F] ["This policy applies only in excess of the total

applicable limits of 'scheduled underlying insurance' and any applicable 'other insurance'

whether or not such limits are collectible."]). The Schedule of Underlying Insurance includes

Twin America's $1 million Greenwich CGL policy, $1 million Greenwich Auto policy, and $4

million Axis excess policy (id. at 6).

Section J of the Lexington policy states:

"J. Maintenance of Scheduled Underlying Insurance You agree that during the 'policy period'

3. The total applicable limits of 'scheduled underlying insurance' will not decrease, except for any reduction or exhaustion of aggregate limits by payment of damages to which this policy applies.

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If you fail to comply with these requirements, we will be liable only to the same extent that we would have, had you fully complied with these requirements"

(id.).

DISCUSSION

A party moving for summary judgment "must make a prima facie showing of entitlement

to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of

fact from the case" (Winegradv New York Univ. Med Ctr., 64 NY2d 851,853 [1985]). If the

movant meets this burden, the non-moving party must then establish the existence of material

issues of fact (see Alvarez v Prospect Hosp., 68 NY2d 320,324 [1986]).

As discussed in further detail below, the Greenwich CGL policy's auto exclusion does

not apply, both Greenwich primary policies are triggered, and Twin is obligated to pay both two

$1 million deductibles. Twin breached the Lexington policy by failing to pay the Greenwich

policy deductibles.

A. The CGL Auto Exclusion

The CGL policy contains an auto exclusion for "'Bodily injury' or 'property damage'

arising out of the ownership, maintenance, use or entrustment to others of any ... 'auto' ...

owned or operated by or rented or loaned to any insured" (Doc No. 60, § 2 [g]).

Plaintiff argues that the court in the underlying litigation found, in connection with the

good faith settlement, that Twin did not own or operate the vehicle, and accordingly, the auto

exclusion does not apply.

"[W]henever an insurer wishes to exclude certain coverage from its policy obligations, it

must do so in clear and unmistakable language" (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304,

310 [1984] [internal quotation marks omitted]). Thus, "ambiguities in an insurance policy['s] ..

. exclusionary clause[s]" are "to be construed against the insurer" (Ace Wire & Cable Co. v

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Aetna Cas. & Sur. Co., 60 NY2d 390,398 [1983]). However, "unambiguous provisions must be

given their plain and ordinary meaning" (Sanabria v Am. Home Assur. Co., 68 NY2d 866, 868

[1986]), and "courts are not free to disregard the plain meaning of the policy language to find an

ambiguity where none exists" Conlon v Allstate Vehicle & Prop. Ins. Co., 152 AD3d 488, 490

[2d Dept 2017] [internal quotation marks omitted]).

The First Department's decision in DMP Contracting Corp. v Essex Ins. Co. (76 AD3d

844,846 [1st Dept 2010]) is instructive. The Court in DMP held that an exclusion foreclosing

'"bodily injury' ... arising out of, caused by or contributed to by the ownership, non-ownership,

maintenance, use or entrustment to others of any 'auto"' was unambiguous in excluding

coverage for bodily injury "whether or not it is the insured who owned, maintained, used or

entrusted to others the subject automobile" because the plain meaning of the language of the

provision "focuses on the connection between a vehicle and the injury, not between a vehicle and

the insured"' (id. [affirming the trial court's finding that "[a] fair reading of the policy and the

plain language of the provision should have placed the insured on notice that the provision was

applicable to the 'use' of 'any auto' regardless of ownership[,] [t]hus [] providing the insured

with the opportunity to question or renegotiate coverage"]).

Here, unlike in DMP, the Greenwich CGL policy's auto exclusion is only triggered when

"the 'occurrence' which caused the 'bodily injury' or 'property damage' involved the ownership,

maintenance, use or entrustment to others of any ... 'auto' ... that is owned or operated by or

rented or loaned to any insured" (id.,§ 2 [g]). That is, the Greenwich CGL policy's auto

exclusion unambiguously excludes only claims for bodily injury or property damage involving

vehicles Twin owned and operated or rented or loaned to another insured. There is nothing

ambiguous about the Greenwich CGL policy or its auto exclusion (cf Essex Ins. Co. v Grande

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Stone Quarry LLC, 82 AD3d 1326, 1327 [3d Dept 2011] [finding a CGL policy ambiguous

where changes to auto exclusion endorsement deleted the words "any insured" from the

requirement that the injury-causing vehicle be owned, operated or loaned by "any insured," but

the policy elsewhere continued to refer to the "insured or any other persons"]; cf also Covington

Specialty Ins. Co. v Indian Lookout Country Club, Inc. [62 F 4th 748, 750 [2d Cir 2023] [auto

exclusion endorsement excluding claims for "[b]odily injury ... arising out of the ownership,

maintenance, use or entrustment to others of any auto" was not ambiguous] [emphasis added]).

Here, the interpretation of the relevant policy language hinges on whether the plain and

unambiguous meaning of the automobile exclusion focuses on the connection between a vehicle

and the injury, or between a vehicle and the insured. Endorsement provisions stating that

coverage is excluded for "[b]odily injury ... arising out of the ownership, maintenance, use or

entrustment to others of any auto" are focused on the vehicle and the injury. In those

provisions, it is the 'use' of 'any auto' that precludes coverage. Conversely, endorsement

language that excludes "[b]odily injury ... arising out of the ownership, maintenance, use or

entrustment to others of any auto ... owned or operates by or rented or loaned to any insured"

requires the insured' s ownership, operation, or entrustment to another to trigger the exclusion

(see e.g. Mount Vernon Fire Ins. Co. v Munoz Trucking Corp., 213 F Supp 3d 594, 603- 604 [SD

NY 2016] ["the Auto Exclusion fully precludes defense coverage so long as the occurrence that

caused the accident involved the ownership or operation of an auto by the insured."]).

As noted above, the Greenwich CGL policy's auto exclusion precludes coverage for

"[b]odily injury ... arising out of the ownership, maintenance, use or entrustment to others of any

auto ... owned or operated by or rented ot loaned to any insured." This language

unambiguously requires the insured to own, operate or entrust the vehicle involved in the

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accident to trigger the exclusion. Because it is undisputed that Twin did not own or operate the

tour bus in the underlying action, the endorsement has not been triggered.

Consequently, Twin is obligated to pay the Greenwich CGL deductible. The court rejects

Twin's argument that, hypothetically, the auto exclusion may have applied under alternative

theories of liability if the underlying matter had gone to trial. The caselaw is clear that the duty

to indemnify is "determined by the actual basis for the insured's liability to a third person," not

the allegations of pleadings (Servidone Const. Corp. v Sec. Ins. Co. of Hartford, 64 NY2d 419,

424 [1985]).

Accordingly, the CGL auto exclusion is unambiguous and does not apply.

B. Twin Must Pay the Deductibles

Twin argues that its only obligation would be to reimburse Greenwich if Greenwich had

paid amounts within the Greenwich policy limits. Thus, Twin argues that Lexington's claims

should be against Greenwich and not Twin. Simultaneously, Twin argues that Greenwich would

have no right to seek reimbursement from Twin even if Greenwich had paid any amounts due to

the Greenwich-Twin settlement agreement. In addition, Twin continues to rely on Intervest

Constr. ofJAX, Inc. v General Fidelity Ins. Co. (133 So3d 494 [2014] [analyzing satisfaction of

SIRs, not deductibles, under Florida law]) and Vons Cos., Inc. v United States Fire Ins. Co. (78

Cal App 4th 52 [Cal Ct App 2000], as mod [Mar. 6, 2000] [analyzing the same under California

law]) for the premise that so long as the policy is silent on the issue, co-insurers can satisfy its

deductibles.

Lexington counters with the case of Zurich Am. Ins. Co. v Centex Corp. (373 F Supp 3d

692,699 [ND Tex 2016]). In that case, Zurich issued a $6 million CGL excess policy to

defendant, subject to a $1 million deductible, providing coverage excess to two wrap up policies.

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The first wrap up policy contained a self~insured retention (SIR) amount of $500,000 and a $5

million limit of liability for each occurrence, while the second was a typical policy with a $5

million limit of liability. The underlying case ultimately settled for $11.5 million, with Zurich

contributing $2.5 million. Zurich, alleging breach of contract, sought to recover the $1 million

deductible from its insured, Centex. Centex argued, like Twin, that other entities could satisfy a

deductible on the insured's behalf. Also, like Twin, Centex cited to cases that concerned SIR

requirements, as opposed to deductibles.

The Zurich Court aptly explained:

"With an SIR, the insured must meet the SIR amount before the insurer becomes responsible for any payment under the policy. For example, the disputed policy in Continental Casualty1 provided that the SIR '"must be paid prior to any payment being made by [the insurer] under the terms and conditions of this Policy of insurance2."' Accordingly, the insurer's liability attached only after the insured covered its portion of the loss.

In other words, the policy requires Centex to pay back deductible amounts that Zurich puts forth, obliging Centex to meet the reimbursable requirement after Zurich covers the deductible amount, not before. As a result, the Zurich Policy deductible does not "represent[ ] the amount of the loss that the insured is responsible for before the coverage is triggered3," but rather the amount that the insured is responsible for after coverage is triggered"

(id. at 699 [internal citations omitted]).

The Zurich policy, like the Greenwich policies here, required the insured to pay the

deductible to the insurer. The Greenwich policies specifically require Twin to reimburse

Greenwich "for deductible amounts that [Greenwich] pay[s] on [Twin's] behalf' (NYSCEF Doc

No. 59 at 75 [ENDORSEMENT #001]). Therefore, according to Lexington, it should follow that

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Greenwich policies and improperly reducing the "scheduled underlying insurance" amount from

$6 million to $4 million. In opposition, Twin raises no material issues of fact.

CONCLUSION

For the reasons stated above, plaintiff is awarded summary judgment on its sixth cause of

action for breach of contract against Twin. In addition, plaintiff is entitled to prejudgment

interest from 1/3/22, the date the California court approved the settlement (see Doc 95). As the

court grants plaintiff summary judgment on the sixth cause of action for breach of the Lexington

policy [condition J.3], the court denies the plaintiff's motion for summary judgment as it relates

to plaintiff's common law indemnification claims. The common law indemnification claims

duplicate the breach of contract claim.

However, plaintiff is entitled to the declaratory relief against Twin that it requests in its

fifth cause of action. For the sake of clarity, plaintiff is not entitled to attorneys' fees. Although

plaintiff requested attorneys' fees in its amended complaint, there is no support for its reasonable

attorneys' fees in its motion papers. Twin's cross-motion for summary judgment is denied in its

entirety.

The court has considered the parties' remaining contentions and finds them unavailing.

Accordingly, it is

ORDERED that plaintiff Lexington Insurance Co.'s motion seeking summary judgment

(motion sequence 12) pursuant to CPLR 3212 is granted as set forth in this decision and order;

and it is further

ORDERED that the Clerk is directed to enter judgment in favor of plaintiff and against

defendant Twin America LLC in the sum of $2,000,000.00, with interest at the statutory rate

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from 1/3/22, as calculated by the Clerk, together with costs and disbursements as taxed by the

Clerk upon the submission of a proper bill of costs; and it is further

ADJUDGED AND DECLARED that "that neither of the Greenwich deductibles, and

neither of the limits of the Greenwich policies, were satisfied or exhausted, in whole or in part,

by any defense and/or indemnity payments made, or to be made, by New York Marine and/or

Gotham in connection with the Consolidated Underlying Actions" captioned Kfouri v CS Global

SF, No. CGC-16-551098 [San Francisco Super. Ct.]; and it is further

ORDERED that plaintiffs motion is otherwise denied; and it is further

ORDERED that defendant Twin America, LLC's cross motion for summary judgment

pursuant to CPLR 3212 is denied in its entirety; and it is further

ORDERED that the Clerk is directed to mark this case disposed.

1/10/2025 DATE ~ ------------ MELISSA A. CRANE, J.S.C. CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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Footnotes

[1] Continental Casualty Co. v North American Capacity Ins. Co., 683 F3d 79, 90 (5th Cir 2012)

[2] (id.) (quoting disputed policy)

[3] id. 11 [* 11] 11 of 14 "[s]ince Greenwich had not made a payment within the Greenwich [] Deductible for Twin to reimburse, a payment by another insurer cannot, as a matter of law, satisfy the Greenwich [] Deductible .... " (plaintiffs omnibus memorandum of law in support of its motions for summary judgment, NYSCEF Doc No. 225 at 27-28). Here, Twin cannot evade its deductible obligation by executing a settlement agreement with Greenwich without taking into consideration its obligation to Lexington as well. Lexington is entitled to look to its insured, Twin, for reimbursement on amounts paid for what essentially amounts to the Greenwich deductibles (Paljevic v WFC Tower D Co., No. 64161997, 2002 WL 34705855 [Sup Ct, NY County 2002] ["Where the claim amount is within the deductible, the insured must refund the amount to the insurer"]; see Tokio Marine & Fire Ins. Co. v Insurance Co. ofN Am., 262 AD2d 103, 103 [1st Dept 1999]). This is particularly so because these deductible amounts were Twin's obligation to pay in the first instance. The Lexington Policy states that the amount of the "scheduled underlying insurance" cannot be decreased other than "by payment of damages." Here again, "unambiguous provisions must be given their plain and ordinary meaning" (Sanabria, 68 NY2d at 868), and "courts are not free to disregard the plain meaning of the policy language to find an ambiguity where none exists" (Conlon, 152 AD3d at 490 [internal quotation marks omitted]). Plaintiff has established, prima facie, that the Greenwich-Twin settlement agreement is not "payment of damages" under the policies. Twin cannot redefine NYM' s coverage or Gotham's excess policy payment as "payment of damages" when the record demonstrates that Greenwich and Twin unilaterally decided to "apply" $1 million from the tour bus owners' policy payments to satisfy Twin's deductible obligations. Twin breached Condition J.3 by failing to pay its deductibles under the 12 [* 12] 12 of 14