On September 23, 2019, Justice Rodriguez of the New York County Supreme Court issued a decision in Wesco Ins. Co. v. Hellas Glass Works Corp., 2019 NY Slip Op 32848(U), holding that two liability insurers were required to share in paying defense costs where facts to be determined in the underlying personal injury lawsuit could trigger indemnity coverage under one of the policies.
The coverage issue in Hellas Glass turned on a fact to be resolved in the underlying personal injury litigation – namely, whether the injury occurred in the course of “loading” or “unloading” glass from a vehicle. If this question was answered in the affirmative, then Plaintiff Wesco Insurance Company’s policy would be triggered; a negative answer would trigger coverage under a policy issued by defendant Massachusetts Bay Insurance Company (“MBIC”).
Justice Rodriguez ordered Wesco and MBIC to share equally in the insured’s defense costs in the underlying action, explaining:
[T]he touchstones of duty to defend analysis are the operative complaint in which allegations against the insured are made. . . .
The third-party complaint and plaintiff Shiryayev’s complaint are utterly silent as to the involvement of an “auto” in the alleged occurrence. Similarly, the two pleadings do not explicitly describe any process of “loading” or “unloading”. Rather, the third-party complaint alleges that defendant Hellas “performed construction work and/or services” at the accident location and that defendant Hellas is liable to defendants/third-party plaintiffs . . . by virtue of contractually assumed indemnification.
Although the operative pleadings do not allege that the accident occurred during a process of loading or unloading an auto, the record also contains plaintiff’s [hearing testimony in a proceeding against the City of New York] and deposition testimony in which plaintiff describes the occurrence. Moreover, plaintiff Wesco’s claims administrator, Am Trust North America, Inc., noted its knowledge of the facts surrounding the claim in its letter dated March 30, 2016, specifically that “Aleksandr Shiryayev, your employee, alleges he sustained injuries on October 10, 2014 when a panel of glass he was unloading from your 2006 GMC Savana fell onto him at 1050 2nd Avenue, New York, New York.” Consequently, the court finds that facts derived from outside the four comers of the operative complaints, specifically, that the accident occurred close in time to the process of unloading and close in proximity to a covered auto, indicate that the claim “arguably arise[s] from covered events” under plaintiff Wesco’s auto policy. . . .
[T]his court finds that, due to the lack of fact finding in the underlying litigation . . . defendant MBIC has failed to carry its heavy burden of establishing that, as a matter of law, there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify the insured under any provision of the insurance policy. It remains possible, given that discovery is ongoing in the underlying action, that the occurrence did not arise out of the act of loading or unloading, but rather was caused entirely by other means.
This decision illustrates two important aspects of the insurer’s duty to defend under New York law. First, the duty is broadly construed and attaches unless there is “no possible factual or legal basis” on which the insured may be obligated to indemnify the insured. Second, although the insurer (with very limited exceptions) cannot rely on facts outside the complaint to avoid its duty to defend, such external facts can trigger a duty to defend, even if, as was the case here with respect to the Wesco policy, the allegations in the complaint, standing alone, would not.