New York Court Slaps Insurers Who Subrogated Against Their Own Insureds.

Zurich American Insurance Company ("Zurich American") and American Zurich Insurance Company ("Zurich") sued Defendants Certain Underwriters at Lloyd's, London Subscribing to Policy Number B12630308616 ("Lloyd's") and Arch Insurance Company ("Arch") over an insurance coverage dispute arising from a personal injury lawsuit. Zurich moved for summary judgment against Lloyd's seeking a declaration that the anti-subrogation rule precludes Lloyd's from commencing a claim for common law indemnification or contribution against Skanska-Walsh Joint Venture ("Skanska").

In Zurich American Insurance Company and American Zurich Insurance Company v. Certain Underwriters At Lloyd's Of London Subscribing To Policy Number B12630308616 and Arch Insurance Company, No. 21-CV-6755 (JPO), United States District Court, S.D. New York (September 12, 2022) the USDC applied New York's anti-subrogation law.

BACKGROUND

The Port Authority of New York and New Jersey ("Port Authority") operates LaGuardia Airport and hired LaGuardia Gateway Partners LLC ("LGA") as the developer of a construction project at LaGuardia ("LGA Project"). In April 2017, LGA entered into a sub-contract with Skanska (the "Contract") to perform work on the LGA Project. Section 20.1 of the Contract requires LGA to procure a commercial general liability policy, under which Skanska would be the first named insured and LGA would be a named insured. The contract required Skanska to "indemnify, defend and hold harmless [LGA] for any losses suffered or costs incurred by [LGA]... to the extent caused by... any third-party claims for bodily injury... arising out of (1) [Skanska's] negligent performance... or (2) any breach of [the Contract] by any [Skanska] party or any breach thereof by [LGA] directly caused by the acts or omissions of any [Skanska] party." The Contract contains a similar clause requiring Skanska to indemnify Port Authority for its losses.

Skanska and LGA obtained a Contractors Controlled Insurance Program ("CCIP") for the LGA Project, which afforded $300 million in commercial general liability insurance coverage to Skanska, LGA, and Port Authority. Zurich American issued the primary commercial general liability policy in the CCIP tower with a $5 million limit ("Zurich American Policy"), Arch issued the first layer excess policy with a $5 million limit ("Arch Policy"), and Lloyd's issued a second layer excess policy with a $20 million limit ("Lloyd's Policy"). American Zurich also issued...