Lexington Insurance Company et al. v. New York Marine and General Insurance Company
Attorneys and Parties
Brief Summary
Insurance coverage—duty to defend and whether parties qualify as vicarious insureds under an omnibus clause in a liability policy governed by California law.
The trial court granted summary judgment to New York Marine and General Insurance Company (NYM), dismissed the complaint, and declared NYM owed no further coverage to Lexington Insurance Company (Lexington) as subrogee of Twin America, LLC and Mark "Zev" Marmurstein.
The grant of summary judgment and the declaratory judgment that NYM owed no further coverage obligations; the complaint was reinstated.
Underlying allegations created a potential that Lexington’s insureds could be vicariously liable for NYM’s named or permissive insureds—triggering potential coverage under the policy’s omnibus clause. Under California law, an insured need only show potential coverage, while the insurer must eliminate any possibility of coverage with undisputed extrinsic facts. NYM failed to do so; its unsworn, largely one-word questionnaire responses were inadequate and did not address all vicarious liability theories, and record evidence suggested intertwined operations supporting agency or alter-ego theories. Even if considered notwithstanding CPLR 3212(b) [summary judgment motion papers must be supported by admissible evidence], NYM’s submissions did not satisfy its burden.
Background
After a San Francisco tour bus accident, multiple suits were filed against New York Marine and General Insurance Company (NYM)’s named and permissive insureds and against Lexington Insurance Company (Lexington)’s insureds, among others. The actions were consolidated and later settled. NYM concluded Lexington’s insureds were not its insureds because they lacked vicarious liability for NYM’s insureds, but acknowledged they could be contractual indemnitees and therefore funded the defense, asserting it exhausted policy limits on defense costs and contributed nothing to the settlement. Lexington paid amounts it contends NYM should have contributed and sued to recover those funds.
Lower Court Decision
Supreme Court, New York County granted NYM’s motion for summary judgment, dismissed Lexington’s complaint, and declared that NYM owed no further coverage obligations to Lexington as subrogee of Twin America, LLC and Mark "Zev" Marmurstein.
Appellate Division Reversal
Unanimously reversed: the motion was denied, the declaration vacated, and the complaint reinstated. Applying California duty-to-defend principles (e.g., Waller and American States), the court held that Lexington met its initial burden because the underlying complaints alleged facts supporting potential vicarious liability (respondeat superior, principal–agent, and alter ego), which fall within the policy’s omnibus clause covering vicarious insureds. NYM did not carry its higher burden to eliminate any possibility of coverage with undisputed extrinsic evidence. The unsworn questionnaires—largely one-word denials of unclear provenance—were insufficient, and some record evidence showed heavily intertwined operations relevant to agency and alter-ego theories. Even if the questionnaires were considered, they failed to meet summary judgment standards (see CPLR 3212[b] [summary judgment motion papers must be supported by admissible evidence]).
Legal Significance
Confirms that under California law, omnibus clauses extend insured status to vicarious insureds, and an insurer seeking summary judgment on no-duty-to-defend grounds must present admissible, undisputed extrinsic facts that foreclose any potential for coverage. Unsworn, conclusory materials are inadequate, and intertwined operations can sustain potential agency or alter-ego theories sufficient to trigger the duty to defend. The decision also underscores that claimed defense-cost exhaustion does not resolve coverage where potential vicarious liability remains disputed on the record.
When underlying allegations support potential vicarious liability, the omnibus clause can render parties insureds, triggering the duty to defend; an insurer cannot win summary judgment without admissible, undisputed evidence that eliminates all possibility of coverage (and unsworn, conclusory questionnaires will not suffice).