Primary Insurer Cannot Use Equitable Indemnification To Rewrite Unambiguous Terms Of Its Policy

Posted by

The plaintiff, Arch Insurance Company (Arch), brought a declaratory judgment action against Illinois Union Insurance Company and Harleysville Worcester Insurance Company the defendants, seeking indemnification for payments made to settle a personal injury claim brought by Enio Rodrigues, an employee of the defendants’ insured, Erie Painting & Maintenance, Inc., against Arch’s insured, the New York State Thruway Authority (Authority).

The court found, and Arch conceded, that Arch could not seek contribution from other insurers for its payment to the Authority because the terms of the Arch Policy established that Arch was a primary insurer for the Authority for the Rodrigues accident.  Instead, Arch asserted that it was entitled to indemnification because its policy functioned as “last resort” coverage in the event Erie Painting’s insurers were unable or refused to provide coverage for a claim arising out of Erie Painting’s work.  Relying upon on the disparity in premiums charged for its policy ($5,250) and Illinois Union’s policy ($70,388), Arch argued that equitable indemnification required it to be fully indemnified by Illinois Union and/or Harleysville for its payment.

The court disagreed, finding that the unambiguous and understandable terms of the Arch Policy made it a primary insurer for the Authority and required it to provide insurance for the Rodrigues Incident. While priority of coverage may be an important component of any contribution calculation, given Arch’s unambiguous duty to provide insurance coverage to the Authority, its request for indemnification fails.

Arch Ins. Co. v. Harleysville Worcester Ins. Co.,
2014 U.S. Dist. LEXIS 91928, 1-2
(S.D.N.Y. July 7, 2014)