OTTAVIANO v. GENEX COOPERATIVE INC (2005)

Plaintiff commenced this action to recover damages for injuries he sustained when a storage tank owned by defendant-third-party plaintiff, Genex Cooperative, Inc. (Genex), ruptured.   At the time of the accident, plaintiff was delivering liquid nitrogen to Genex on behalf of his employer, third-party defendant, Praxair, Inc. (Praxair).  We determined on a prior appeal that Supreme Court properly granted the motion of Genex for summary judgment on its cause of action seeking contractual indemnification from Praxair (Ottaviano v. Genex Coop. [Appeal No. 2], 305 A.D.2d 1010, 1011, 758 N.Y.S.2d 753, lv. dismissed 100 N.Y.2d 615, 767 N.Y.S.2d 396, 799 N.E.2d 619).   The excess liability insurance carrier for Praxair, Allianz Insurance Company (Allianz), thereafter retained Reed Smith LLP (Reed Smith) to represent Genex in the main action.   Genex, however, was represented by Ford Marrin Esposito Witmeyer & Gleser LLP (Ford Marrin) in the main action.

 Contrary to the contention of Allianz, the appellant herein, the court properly denied that part of the cross motion of Reed Smith seeking an order substituting Reed Smith for Ford Marrin as counsel for Genex.   That cross motion, ostensibly made on behalf of Genex, was in fact opposed by Genex.   As a general rule, a liability insurer has a right to control the defense of underlying litigation against its insured based on the right of the insurer to protect its financial interests (see M & M Elec. v. Commercial Union Ins. Co., 241 A.D.2d 58, 61-62, 670 N.Y.S.2d 909, lv. denied 92 N.Y.2d 815, 683 N.Y.S.2d 759, 706 N.E.2d 747;  Parker v. Agricultural Ins. Co., 109 Misc.2d 678, 681, 440 N.Y.S.2d 964).   Genex, however, is not the insured of Allianz, and Allianz has failed to identify any contractual or other source to support its asserted right to control the defense of Genex in the main action.   Further, even assuming, arguendo, that Allianz had the right to control the defense of Genex as its “insured,” we conclude that such right must yield where, as here, there are conflicts of interest between Allianz and Genex and between Genex and Praxair (see Penn Aluminum v. Aetna Cas. & Sur. Co., 61 A.D.2d 1119, 1120, 402 N.Y.S.2d 877).   Because Reed Smith was not substituted as counsel for Genex, it lacked standing with respect to the further part of its cross motion seeking to disqualify Ford Marrin as counsel for Genex as well as with respect to its additional cross motion seeking leave to amend the second amended answer of Genex (see Dobbins v. County of Erie, 58 A.D.2d 733, 395 N.Y.S.2d 865).

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously affirmed with costs.

MEMORANDUM: