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NATIONAL HOCKEY LEAGUE, et al., Plaintiffs, v. TIG INSURANCE COMPANY f/k/a Transamerica Insurance Company et al., Defendants.
This action concerns insurance coverage for various underlying personal injury lawsuits and other proceedings that former National Hockey League players brought alleging that they sustained concussion-related injuries during their careers (collectively, Concussion Litigation). The insurer-defendants at issue on this motion provided the NHL plaintiffs with 31 primary commercial general liability policies (Policies) spanning from 1982-2013. Generally, each of those policies provided the insured with coverage for a limited period of one year. NHL was uninsured for most of the years prior to the issuance of those policies.
In Motion Seq. No. 04, plaintiffs National Hockey League, NHL Board of Governors, and NHL Enterprises, Inc. (collectively, NHL) move for partial summary judgment declaring that: (1) the insurers has a contractual duty to defend the underlying Concussion Litigation; (2) the insurers’ duties to defend require payment of all reasonable defense costs incurred in NHL's defense of the Concussion Litigation; and (3) the insurers cannot allocate or recover any defense costs from NHL. In the alternative, NHL seeks (4) a declaration that allocation of defense costs must exclude NHL from paying, even for the years it was self-insured. NHL directs this motion against defendants Chubb Insurance Company of Canada, Federal Insurance Company, Vigilant Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., American Home Assurance Company, and TIG Insurance Company (collectively, defendants) only. NHL does not move against defendants Zurich Ins. Co. Ltd. or Aviva Ins. Co. of Canada.
The Underlying Concussion Litigation Matters
Beginning in November 2013, over 150 named plaintiffs filed multiple concussion-related lawsuits against NHL. In August 2014, the Judicial Panel on Multidistrict Litigation transferred those lawsuits to Federal Court under the caption In re: National Hockey League Players’ Concussion Injury Litigation (MDL). The operative complaint in the MDL was a putative class action on behalf of all retired NHL players. In the MDL, the players alleged that they sustained concussive injuries during their time as players for the NHL. Specifically, the players alleged, on behalf of all retired NHL players, that they sustained concussive and sub-concussive injuries that occurred and continued to occur throughout their careers in the NHL and afterward. The NHL operated since 1917 and obtained coverage in approximately 1974. Ultimately, the Federal Court denied the players’ motion for class certification in the MDL and the NHL settled the MDL cases, seven related concussion cases in California State court, and certain unfiled claims for approximately $18.5 million.
The defendants issued 31 primary comprehensive general liability policies spanning from October 31, 1982 to January 1, 2014. The policies each contain a duty to defend and a duty to indemnify for occurrences of bodily injury within the policy periods.
The Chubb policies generally state:
“We will pay damages the insured becomes legally obligated to pay by reason of liability imposed by law or assumed under any contract or agreement because of:
bodily injury ․ caused by an occurrence ․ to which this insurance applies.
This insurance applies:
1. to bodily injury ․ which occurs during the policy period[.]
We will defend any claim or suit against the insured seeking such damages.
We will defend claims or suits against the insured seeking damages to which this insurance applies even if the allegations of the suit are groundless, false or fraudulent.
SUIT means a civil proceeding in which damages because of bodily injury ․ to which this insurance applies are alleged ․” (Doc 108).
The AIG policies generally state:
“We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury ․ to which this insurance applies. We will have the right and duty to defend any suit seeking those damages even if the allegations of the suit are groundless, false or fraudulent.
This insurance applies to bodily injury ․ only if
(1) The bodily injury ․ is caused by an occurrence that takes place in the coverage territory and (2) The bodily injury ․ occurs during the policy period.
Suit means a civil proceeding in which damages because of bodily injury ․ to which this insurance applies are alleged ․” (Doc 166).
The TIG policy states:
“We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” ․ to which this insurance applies․ This insurance applies only to “bodily injury” ․ which occurs during the policy period. The “bodily injury” ․ must be caused by an “occurrence.” ․ We will have the right and duty to defend any “suit” seeking those damages.
“Suit” means a civil proceeding in which damages because of “bodily injury” ․ to which this insurance applies are alleged ․” (Doc 104).
In late 2013, NHL provided notice of the Concussion Litigation to the defendants, who agreed, under reservations of rights, to front the defense costs. NHL had already retained, at that time, independent law firms that NHL selected for itself. Under their reservations of rights, the defendants made payments towards parts of the defense costs for the Concussion Litigation. Those payments amounted to almost $20 million between 2017 and 2020. NHL seeks to recover the unpaid portions of its defense costs in this action.
In Motion Seq. No. 04, NHL argues that the defendants have a duty to pay its reasonable defense costs for the entire Concussion Litigation lawsuits. NHL also seeks a declaration that the defendants may not allocate any defense costs to NHL for NHL's self-insured years.
The defendants respond that summary judgment is not appropriate because NHL did not trigger the defendants’ obligations to reimburse costs. Specifically, they argue that plaintiff was required to tender the defense of the underlying cases to the defendants, but NHL instead elected to retain independent counsel and control its own defense. Defendants assert that discovery is necessary to “further explore whether NHL, from the outset, intended to maintain complete, unilateral control over the defense of the Concussion Litigation” (Doc 186 at 9-10 [Def's Opp]).
Relatedly, defendants argue that there was a conflict of interest between them and NHL, and that the issue of defense costs must be analyzed under equitable principles pursuant to the independent counsel doctrine (id. at 8-9 [“The doctrine thus transforms the insurer's contractual duty to defend (with the concomitant right to control) into an equitable duty to pay for the defense (without a right to control)”]).
Defendants also contend that allocation to NHL is necessary because NHL was uninsured for almost 60 of the more than 95 years at issue in the Concussion Litigation, and that allocation of defense costs should proceed pro rata, on a time-on-risk basis, that includes NHL's uninsured periods.
To obtain summary judgment, the movant must make a prima facie showing of entitlement to judgment as a matter of law by submitting sufficient “evidentiary proof in admissible form” to demonstrate the absence of material issues of fact (Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316, 476 N.E.2d 642 ). The court views the evidence in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor (see Flomenbaum v. New York Univ., 71 A.D.3d 80, 91, 890 N.Y.S.2d 493 [1st Dept. 2009]). The burden shifts to the non-moving party to demonstrate the existence of a factual issue requiring a trial of the action if the movant makes its prima facie case (see Vermette v. Kenworth Truck Co., 68 N.Y.2d 714, 717, 506 N.Y.S.2d 313, 497 N.E.2d 680 ). Additionally, the court may exercise its power under CPLR 3212 (b) and search the record to award summary judgment to the non-moving party.
Defendants first argue that NHL never triggered a right to defense coverage because it has not established that it was prepared to tender the defense to the defendants. The court disagrees. NHL notified defendants of the Concussion Litigation in 2013 and the defendants, aware of NHL's selection of its own counsel, were at least somewhat involved in the litigation and paid part of the defense costs under their reservations of rights. Defendants did not timely disclaim coverage or demand that NHL cede control of the defense. The basis of this purported disclaimer (raised for the first time in this lawsuit) — NHL's failure to tender control of the defense to the defendants — was or should have been apparent almost immediately and the multi-year delay in disclaiming is unreasonable as a matter of law (see e.g. Hunter Roberts Const. Group, LLC v. Arch Ins. Co., 75 A.D.3d 404, 409, 904 N.Y.S.2d 52 [1st Dept. 2010]).
Where “the insurer's interest in defending the lawsuit is in conflict with the [insured]’s interest ․ [the insured] is entitled to defense by an attorney of his own choosing, whose reasonable fee is to be paid by the insurer” (Public Serv. Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392, 401, 442 N.Y.S.2d 422, 425 N.E.2d 810 ; see also Prashker v. U.S. Guar. Co., 1 N.Y.2d 584, 593, 154 N.Y.S.2d 910, 136 N.E.2d 871 ; Cunniff v. Westfield, Inc., 829 F. Supp. 55, 57 [E.D.N.Y. 1993]). “Where an insurer defends under a reservation of rights, the insured is entitled to retain its own counsel” (Federated Dept. Stores, Inc. v. Twin City Fire Ins. Co., 28 A.D.3d 32, 37 n.1, 807 N.Y.S.2d 62 [1st Dept. 2006]). The “insurer's reservation affects only the insurer's duty to indemnify, not its duty to defend ․” (1 Insurance Claims and Disputes § 4:26 [6th ed.]).
Here, defendants’ waived their right to control NHL's defense in the underlying action by failing to disclaim coverage timely and by making partial payments towards NHL's independent defense under reservation of rights over the course of several years. Defendants agreed to make partial payments towards NHL's defense costs under reservation of rights and acquiesced to NHL's selection of independent counsel. In any event, NHL was entitled to independent counsel by virtue of defendants’ reservations of rights (Federated Dept. Stores, Inc., 28 A.D.3d at 37 n.1, 807 N.Y.S.2d 62). Thus, defendants’ disclaimer arguments are precluded at this juncture.
Moving on to allocation, the issue is whether defense costs can be allocated to the insured on the back end for the periods that it failed to obtain coverage. “It is well established that[,] ‘[i]n determining a dispute over insurance coverage, we first look to the language of the policy’ ” (Keyspan Gas E. Corp. v. Munich Reins. Am., Inc., 31 N.Y.3d 51, 60-61, 73 N.Y.S.3d 113, 96 N.E.3d 209 , quoting Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139, 148, 969 N.Y.S.2d 808, 991 N.E.2d 666 ). The duty to defend “is exceedingly broad,” and “[a]n insurer must defend whenever the four corners of the complaint suggest ․ a reasonable possibility of coverage” (Continental Casualty Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648, 593 N.Y.S.2d 966, 609 N.E.2d 506 ). That is, an insurer is obligated to front-end its insured's defense (or reasonable defense costs) for suits alleging covered incidents.
The court in Keyspan found that the “during the policy period” language is a provision “limiting the insurer's liability to losses and occurrences” that required a pro rata approach to indemnification allocation (Keyspan Gas E. Corp., 31 N.Y.3d at 61, 73 N.Y.S.3d 113, 96 N.E.3d 209). The Court of Appeals reasoned that the “all sums” approach would “impose liability in perpetuity (or retroactively to periods prior to coverage) on an insurer who issued insurance coverage for only a limited number of years” (id.). It also noted that application of the unavailability rule (with the all sums approach to allocation of indemnification) “would effectively provide insurance coverage to policyholders for years in which no premiums were paid and in which insurers made the calculated choice not to assume or accept premiums for the risk in question” (id. at 61, 73 N.Y.S.3d 113, 96 N.E.3d 209).
The court finds that allocation of defense costs to NHL for the periods that it was self-insured is appropriate under the facts presented here and applying the language in the pertinent policies. In the policies in this case, the indemnification provisions state that the defendants “will pay damages the insured becomes legally obligated to pay ․ because of ․ bodily injury ․ caused by an occurrence ․ to which this insurance applies.” The insurance applies to bodily injury that “occurs during the policy period” only (see e.g. Doc 108). Likewise, the defense costs portions of the policies state that defendants “will defend claims or suits against the insured seeking damages to which this insurance applies even if the allegations of the suit are groundless, false or fraudulent․ SUIT means a civil proceeding in which damages because of bodily injury ․ to which this insurance applies are alleged ․” (e.g. Doc 108). The language “to which this insurance applies” plainly limits the scope of both the defendants’ indemnification and defense obligations to bodily injury caused by an occurrence during the applicable policy periods.
In (Danaher Corp. v. Travelers Indemnity Co., 414 F. Supp. 3d 436 [S.D.N.Y. 2019]), the court found that “defense costs can be readily apportioned, as ‘apportionment of defense costs [may] follow the method for apportionment of indemnification costs’ ” (id. quoting Avondale Indus., Inc. v. Travelers Indemnity Co., 774 F. Supp. 1416, 1437 ). It apportioned defense costs to the self-insured parties in the same manner as indemnification costs, and ruled that otherwise allocation “would be inconsistent with the principle from Keyspan Gas that an insured must bear the risk of loss allocable to any years in which the insured went without coverage” (id. at 454; see also Insurance Co. of N. Am. v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1224-1225 [6th Cir. 1980] [“An insurer contracts to pay the entire cost of defending a claim which has arisen within the policy period. The insurer has not contracted to pay defense costs for occurrences which took place outside the policy period. Where the distinction can be readily made, the insured must pay its fair share for the defense of the non-covered risk.”]). It is immaterial that the Danaher plaintiffs were indemnitors of the insured as they stood in the insured's shoes.
The ruling in Danaher is persuasive. The former NHL players alleged [concussive and sub-concussive] bodily injuries that first occurred during their professional careers and continued afterwards. The proposed class of former players would have encompassed players from 1917 onwards, and some, if not many, of their alleged injuries would have occurred during the years that NHL failed to obtain insurance. To the extent that the defense of the Concussion Litigation encompassed claims of bodily injury that arose prior to NHL's insured years, NHL should be required to pay its own reasonable costs for that defense. In the policies, defendants agreed to cover the defense for only suits alleging bodily injury that occurred during the policy periods (“to which this insurance applies”).
Thus, each of the policies is limited to the amount of time that it covered. Accordingly, the defense costs must be allocated among the insurers and the insured (for its self-insured periods) commensurate with their proportionate time on the risk. NHL did not carry insurance for approximately 57 of the 97 years that the underlying Concussion Litigation addressed. Accordingly, NHL must “pay its fair share for the defense of the non-covered risk” (Danaher Corp. v. Travelers Indemnity Co., 414 F. Supp. 3d 436, 454 [S.D.N.Y. 2019], quoting Generali-U.S. Branch v. Caribe Realty Corp., 1994 WL 903279, at *2 [Sup. Ct., N.Y. County 1994]).
Other courts in this jurisdiction have reached the same result. For instance, the court in (Generali-U.S. Branch v. Caribe Realty Corp., 1994 WL 903279 [Sup. Ct., N.Y. County 1994]) found that “there is a clear basis for apportioning defense costs between [the insured] and [the insurer]” where one of the alleged occurrences of lead poisoning happened prior to the issuance of a policy when the defendant was not insured (id. at *2).
Method of Allocation
NHL alternatively argues that apportionment of defense costs between itself and the insurers should be limited to the 302 individual settled claims from the Concussion Litigation, not all of the claims raised in the various underlying matters that were defended. NHL contends that allocation of defense costs to it should therefore be “calculated as the ratio of amounts paid in settlement to claimants with no alleged injury during the Policy periods, divided by the total settlement amount paid to all claimants” (Doc 95 at 21). That is, NHL seeks to avoid all or nearly all allocation of defense costs to itself on the basis that the settled claims involved retired players whose injuries at least continued into the years covered by the policies. NHL's position is that allocation to it would be appropriate for only settled claimants who sustained injuries and died prior to the issuance of any policy, regardless of when the original injuries occurred.
Defendants respond that a pro rata time-on-risk allocation encompassing all the claims in the Concussion Litigation—including all of the claims of the purported class of retired NHL players from 1917 onwards—is more appropriate. Defendants point to the class certification motion in the MDL.
The court rejects NHL's proposed method for allocation. The defense of the underlying Concussion Litigation was not limited to only the individual claims that ultimately settled. While the motion to certify the class in the MDL was denied, NHL defended the entire proposed class action and accrued defense costs in the process. Directing allocation for only the settled claims would ignore the policies’ “to which this insurance applies” language. Thus, using NHL's approach would subvert the contracts and obviate NHL's obligation to cover the defense costs “allocable to any years in which [it] went without coverage” (Danaher, 414 F. Supp. 3d at 454).
NHL relies on (Continental Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 642, 593 N.Y.S.2d 966, 609 N.E.2d 506 ). The Rapid-Am. court noted that “[t]he question whether the insured itself must contribute to defense costs is appropriately deferred at least until such time as the underlying lawsuits are shown to involve ‘occurrences’ during self-insured periods” (id. at 642, 593 N.Y.S.2d 966, 609 N.E.2d 506). Rapid-Am. actually militates against NHL's proposed method of allocation because the Concussion Litigation proceedings were settled without determinations of when or if qualifying bodily injuries occurred.
Courts in New York and in the United States generally have applied many methods for allocating defense costs to insureds and insurers, some of which would not be workable here (see e.g. Ostrager & Newman, Handbook on Ins. Coverage Disputes, § 6.02 [20th ed, 2021]). “In cases in which it is determined that the insured is self-insured for part of the coverage period, the weight of authority is that the insured must bear a pro rata share of defense costs” (id. § 6.02 [a] ). Nonetheless, the record before the court is not sufficient to determine, as a matter of law, which pro rata allocation approach is best suited. Accordingly, the motion is denied as to the method of allocation. This denial is without prejudice to a new motion by defendants to determine which pro rata approach to apply.
The court has considered the parties’ remaining arguments and finds them without unavailing.
Accordingly, it is
ORDERED that the motion is granted in part and denied in part; and it is further
ORDERED, ADJUDGED and DECLARED that NHL's motion for a declaratory judgment is granted to the extent that defendants are required to pay reasonable defense costs incurred in NHL's defense of the Concussion Litigation, provided that the defense costs must be allocated between the insurers and NHL using a method to be determined after further motion practice; and it is further
ORDERED that the remainder of the relief requested in the motion is denied.
Melissa A. Crane, J.
Response sent, thank you
Docket No: Index No. 653421/2020
Decided: June 24, 2022
Court: Supreme Court, New York County, New York.
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