ANTONITTI v. Perna Contracting Corporation, third-party defendant-appellant.

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Supreme Court, Appellate Division, Second Department, New York.

Nicolo ANTONITTI, et al., plaintiffs, v. CITY OF GLEN COVE, defendant third-party plaintiff-respondent; Perna Contracting Corporation, third-party defendant-appellant.

Decided: November 29, 1999

DAVID S. RITTER, J.P., WILLIAM C. THOMPSON, MYRIAM J. ALTMAN and WILLIAM D. FRIEDMANN, JJ. Curtis, Zaklukiewicz, Vasile, Devine & McElhenny, Merrick, N.Y. (Roy W. Vasile of counsel), for third-party defendant-appellant. Fogarty & Fogarty, Mineola, N.Y. (Edward Fogarty, Jr., of counsel), for defendant third-party plaintiff-respondent.

In an action to recover damages for personal injuries, etc., the third-party defendant appeals from an order of the Supreme Court, Nassau County (Dunne, J.), dated May 26, 1998, which denied its motion to dismiss the third-party complaint.

ORDERED that the order is modified by deleting the provision thereof denying the motion in its entirety and substituting therefor provisions granting the motion to the extent that so much of the third-party complaint as seeks indemnification for payments actually made by Reliance Insurance Company on behalf of the defendant third-party plaintiff City of Glen Cove is dismissed and otherwise denying the motion;  as so modified, the order is affirmed, with costs to the third-party defendant.

The plaintiff, an employee of the third-party defendant Perna Contracting Corporation (hereinafter Perna), was injured while working on premises owned by the defendant third-party plaintiff City of Glen Cove (hereinafter the City).   The plaintiff later commenced this action against the City. Notably, both Perna and the City were insured under the same general liability policy issued by Reliance Insurance Company (hereinafter Reliance) to Perna, with the City named as an additional insured.

Reliance thereafter undertook to defend the City. Subsequently, a Reliance “litigation supervisor” advised Perna that the City, through counsel Reliance had retained for it, would soon be instituting a third-party action against Perna.   Perna moved to dismiss the subsequently commenced third-party action, arguing, inter alia, that it violated the antisubrogation rule.   The Supreme Court denied the motion.   We modify.

Although the general liability policy insuring both the City and Perna contains an exclusion for liability deriving from bodily injury to Perna's employees, there is an exception to this exclusion for liability assumed by Perna under an “insured contract”.

 We agree with Perna that the underlying construction contract, which requires, among other things, that Perna indemnify the City for claims arising from injuries to Perna's employees, qualifies as an “insured contract” within the meaning of the policy (cf., Grefer v. Anderson, 249 A.D.2d 892, 893, 672 N.Y.S.2d 184).   The third-party claim for indemnity interposed by the City thus represents a potential liability for which Perna was covered under the policy (see, Morales v. City of New York, 239 A.D.2d 566, 567, 657 N.Y.S.2d 766;  see also, Maksymowicz v. New York City Bd. of Educ., 232 A.D.2d 223, 647 N.Y.S.2d 780;  cf., Grefer v. Anderson, supra).   Accordingly, by advancing the subject third-party claim, the City-in reality, Perna's general liability carrier-was impermissibly attempting to pass “the incidence of loss to its own insured”, in violation of the antisubrogation rule (see, North Star Reinsurance Corp. v. Continental Ins. Co., 82 N.Y.2d 281, 294, 604 N.Y.S.2d 510, 624 N.E.2d 647;  Morales v. City of New York, supra;  Maksymowicz v. New York City Bd. of Educ., supra).   Under these circumstances, Perna's motion to dismiss the third-party complaint should have been granted (see, Maksymowicz v. New York City Bd. of Educ., supra).

 We note, however, that an insurer, on paying a loss, is subrogated in a corresponding amount to the insured's right of action against any other person responsible for the loss (see, Winkelmann v. Excelsior Ins. Co., 85 N.Y.2d 577, 582, 626 N.Y.S.2d 994, 650 N.E.2d 841;  Federal Ins. Co. v. Andersen & Co., 75 N.Y.2d 366, 372, 553 N.Y.S.2d 291, 552 N.E.2d 870;  Safeguard Ins. Co. v. Rosen, 39 A.D.2d 851, 332 N.Y.S.2d 963, affd. 31 N.Y.2d 1054; , 342 N.Y.S.2d 378, 295 N.E.2d 189;  6A Appleman, Insurance Law & Practice § 4051, at 103;  Couch, Insurance § 61:4, at 77).   Thus, a right of subrogation arises only upon payment of a loss by the insurer.   To vindicate the antisubrogation rule and still preserve the rights of the City to recover losses for which it was not actually compensated by its insurer, the common-law indemnification claims against Perna should be dismissed pro tanto to the extent of payments actually made by the insurer (see, Small v. Yonkers Contracting, Inc., 242 A.D.2d 378, 662 N.Y.S.2d 67).

The City's remaining contentions are without merit.

MEMORANDUM BY THE COURT.

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