“AntiSubrogation Rule” Does Not Bar Indemnification Claim

[OK – let me warn you in advance that this one is confusing.]   The City of Johnstown, NY, contracted with Luizzi to do some road paving work.  Luizzi had three existing insurance policies: (a) a CGL policy; (b) an automobile policy; and (c) an umbrella policy.  In addition, in order to do the work for the City, Luizzi obtained a special owners and contractors protective liability policy (“OCP”).  This fourth policy only named the City as an insured (Luizzi was not a named insured under the OCP policy).  All four policies were written by Harleysville.  Mr. Pesta was an employee of Luizzi and was severely injured (his legs were amputated) when he was struck by a dump truck operated by another Luizzi employee.  Pesta sued the City [1]  for his injuries.  The City brought a third-party indemnification claim against Luizzi.

The City settled Pesta’s personal injury claim [2]  but preserved its right to get indemnification from Luizzi.  Luizzi argued that any recovery by the City should be capped at the applicable policy limits.  The Court found – due to exclusions -  that neither the CGL, auto nor umbrella policy afforded coverage to Luizzi.   Since the OCP policy did not name Luizzi as an insured, the antisubrogation rule did not prevent the City from going after Luizzi’s assets [3]. 

The Court defined the antisubrogation rule as follows:  “[a]n insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered.”   However, none of the four Harleysville policies provided insurance to Luizzi for the loss.  (The CGL, auto and umbrella all had valid exclusions which excluded coverage to Luizzi for the loss and the OCP policy did not name Luizzi as an insured).   Since, with respect to Pesta’s claim, Luizzi was not “an insured” of Harleysville, Harleysville was not prevented by the antisubrogation rule from going after Luizzi’s assets for the amount it had paid to Pesta.
Bottom Line:  The antisubrogation rule prevents a carrier from going after one of its own “insureds” in certain circumstances.  However, if a tortfeasor is not considered “an insured,” subrogation may be possible.   [I warned you this was confusing.  Email me with questions if you are still confused.]

[1] NY’s workers compensation law barred Pesta from suing his employer Luizzi directly.
[2] The decision didn’t say it, but I assume the Harleysville OCP policy defended the City, paid the damages to Pesta and Harleysville subrogated to go after Luizzi’s corporate assets.
[3] Pesta v. City of Johnstown, Third Judicial District (7/17/08))