The 'Anti-Subrogation' Rule

Sunday, June 19, 2005 | 0

A recent case conveyed what I would call the "Anti-Subrogation Rule," where the court ruled that co-defendants, insured under same policy, cannot pursue cross-claims for indemnification against each other.

The case was Fidel Blanco, et al. v. CVS Corporation, d/b/a CVS 346, Indian Rock, LLC et al. (2d Dept 2005) (Index No. 4950/99).

Plaintiff, an employee of G.W. Plumbing, Inc., was injured when he fell from a scaffold while working on the construction of a drive- through canopy at a newly-constructed CVS store. The defendants CVS Corporation, d/b/a CVS 346, and CVS Suffern Store, LLC leased the premises from the defendant landlord Indian Rock, LLC. Pursuant to the terms of the lease, Indian Rock was required to maintain general liability insurance coverage and was to name CVS as an additional insured under that policy. Indian Rock procured its insurance through CNA. The policy had a limit of $1,000,000 per occurrence. The lease also required CVS to maintain general liability insurance coverage and to name Indian Rock as an additional insured under its policy. CVS procured its insurance through AIG. That policy contained a limit of $1,750,000 per occurrence.

Plaintiff commenced this action against CVS and Indian Rock to recover damages for personal injuries based upon violation of Labor Law section 240(1). CVS and Indian Rock asserted cross claims against each other for, among other things, contractual and common-law indemnification. CNA assumed the defense and indemnification of CVS as an additional insured under its policy.

The plaintiffs settled their action with CVS and Indian Rock for the sum of $1,500,000. CVS and Indian Rock agreed that each would pay 50% of the settlement sum but reserved their rights to pursue their cross claims against one another. The trial court denied the cross claims as barred by the anti-subrogation rule. Indian Rock appealed.

The Second Department held that Indian Rock was not entitled to contractual or common-law indemnification from CVS. The anti- subrogation rule provides that "an insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered." The rule applies to bar indemnification up to the policy limits of the comprehensive general liability policy at issue.

"Indian Rock's comprehensive general liability policy named CVS as an additional insured and it contained a limit of $1,000,000 per occurrence. Indian Rock's $750,000 share of the settlement fell within these policy limits. Since the same insurance company covered CVS and Indian Rock for the same risk, the anti-subrogation rule applies to bar Indian Rock from indemnification for its part of the settlement which was within the limits of the policy purchased by it. Thus, Indian Rock's cross claims were properly denied."

by NY attorney Lawrence Rogak.

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