A United States Court of Appeals overturned a lower court's ruling, finding that an insurer owed a defense to a cleaning company due to allegations of negligence. The case is Marine v. Fed. Ins. Co., 2026 U.S. App. LEXIS 18087 (2d Cir. 2026).
Background
Mary Guzman, an employee of the cleaning company PBM, was cleaning a revolving door when a glass panel dislodged and fell on her. Guzman filed a state court negligence action against the building owners, Old Slip and Beacon, and the lessee, Bank of New York Mellon (BNYM), alleging they created a dangerous condition on the premises.
Since workers' compensation generally bars employees from suing their own employers for workplace injuries, Guzman did not name her employer, PBM, in her lawsuit.
The building owners sued the cleaning company and the lessee, alleging that their negligence was the cause of the accident. The lessee, BNYM, countersued against the building owners and the cleaning company for contribution and indemnification.
The owners' insurer, LM Insurance Corp., filed a federal action against the cleaning company's insurer, New York Marine, and the lessee's insurer, Federal Insurance Co. LM sought to have New York Marine and Federal cover the legal defense and any potential payout for the owners in Guzman's underlying lawsuit.
A US District Court ruled that New York Marine had no duty to defend or indemnify either the building owners or the lessee, finding that the cleaning company was not responsible for the broken door. The lessee's insurer, Federal, appealed the ruling.
US Court of Appeals
The appellate court first determined who was an additional insured under the PBM's insurer. PBM's service contracts with Old Slip and BNYM explicitly required PBM to name them as additional insureds on its New York Marine commercial general liability policy. However, the other co-owner of the building, Beacon, had no such written agreement. As a result, Old Slip and BNYM were included as additional insureds on the insurance contract, but Beacon was not.
The court noted that "the standard for determining whether an additional named insured is entitled to a defense is the same standard that is used to determine if a named insured is entitled to a defense." Therefore, an additional insured is treated the same as a named insured with respect to the duty to defend.
Additionally, under New York law, an insurer's duty to defend its insured is much broader than its duty to indemnify. As the court stated, if "the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, false, or baseless the suit may be."
PBM's insurance policy covered liability for bodily injury caused, in whole or in part, by the acts or omissions of PBM or anyone acting on its behalf in the performance of its ongoing operations for the additional insureds.
The district court had ruled that there was no proof that Guzman, or by extension PBM, had caused the revolving door to break. Therefore, there was no act or omission present that would trigger coverage.
However, the appellate court noted that the owners' third-party complaint against PBM explicitly alleged that PBM was the primary wrongdoer who caused the dangerous condition. The complaint alleged that PBM "caused, created, maintained, controlled, and was responsible for the conditions" that resulted in the injury.
The court stated that because the allegations exist and are not facially frivolous, the insurer cannot walk away from its duty. Since the facts are unknown, the court cannot rule out the possibility that Guzman committed a negligent act that caused the door to break. The court determined that the owners' allegations were enough to trigger New York Marine's duty to defend and vacated the district court's judgment.
Editor's Note
This case highlights how broad an insurer's duty to defend is. As the court noted, the mere allegations that PBM's negligence was the cause of the loss, and not the proven facts, were enough to trigger the insurer's duty to defend. Regardless of how groundless or false the underlying lawsuit is, the insurer is compelled to defend, as long as it is within the scope of coverage.
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