Con Edison ("Con Ed") was unsuccessful in arguing for defense costs that had already been paid by other insurers. Consol. Edison Co. of N.Y. v. Lexington Ins. Co., 2015 U.S. Dist. LEXIS 121573 (S.D. N.Y. Sept. 9, 2015). Team, Inc. was under contract with Con Ed to provide repairs to the steam system running below the streets of New York City. The contract required Team to indemnify Con Ed for all claims resulting from personal injury or property damage connected to Team's work. Team also obtained a CGL policy naming Con Ed as an additional insured. The policy was to provide primary coverage. Any insured was responsible for the first $250,000 of costs for investigation and/or defense. On July 1, 2007, a steam distribution main, on which Team had finished working, ruptured, creating a huge crater and sending steam and debris, including asbestos insulation, into the surrounding area. The rupture caused substantial damage to nearby buildings, vehicles and underground infrastructure. It also caused personal injury, including two individuals in a tow truck that fell into the crater and a woman who suffered a fatal heart attack while running from the explosion. Forty-five lawsuits were filed against Con Ed. Con Ed notified Team, and Team provided notice to Lexington. Team refused to defend or indemnify because Con Ed's negligence caused the explosion. Lexington conducted an investigation and issued a reservation of rights letter on October 6, 2008, agreeing to provide a defense. Nevertheless, Con Ed did not permit Lexington to defend the lawsuits. Con Ed retained its own outside counsel and had in-house counsel do some of the work. Con Ed did not comply with Lexington's request for copies of complaints and defense cost invoices. Lexington made requests for information in October 2008, July 2009 and March 2010. Con Ed did not provide Lexington with information until July 21, 2011. During those years, Con Ed had over $50 million in legal fees. But other insurers paid these defense costs. The first layer of excess coverage was triggered when Con Ed satisfied a self-insured retention of $5 million. The excess carrier then paid over $35 million in defense costs. The second layer of excess coverage then began paying defense costs, which eventually totaled over $17 million. Neither excess layer reimbursed Con Ed for the $5 million self-insured retention nor for the cost of Con Ed's in-house counsel. On May 4, 2011, Lexington paid its policy limit of $2 million to Con Ed. Lexington was released from liability for defense costs incurred from and after the date of release, but Con Ed retained the right to reimbursement for reasonable defense costs incurred in connection with the claims and litigation. Con Ed then sent Lexington defense invoices for $4.7 million for defense costs in 2007. Con Ed later sent invoices for 2008 ($9.5 million), 2009 ($4 million), 2010 ($4.1 million), and 2011 ($2.5 million). Lexington refused to pay on these invoices. Suit was filed and Lexington moved for summary judgment, seeking to dismiss Con Ed's claims for any defense costs that were reimbursed by the excess carriers. Lexington also sought summary judgment for the rest of Con Ed's unreimbursed out-of-pocket defense costs. The court granted summary judgment to Lexington on reimbursement of defense costs already reimbursed. An insured could not obtain reimbursement for defense costs from one insurer that had already been reimbursed by another insurer. Con Ed had not been damaged and had no claim for reimbursement from Lexington. The court also granted summary judgment to Lexington on the $5 million in self-insured retention and the costs of Con Ed's in-house counsel. The Lexington policy had a "voluntary payments" provision stating that the insured could not make any payment without the insurer's consent.Although Lexington did not raise this issue as an affirmative defense, Con Ed failed to plead a claim for these costs in its complaint. It was too late for Con Ed to amend.
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