SUIT SEEKING INDEMNIFICATION FOR A SETTLEMENT PAID TO DEFENDANT’S EMPLOYEE SHOULD NOT HAVE BEEN DISMISSED, RELEVANT LAW EXPLAINED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the suit by a general contractor (Aragon) and property lessee seeking indemnification for a settlement paid to defendant subcontractor’s (Port Richmond’s) injured employee (Brown), as well as the suit alleging the failure to procure insurance, should not have been dismissed. The court explained the relevant indemnification law:

It is well settled that “where an indemnitor does not receive notice of an action settled by the indemnitee, in order to recover reimbursement [for the settlement], [the indemnitee] must establish that [it] would have been liable and that there was no good defense to the liability”… . Conversely, “[w]here the indemnitor does receive notice of the claim against the indemnitee, . . . the general rule is that the indemnitor will be bound by any reasonable good faith settlement the indemnitee might thereafter make”… . As to notice, ” [i]t is sufficient that the party against whom ultimate liability is claimed is fully and fairly informed of the claim and that the action is pending with full opportunity to defend or to participate in the defense'” … . …

Applying these principles, we find that the motion court improperly dismissed the indemnification claim. The subcontract plainly requires indemnification for claims arising out of Port Richmond’s work on the construction project. On appeal, Port Richmond does not argue that Brown’s injuries did not arise from its work. Instead, Port Richmond contends that because the underlying action was dismissed against Aragon, plaintiffs cannot establish Aragon’s liability for those injuries. However, where notice is given, the indemnitee need not establish its own liability for the underlying claim … . There is no dispute that Port Richmond had notice of the underlying action as well as the settlement negotiations in this Court.  Zurich Am. Ins. Co. v Tower Natl. Ins. Co., 2018 NY Slip Op 01401, Second Dept 3-1-18

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