Conditional Contractual Indemnification Where Owner May Share Fault; Pre-Notice Settlement Creates Irrebuttable Prejudice Under Insurance Law § 3420(c)(2)(B)

1. Introduction

350 E. Houston St., LLC v Travelers Indem. Co. of Am. (2026 NY Slip Op 02032, 1st Dept Apr. 2, 2026) arises from a Manhattan construction project at 11 Avenue C. Plaintiff-owner 350 East Houston Street, LLC retained Noble Construction Group, LLC as construction manager. Noble hired Copps Foundations, Inc. under a trade contract for excavation support and foundation piles work; Copps subcontracted Peterson Geotechnical Construction LLC to install micropiles and a dewatering system. After excavation-related work, an adjacent building owner alleged foundation damage and building shift.

The appeals presented a familiar but consequential cluster of construction-litigation issues: (i) whether the owner and related plaintiffs were entitled to unconditional contractual indemnification from Copps, (ii) whether negligence and contribution claims against Copps could be dismissed on summary judgment, (iii) whether an excess insurer (Temple Insurance Company) could disclaim based on late notice and pre-notice settlement, (iv) whether a late summary judgment motion by Noble could be considered for “good cause,” (v) whether Copps’s third-party claims against Noble for common-law indemnification and contribution should be dismissed, and (vi) whether Peterson should be precluded from using an inadequately disclosed expert.

2. Summary of the Opinion

  • The First Department affirmed conditional contractual indemnification for plaintiffs against Copps, but agreed there were triable issues preventing a declaration of unconditional indemnification because the owner may have participated in rejecting a recommended change to micropiling means and methods after unexpected subsurface conditions were discovered.
  • The Court affirmed denial of Copps’s summary judgment motion on negligence and related contribution cross-claims, finding fact issues on whether Copps directed or controlled the work.
  • The Court affirmed summary judgment for Temple, holding notice was untimely and that plaintiffs’ pre-notice settlement and repairs triggered an irrebuttable presumption of prejudice under Insurance Law § 3420(c)(2)(B).
  • The Court held Supreme Court properly entertained Noble’s late summary judgment motion for “good cause” under CPLR 3212(a), but modified the order by reinstating Copps’s third-party claims against Noble and making Noble’s contractual indemnification award against Copps conditional (not unconditional) given overlapping factual disputes about direction/control and pre-incident decisions.
  • The Court affirmed denial of preclusion against Peterson, reiterating that preclusion requires willful, deliberate, and contumacious noncompliance and a showing of prejudice.

3. Analysis

3.1. Precedents Cited

A. Contractual indemnification: broad “arise out of” language, but conditional where indemnitee may be negligent

The Court relied on Bradley v Earl B. Feiden, Inc. (8 NY3d 265 [2008]) and Drzewinski v Atlantic Scaffold & Ladder Co. (70 NY2d 774 [1987]) for the proposition that clear and unambiguous indemnity clauses allocating risk for claims “in any way” connected to the work are enforceable as written and are triggered by the work nexus (not necessarily by a finding of the indemnitor’s fault).

Mancusi v Avalonbay Communities, Inc. (199 AD3d 463 [1st Dept 2021]) supplied the immediate template: “arising out of” provisions are triggered where the loss originates from or is connected with contracted work (here, micropiling), yet indemnity may remain conditional if fact issues exist as to the indemnitee’s own negligence. The Court also cited Rivera v Columbia Hicks Assoc. LLC (203 AD3d 524 [1st Dept 2022]) to reinforce that such provisions need not be conditioned on a finding of fault by the indemnitor.

B. Negligence/contribution standards: “direction or control” and allocation of responsibility

On negligence and contribution issues, the Court cited 905 5th Assoc., Inc. v Weintraub (85 AD3d 667 [1st Dept 2011]) and Brothers v New York State Elec. & Gas Corp. (11 NY3d 251 [2008]) for the principle that liability can turn on whether a party directed, supervised, or controlled the work, creating triable issues not resolvable on summary judgment.

C. Excess coverage: late notice, proof of mailing, and statutory prejudice

The Court’s late-notice analysis invoked Matter of Allstate Ins. Co. [Patrylo] (144 AD2d 243 [1st Dept 1988]) for the evidentiary proposition that unsupported assertions of mailing—without documentary proof—do not establish notice.

Critically, the Court applied Insurance Law § 3420(c)(2)(B) to hold that plaintiffs’ settlement of the neighbor’s claim before Temple received notice created “an irrebuttable presumption of prejudice,” and emphasized the related investigative/defense deprivation recognized by Insurance Law § 3420(c)(2)(C). Hartford Fire Ins. Co. v Hudson Excess Ins. Co. (238 AD3d 667 [1st Dept 2025]) was cited to underscore that depriving an insurer of the chance to investigate or defend supports summary judgment on late-notice grounds in the excess-liability context.

D. Late summary judgment motions: “good cause shown”

The Court applied Brill v City of New York (2 NY3d 648 [2004])—the leading authority requiring “good cause” for untimely summary judgment motions—and relied on Bank of N.Y. Mellon v Davis (209 AD3d 426 [1st Dept 2022]) to confirm that trial courts retain broad discretion when a concrete, non-pretextual explanation is offered (here, miscalendaring plus counsel’s health/family circumstances and prompt remedial steps).

E. Third-party indemnity/contribution and the economic loss boundary

Reinstating Copps’s third-party claims against Noble, the Court cited McCarthy v Turner Constr., Inc. (17 NY3d 369 [2011]) and Trump Vil. Section 3 v New York State Hous. Fin. Agency (307 AD2d 891 [1st Dept 2003]) to frame common-law indemnification and contribution as fact-sensitive inquiries tied to actual supervision/control and relative fault, and grounded contribution in CPLR 1401.

The Court also rejected Noble’s characterization of Copps’s third-party pursuit as purely contract/economic loss, citing Board of Educ. of Hudson City School Dist. v Sargent, Webster, Crenshaw & Folley (71 NY2d 21 [1987]) to recognize that negligence-based claims (including negligent supervision/control) can support tort allocation beyond mere contract damages.

F. Expert preclusion: drastic remedy requiring willfulness and prejudice

The Court affirmed denial of preclusion by applying MSCI Inc. v Jacob (120 AD3d 1072 [1st Dept 2014]) (trial court discretion under CPLR 3126[2]), Chapman v State of New York (189 AD2d 1075 [3d Dept 1993]) (insufficient disclosure under CPLR 3101[d][1][i]), and Siegman v Rosen (270 AD2d 14 [1st Dept 2000]) (preclusion requires willful, deliberate, contumacious conduct). Rivera v Montefiore Med. Ctr. (123 AD3d 424 [1st Dept 2014], affd 28 NY3d 999 [2016]) supported the conclusion that lack of prejudice and the ability to respond to the expert’s theory weigh strongly against preclusion.

3.2. Legal Reasoning

A. Why indemnification was triggered—yet remained conditional

The Court first treated the trade contract’s indemnity clause as text-driven: it covered “all claims, losses, damages . . . demands, costs and expenses” connected “in any way or measure” to property damage “caused by, arise out of or in connection with the Work.” Once the neighbor’s damage was linked to micropiling contemplated by the contract, the clause was triggered without needing a separate finding that Copps itself was at fault.

But the Court refused to convert that trigger into unconditional indemnity because the record supported a competing narrative: after unexpected subsurface conditions were discovered, Copps and Peterson allegedly recommended a change in means and methods, and there were fact questions whether the owner participated in rejecting that change. If a factfinder could attribute proximate-cause negligence to the owner, indemnification could not be declared unconditional at the summary judgment stage. The result is a practical, litigation-shaping rule: a broad indemnity clause may establish entitlement, but a plausible fact pattern of indemnitee negligence keeps the remedy conditional pending liability findings.

B. Negligence and contribution against Copps: supervision/control as a triable factual question

Copps could not obtain dismissal because the record supported competing inferences about whether it directed or controlled the work (including supervision of Peterson). That supervision/control issue also animated contribution cross-claims, making summary disposition inappropriate.

C. Excess coverage: late notice plus pre-notice settlement as a decisive combination

Temple prevailed for two reinforcing reasons. First, notice was not “as soon as practicable”: Temple received notice only when served with process nearly 11 months later, after the neighbor’s claim had been resolved and repairs performed. Second, plaintiffs could not substantiate earlier notice with documentary proof of mailing or shipment tracking. The Court treated the absence of objective mailing/shipping evidence as fatal to plaintiffs’ attempt to create a fact issue.

Most importantly, the Court held that settling before notice triggered statutory consequences: an irrebuttable presumption of prejudice under Insurance Law § 3420(c)(2)(B), coupled with the concrete prejudice of depriving Temple of investigation and defense opportunities under Insurance Law § 3420(c)(2)(C). In effect, even if other disputes existed, the pre-notice settlement foreclosed coverage as a matter of law.

D. Late motion practice: “good cause” can be satisfied by a specific, non-strategic explanation

Applying CPLR 3212(a) and Brill v City of New York, the Court approved Supreme Court’s decision to consider Noble’s late motion because counsel provided a concrete explanation (miscalendaring compounded by health/family issues) and acted promptly upon discovering the error. The opinion signals that while “law office failure” is not automatically “good cause,” a detailed record showing non-strategic error and prompt corrective conduct can satisfy the standard.

E. Third-party claims against Noble: overlapping fault theories require trial-level allocation

The Court drew a line between (i) dismissing third-party claims on the theory they seek only contract/economic loss and (ii) permitting tort-based allocation where the pleadings and record support negligent supervision/control and pre-incident decision-making as potential tortious conduct. Because there were fact issues about both Copps’s and Noble’s roles—including the rejection of altered means and methods—Copps’s common-law indemnification and contribution claims against Noble had to be reinstated. For the same reason, Noble’s contractual indemnification against Copps could only be conditional.

F. Expert disclosure: insufficiency does not automatically equal preclusion

Although Peterson’s expert disclosure was inadequate under CPLR 3101[d][1][i], the Court reaffirmed that preclusion under CPLR 3126[2] is a drastic remedy reserved for willful, deliberate, contumacious conduct, typically coupled with prejudice. Plaintiffs could respond to the expert opinions and had notice of Peterson’s theories in advance of trial; those circumstances supported denial of preclusion.

3.3. Impact

  • Construction indemnity drafting and litigation: The decision reinforces that “arise out of/in connection with the Work” language is broad enough to trigger indemnity even absent a finding of the indemnitor’s fault, but it also highlights a recurring limiting principle: where the indemnitee may be negligent (especially by participating in means-and-methods decisions), courts are likely to award only conditional summary judgment.
  • Means-and-methods disputes: The opinion underscores that owner and construction manager involvement in rejecting field-driven changes after unforeseen subsurface conditions can create triable negligence issues, affecting indemnity and contribution outcomes.
  • Excess insurance claims handling: The ruling is a cautionary precedent for policyholders and additional insureds: settling and repairing before giving notice to an excess carrier can be outcome-determinative because of the statutory “irrebuttable presumption of prejudice.”
  • Motion practice discipline: While Brill v City of New York remains strict, the decision shows that detailed, credible, promptly addressed calendaring errors may still permit consideration of a late motion—without guaranteeing substantive victory.
  • Discovery sanctions: The opinion continues the First Department’s restrained approach to preclusion, favoring merits-based resolution absent demonstrable willfulness and prejudice.

4. Complex Concepts Simplified

Contractual indemnification vs. common-law indemnification
Contractual indemnification is based on the parties’ written agreement allocating risk. Common-law indemnification is an equitable remedy that shifts loss to the party actually responsible (often turning on supervision/control and fault).
Conditional vs. unconditional indemnification (on summary judgment)
A court may grant conditional indemnification when the contract clearly applies but the indemnitee’s own negligence remains unresolved. The obligation becomes enforceable depending on later findings (e.g., the owner is ultimately found not negligent).
“Arise out of”
This is typically read broadly to mean “originating from,” “incident to,” or “having a connection with” the work—without requiring proof that the indemnitor was negligent, so long as the causal connection to the work exists.
Late notice (“as soon as practicable”)
Policies commonly require prompt notice so the insurer can investigate and defend. Unsupported claims that notice was sent are often insufficient without objective documentation (e.g., receipts, tracking, logs).
Irrebuttable presumption of prejudice (Insurance Law § 3420[c][2][B])
If the insured settles a claim before giving the insurer notice, the law conclusively presumes the insurer was prejudiced—meaning the insured cannot “prove” the insurer was not harmed by the delay.
Preclusion
A sanction barring evidence (like expert testimony). Courts treat it as drastic and typically require willful, deliberate, contumacious noncompliance and meaningful prejudice.

5. Conclusion

The First Department’s decision crystallizes two practical rules for New York construction and insurance disputes. First, broad “arising out of the work” indemnity language can establish entitlement to indemnification without proving the indemnitor’s fault, but the presence of credible evidence that the indemnitee participated in negligent means-and-methods decisions will usually confine relief to conditional indemnification pending factfinding. Second, in the excess-coverage context, late notice coupled with pre-notice settlement is especially perilous: settling before notice triggers an irrebuttable presumption of prejudice under Insurance Law § 3420(c)(2)(B), supporting dismissal as a matter of law.