State National Insurance Company is taking State Farm Fire and Casualty to federal court, demanding that its rival pick up the tab for defending and indemnifying two New York construction firms in a high-stakes injury suit.
In a complaint filed in the Eastern District of New York, State National alleges that State Farm is obligated to provide defense and indemnity coverage on a primary and non-contributory basis for President Union LLC and Sky Construction NY Inc.—two companies named as additional insureds under a policy State Farm issued to their subcontractor, Superior Chutes & Compactors Installations, Inc. The dispute centers on a workplace accident that allegedly left construction worker Jhony Galan with injuries at a Brooklyn job site.
According to the complaint, Galan alleges he sustained injuries to his right forefoot and left shoulder on July 9, 2024, while working at 325 Bond Street, Brooklyn, NY. He seeks recovery for past lost earnings of approximately $40,000, future lost earnings of approximately $200,000, physician expenses of approximately $40,000, and hospital expenses of approximately $25,000. The underlying lawsuit, pending in Kings County Supreme Court, asserts negligence and violations of New York Labor Law Sections 200, 240(1), and 241(6), and Rule 23 of the NY Industrial Code against Union and Sky.
Union and Sky, in turn, filed a third-party complaint against Superior Chutes, seeking common law and contractual indemnification and damages for breach of contract to procure insurance. The subcontract between Union, Sky, and Superior Chutes, dated July 7, 2024, required Superior Chutes to provide all supervision, layout, manpower, materials, equipment, scaffolding, hoisting, rigging, insurance, storage, and supplies necessary for excavation work at the site. The subcontract included indemnity provisions requiring Superior Chutes to indemnify and hold Union and Sky harmless from claims arising from its work, except for damages arising from the sole active negligence of the contractor.
The insurance requirements in the subcontract specified commercial general liability coverage with a $2,000,000 general aggregate, $2,000,000 products/completed operations aggregate, $1,000,000 each occurrence, $50,000 fire damage (legal) liability, and excess liability coverage of at least $5,000,000 over the primary policy. The policies were required to be primary and non-contributory, with Union and Sky named as additional insureds. The contract also required that all such insurance remain in effect for at least three years following completion of the work, and that defense costs would not be included in the limits of liability.
State National, which insures Union and Sky, states it has been providing a defense to Union and Sky in the underlying lawsuit. State Farm, which insured Superior Chutes, is alleged to have issued a policy that includes an Additional Insured – Owners, Lessees, or Contractors (Blanket) Endorsement.
On Jan. 24, 2025, Milber Makris Plousadis & Siden, LLP, defense counsel for Union and Sky, sent a letter to State Farm seeking defense, indemnification, and additional insured coverage. State Farm acknowledged receipt on February 6, 2025, and requested additional information. On Feb. 19, 2025, Milber sent further documentation, including the third-party complaint. On July 9, 2025, State Farm denied any obligation to provide defense, indemnification, or additional insured coverage.
State National seeks a declaration that State Farm is obligated to provide defense and indemnity coverage to Union and Sky for the underlying lawsuit, and that State National’s coverage is excess to State Farm’s. State National also seeks reimbursement for all defense fees and costs incurred.
The case shines a spotlight on the intricate web of contractual risk transfer and insurance obligations that underpin large construction projects. For insurance professionals, the outcome could influence how additional insured endorsements, primary versus excess coverage, and defense cost allocations are handled in the future. The stakes are high, with hundreds of thousands of dollars in potential liability and the prospect of a precedent that could ripple through the commercial insurance industry.
For now, State National’s allegations remain just that – allegations. The court has yet to decide whether State Farm must step up and take the lead in defending the construction firms. As the case moves forward, insurers and risk managers across the industry will be watching closely to see how the court interprets the policy language and contractual obligations at play.
