Additional Insured Endorsement Clarified By New York Court of Appeals
The New York Court of Appeals recently issued an important decision on how the Additional Insured endorsement to a Commercial General Liability insurance policy should be interpreted. It did so in a split decision and by reversing a decision by the Appellate Division. A vigorous dissent accompanied the opinion. Commentators are already discussing the ramifications of this decision, including whether the Insurance Services Office (“ISO”) will modify its Additional Insured endorsement because of this decision. What follows is a brief analysis.
In The Burlington Ins. Co. v. NYC Transit Authority, No. 57 (N.Y. Ct. of App. Jun. 6, 2017), the court addressed whether additional insureds were entitled to coverage under a contractor’s Commercial General Liability policy for an accident that was caused by the negligence of one of the additional insureds and where the named insured was found not to be at fault. At issue was the application of ISO form CG 20 10–the additional insured endorsement. The contractor’s agreement with the transit authority required it to obtain commercial general liability insurance with an endorsement listing the transit authority and other government entities as additional insureds. The operative language of the endorsement provided as follows:
Section II — Who is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury” . . . caused, in whole or in part, by:
Your acts or omissions; or
The acts or omissions of those acting on your behalf;
in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above.
Because the transit authority was solely responsible for the accident that caused the claimant’s injury, the insurance company denied coverage and sought a declaratory judgment. The Supreme Court granted the insurance company summary judgment and the Appellate Division reversed.
In reversing the intermediate appellate court and reinstating summary judgment in favor of the insurance carrier, the Court of Appeals concluded “that where an insurance policy is restricted to liability for any bodily injury ’caused, in whole or in part’ by the ‘acts and omissions’ of the named insured, the coverage applies to injury proximately caused by the name insured.” In so holding, the court rejected the Appellate Division’s “but for” causation formulation of the policy.
In making its finding, the court relied on what it called the plain meaning of the words of the endorsement. Essentially, the court held that there was no coverage for the additional insureds because the policy, by its terms, is limited to those injuries proximately caused by the named insured. The court distinguished proximate cause–a legal cause to which the court has assigned liability–from “but for” causation, which does not necessarily result in liability. Focusing in on the plain language of the endorsement, the court noted that the endorsement stated that the injury must be caused, in whole or in part, by the named insured. This language, held the court, requires proximate causation. Because the injury was solely the fault of the additional insured and was not proximately caused by any actions of the named insured, there was no coverage under the additional insured endorsement.
Notably, the court cited to ISO drafting history to show that this formulation was put into the endorsement because ISO thought that the courts had been interpreting the prior formulation (using the words “arising out of”) too broadly, which caused the endorsement to apply to injuries arising from the additional insured’s sole negligence. The court noted that to interpret the endorsement as had the dissent and the Appellate Division would allow the transit authority to compel a subcontractor to pay for injuries to its employee proximately caused by the negligence of the transit authority.
Had there been other insurance issued to the additional insureds the case may have been complicated further. But given the self-insured nature of government agencies, seeking coverage from the contractor’s policy under the additional insured endorsement was likely the only option.