Appellate Division Issues Recent Decisions on Additional Insured Coverage

Recently, the Appellate Division, First Department issued two important decisions on the issue of additional insured coverage pursuant to an endorsement found in many commercial general liability policies today. The two decisions – Burlington Insurance Co. v. NYC Transit Authority, __ A.D.3d __, 14 N.Y.S.3d 377 (1st Dep't, Aug. 11, 2015) and Structure Tone, Inc. v. National Casualty Co., 130 A.D.3d 405 (1st Dep't 2015) – provide further guidance as to when additional insured coverage will be triggered in favor of a third party.

In both cases, the Appellate Division considered whether additional insured coverage had been triggered in favor of a third party under a similar endorsement in the named insured's policy. The endorsement provided that additional insured coverage would extend to certain third parties, but "only with respect to liability for bodily injury . . . caused, in whole or in part, by your [the named insured's] 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."

In Burlington Insurance Co., the Court was asked to decide whether additional insured coverage would be triggered under such an endorsement where the underlying accident was caused by an "act" of the named insured (i.e., operating a machine that set off an explosion), even though it was undisputed that the named insured was not at fault for the accident. In finding that additional insured coverage would be triggered in favor of the owners who contracted with the named insured, the Court reaffirmed that the "caused by" language in such an endorsement "does not depend upon a showing that the named insured's causal conduct was negligent or otherwise at fault." The Court noted that the endorsement simply requires that the accident be caused, in whole or in part, by the named insured's "acts or omissions," and does not require any showing that the named insured was at fault. If a showing of negligence on the part of the named insured is required, then, the Court held, the endorsement must expressly state so.

In Structure Tone, Inc., the Appellate Division, First Department reviewed a similar endorsement but concluded that additional insured coverage had not been triggered. In that case, the owner of the project where the accident occurred sought additional insured coverage pursuant to an electrical subcontractor's general liability policy. Significantly, the owner did not directly contract with the named insured subcontractor. In interpreting a similar endorsement as cited above, the Court held that the owner was not entitled to additional insured coverage because the accident was not caused by an act or omission of the named insured in the performance of its ongoing operations "for the additional insured." The named insured was not performing operations "for" the owner, but rather for the general contractor who retained the named insured. Given the express terms of the endorsement, the Court held that additional insured coverage did not extend to the owner.

Both decisions have important implications with respect to these commonly litigated additional insured claims: the Burlington Insurance Co. decision broadly extends additional insured coverage so long as the named insured's acts or omissions "caused" the accident (even if the named insured was not negligent); whereas the Structure Tone, Inc. decision limits additional insured coverage only to those entities with whom the named insured directly contracted (and not to owners or general contractors who often benefit from, but do not contract directly with, the named insured).