July 20, 2017 Practice Points

Proximate Causation Required for Additional Insured Coverage

The Court of Appeals of New York recently overturned appellate division and federal district court precedent on the interpretation of additional insured language in the 2004 ISO Form 20 10 Endorsement and its equivalents

by David E. Schoenfeld and Thomas J. Dammrich II

The Court of Appeals of New York recently overturned appellate division and federal district court precedent on the interpretation of additional insured language in the 2004 ISO Form 20 10 Endorsement and its equivalents. In Burlington Ins. Co. v. NYC Transit Authority, --- N.E.3d ----, 2017 NY Slip Op 04384 (N.Y. June 6, 2017), the court concluded that “where an insurance policy is restricted to liability for any bodily injury ‘caused, in whole or in part’ by the ‘acts or omissions’ of the named insured, the coverage applies to injury proximately caused by the named insured.” The court rejected a “but for” causation formulation of the policy based on the idea that the phrase “caused by” does not materially differ from the phrase “arising out of” under New York law. See Zurich Am. Ins. Co. v. Harleysville Ins. Co., 194 F. Supp. 3d 253, 258 (S.D.N.Y. 2016). According to the court, “but for” causation cannot be partial, because an event either is or is not connected to a result. The court found the words “in whole or in part” can only modify proximate causation. Further, the liability language limits coverage for damages resulting from the named insured’s negligence or some other actionable act or omission. 

The Burlington court held that this interpretation squares with ISO’s intent in amending the endorsement in 2004 and apportions the risk consistent with the economics of the insurance. The court noted that ISO specifically replaced the “arising out of” language with “caused, in whole or in part” to provide coverage for an additional insured’s vicarious or contributory negligence, and to prevent coverage for the additional insured’s sole negligence.

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