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.
The Burlington case arose out of an injury to a New York City Transit Authority employee who fell off an elevated platform while trying to avoid an explosion that occurred when the named insured’s excavation machine touched a live electrical cable buried in concrete in the subway. The Transit Authority argued that it was entitled to coverage because the named insured’s operation of the machine provided the requisite causal nexus triggering the policy. However, two internal memos acknowledged the Transit Authority’s sole responsibility for the accident. The excavation equipment operators were operating their equipment properly and had no way of knowing about the cable. The Transit Authority’s inspection had failed to identify the job-site hazard. Burlington asserted and the majority opinion agreed that since the named insured was not at fault for the injuries, the Transit Authority was not an additional insured under the policy. Although the explosion would not have occurred and the employee would not have been injured but for the machine contacting the cable, the court ruled that was not the proximate cause of the injury because the named insured did not operate the machine a faulty manner.
Other courts have rejected arguments that additional insured coverage is limited to vicarious liability claims, i.e., injuries solely caused by the named insured’s acts or omissions. First Mercury Ins. Co. v. Shawmut Woodworking & Supply, Inc., 660 Fed. Appx. 30 (2d Cir. 2016); James F. Davis Constr. Corp. v. Erie Ins. Exch., 126 A.3d 753 (Md. Ct. Spec. App. 2015). Coverage for additional insureds extends to occurrences attributable in part to acts or omissions by both the named insured and the additional insured. Whether the policy only indemnifies the portion of the loss that was caused by the named insured remains an open question.
Keywords: insurance, coverage, litigation, New York, additional insureds