New York Appellate Court Rules Named Insured Does Not Need to be at Fault to Trigger Additional Insured Endorsement

The New York Appellate Division has continued its expansive interpretation of the standard additional insured endorsement, ruling that insurers can be on the hook for the liability of an additional insured despite the complete lack of negligence or fault by the named insured. In The Burlington Ins. Co. v. NYC Transit Authority, Index No. 102774/11 (NY. App. Div. Aug. 11, 2015), Breaking Solutions was hired to perform excavation work. It named the NYC Transit Authority and Metropolitan Transit Authority as additional insureds on a policy issued to it by Burlington. During excavation, Breaking Solutions struck a buried electrical cable with its equipment, sparking an explosion that knocked a NYC Transit Authority employee from an elevated platform causing him injuries. Suit was ultimately brought against the two transit authorities, which sought defense and indemnity from Burlington as additional insureds.

The Burlington policy stated that the transit authorities were additional insureds “only with respect to liability for ‘bodily injury’…caused, in whole or in part, by the [named insured’s] acts or omissions…in the performance of [the named insured’s] ongoing operations.” Burlington sought a declaration that it did not owe additional insured coverage to the transit authorities because it was undisputed that its named insured, Breaking Solutions, was not at fault for causing the accident. Rather, the NYC Transit Authority was the party responsible for identifying and marking the underground cable, but failed to do so. The trial court granted judgment for Burlington and the appellate court reversed.

The court held that the endorsement “on its face, defines the additional insured coverage afforded in terms of whether the loss was ’caused by’ the named insured’s ‘acts or omissions,’ without regard to whether those ‘acts or omissions’ constituted negligence or were otherwise actionable.” It found that Breaking Solutions’ “act of triggering the explosion” by disturbing the cable was sufficient to find additional insured coverage, which “does not depend upon a showing that the named insured’s causal conduct was negligent or otherwise at fault.”

The court relied upon several of its prior decisions, including W&W Glass Sys., Inc. v. Admiral Ins. Co., 91 Ad.3d 530 (1st Dept. 2012).[1] While acknowledging that the purpose of the endorsement may have been to require some fault on behalf of the named insured, it stated that “the fact remains that no words referring to the negligence or fault of the named insured were included in the endorsement itself.” It did note, however, that the endorsement in W&W Glass expressly stated that it did not apply if the additional insured’s negligence was the sole cause of its liability, an exception absent from the Burlington policy that clearly would have made a difference.

The holding is notable for a number of reasons. First, the “liability for” language in the endorsement, which has been the focus of decisions from other jurisdictions finding vicarious liability or some degree of fault by the named insured is required, is functionally ignored. Second, while the “caused by” language was added by ISO to require more than the bare causal nexus the prior “arising from” language was being afforded, the new language is basically treated equivocally. Third, it is apparent from the court’s analysis that the “acts or omissions” language might be applied broadly to include de minimis acts by the named insured.

The decision adds to the complex but commonplace arena of additional insured disputes. While one should remain mindful of the distinction between the scope of coverage purchased by a named insured and the limited grant of coverage afforded to an additional insured, in New York that distinction now appears less than sharp.

[1] New York federal courts have been critical of the line of authority relied upon, noting the appellate division did not “carefully parse the contractual language” and that the holding in W&W Glass was reached “in the absence of significant legal analysis.” See Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. XL Ins. Am., Inc., 2013 WL 1944468 (S.D.N.Y. May 7, 2013); Liberty Mut. Ins. Co. v. Zurich Am. Ins. Co., 2014 WL 1303595 (S.D.N.Y. Mar. 28, 2014).