NY Ruling Curtails Contractors Additional Insured Coverage


The Court of Appeals, New York’s highest court, ruled this week that a common insurance policy endorsement extends coverage to additional insureds only when an injury is proximately caused by the named insured’s negligent conduct, a ruling that substantially limits the protection available to general contractors whose subcontractors have purchased such policies. In an opinion issued Tuesday, June 6, 2017, a split New York Court of Appeals upended a State appellate panel’s ruling that had held that the New York City Transit Authority and Metropolitan Transit Authority are entitled to additional insured coverage under an endorsement which in relevant part provided that the named insured are additional insureds “… only with respect to liability for ‘bodily injury,’ ‘property damage,’ or ‘personal and advertising injury’ caused in whole or in part, by: (1) Your acts or omissions; or (2) The acts or omissions of those acting on your behalf.

The New York City Transit Authority and Metropolitan Transit Authority seeking additional insured coverage had maintained that the endorsement does not limit liability to cases in which the insured’s acts or omissions are negligent or otherwise legally actionable. Essentially they advocated that the “caused, in whole or in part” means “but for” causation. Under their reading of the policy, all that is necessary for an additional insured to be covered is that the insured’s conduct be a causal link to the injury.

The Court of Appeals disagreed. The Court noted that not all “but for” causes result in liability. In contrast, “proximate cause” refers to a “legal cause” to which the Court has assigned liability. In reversing the appellate panel’s ruling, the Court of Appeals concluded that there is no coverage because, by its terms, the policy endorsement is limited to those injuries proximately caused by the named insured, and the underlying facts of the case demonstrated no negligence on the part of the named insured.  The Court also found that the endorsement’s reference to “liability” caused by the named insured’s acts or omissions only further confirmed that coverage for additional insureds is limited to situations where the insured is the proximate cause of the injury.

The Court of Appeals declined to adopt the position that the term “caused by” was synonymous with “arising out of”.  It found that the term “caused by,” requires legal fault. In contrast to the term “arising out of” which results in coverage even where there is no negligence by the named insured.

The full Court of Appeals Decision can be found at the link below:https://www.nycourts.gov/ctapps/Decisions/2017/Jun17/57opn17-Decision.pdf