NJ Court Finds That Endorsement Limiting Scope of “Coverage Territory” Governs
The interplay between various endorsements in a policy is not always clear. This is especially the case where multiple endorsements state they are “replacing” the same provisions. A New Jersey federal judge rejected an attempt by an insured to expand coverage beyond the scope of the policy’s plain terms. In so doing, the court reaffirmed that a policy endorsement’s restriction of coverage to a specified location cannot be overridden by another endorsement which does not alter, or otherwise refer to, that aspect of coverage.
In FYT Supplies, the insured FYT was a tattoo parlor, which operated out of a location in Brooklyn. Its insurance policy contained a Limitation of Coverage Endorsement provision which stated that the Policy applied only to bodily injury that “[o]ccurs on the premises shown in the Schedule,” which in turn only listed the insured’s location in Brooklyn. In 2018, while at a trade show in the Meadowlands in New Jersey, one of the FYT’s employees was injured while moving certain equipment. The employee sued FYT and FYT sought coverage, which was denied by its insurer.
In the ensuing declaratory judgment action, the insurer argued that there was no coverage based on the Limitation of Coverage Endorsement. In other words, because the injury did not occur on the Brooklyn premises listed in the Schedule, but in New Jersey, there was no coverage for FYT in the underlying action. FYT sought to avoid this straightforward application of policy language by pointing to the Policy’s New York Changes Endorsement. That endorsement modified the coverage grant of the Policy and states that coverage exists for bodily injury that takes place in the “coverage territory,” defined to mean anywhere in the United States. FYT thus argued that this language superseded the Limitation of Coverage Endorsement.
The court rejected FYT’s arguments, holding that the Limitation of Coverage Endorsement governed, and thus the insurer’s liability was confined to injuries that took place at the insured’s location in Brooklyn. The court noted that the New York Changes Endorsement does not impact the scope of coverage in any way. Thus, the court held that “the language of the New York Changes Endorsement is inserted into a policy which also lists and explicitly incorporates the Limitation of Liability Endorsement.”
The court also noted that, perhaps unsurprisingly given its potential impact, no court had yet addressed FYT’s arguments. However, the court held that “[r]eading the … Policy and the endorsements as a whole, it becomes clear that there is only one modification to the precise section at issue, and that modification is contained in the Limitation of Coverage Endorsement. [FYT’s] interpretation would render it meaningless.” While the outcome of the FYT decision seems obvious, it nonetheless affirms the notion that a court will not render certain policy provisions meaningless and frustrate the purpose of the language to which the parties agreed.
Thanks to Doug Giombarrese for his contribution to this post. If you have any questions or comments, please contact Colleen Hayes.