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Balcony Collapse Coverage Suit Gets Second Chance Where Additional Insured Coverage is Found to be Ambiguous

July 14, 2023

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In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2023/07/Westminster-American-Insurance-Company-v.-Security-National-Insurance-Company.pdf">Westminster American Insurance Company v. Security National Insurance Company</a>,</em> the Third Circuit recently reversed a decision of the United States District Court for the Eastern District of Pennsylvania which held that an Employer’s Liability Exclusion (“ELE”) in a contractor’s policy precludes coverage for claims arising from a balcony collapse at a Philadelphia apartment building.

The building owner and property manager sought additional insured coverage after a construction accident injured two workers. One of the men worked for the building’s property manager, Altman Management Co., Inc. (“Altman”).

The ELE provided that coverage is unavailable for bodily injury to an employee of “any insured” arising out of and in the course of either (1) employment by the insured, or (2) the performance of duties related to the conduct of the insured’s business. The policy also included a Blanket Additional Insured Endorsement, which listed several entities in a schedule as insureds, but “only to the extent that the person or organization shown in the Schedule is held liable for your acts or omissions arising out of your ongoing operations performed for that insured.”

In dismissing the lawsuit, the District Court found that Altman was an additional insured under the policy and therefore the ELE applied to preclude injuries sustained by its employee. The question of coverage on appeal was dependent on whether Altman was an additional insured listed on the policy schedule, as the District Court ruled. The appellants argued that a party does not become an “additional insured” unless they are “held liable for the named insured’s acts or omissions arising out of its ongoing operations performed for that insured.” They argued that Altman cannot be held liable based on the exclusivity of remedies provision in the Pennsylvania workers compensation statute, so Altman cannot be an “additional insured” under the policy.

In reversing the District Court’s decision, the Third Circuit agreed and held that the ELE did not preclude coverage for the underlying settlements because the terms of the Additional Insured Endorsement were ambiguous. The Court found that there was more than one way to interpret the terms of the endorsement, so the provision would be construed against the insurer. The Court explained that being listed in the schedule alone did not confer additional insured status to Altman and that other interpretations were viable, and therefore the language was ambiguous.

The takeaway from this decision is that the specific language in an additional insured endorsement is important in determining additional insured coverage under a contractor’s policy. Simply being listed as an additional insured in a schedule is not sufficient where there is limiting language in the endorsement and parties should consider the putative insured’s status and involvement in the work and accident.

Thank you to Susan Derasmo for her contribution to this post. Please contact <a href="agibbs@wcmlaw.com">Andrew Gibbs</a> with any questions.

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