Wade Clark Mulcahy LLP

The District Court of New Jersey recently considered whether an insurance company’s duty to defend an additional insured is triggered by allegations of direct liability, vicarious liability, or both under New Jersey law. Navigators Specialty Insurance Company v. Citizens Insurance Company of America, 2024 WL 3287848 (D.N.J. July 3, 2024).

In the underlying lawsuit, a construction worker sued his employer, Men of Steel, and the general contractor at the project site, AJD Construction.  Id. at 1.  AJD’s insurer, Navigators Specialty, tendered the defense of AJD to Citizens Insurance, Men of Steel’s insurer. Id. Citizens Insurance disclaimed coverage, asserting the claims of direct liability raised against AJD were not covered by its policy’s additional insured provision. Id. The Policy stated that an additional insured is only covered “with respect to liability for bodily injury … caused, in whole or in part by, the acts or omissions” of Men of Steel or someone acting on its behalf. Id. at 3. Citizens Insurance argued the “in whole or in part” language limited the Policy’s coverage to claims of derivative liability. Id. at *4. Navigators Specialty contended the language encompassed claims of derivative and direct liability. Id. 

On review, the Court noted the issue was one of first impression under New Jersey law. Id. Nevertheless, the Court predicted the New Jersey Supreme Court would rule that an insurer’s duty to defend is triggered by allegations of vicarious or direct liability, citing four reasons in support. Id. at *5.

First, lower New Jersey decisions evaluating this provision concluded that both types of allegations triggered the duty to defend. Id. Second, District Court precedent affirmed the same interpretation of the “in whole or in part” language. Id. at 6. Third, New Jersey’s approach to “going with the consensus” when interpreting standard form policies indicated the Supreme Court would follow the rationale of other jurisdictions. Id. at 7. The “overwhelming majority rule” is that the “in whole or in part” language triggers a duty to defend allegations of direct and vicarious liability. Id. Finally, under the “plain and ordinary meaning” of the Policy, the provision at issue did not “purport to limit coverage to an ‘injury’ that is ‘caused’ in one particular way or another, direct or vicarious.” Id. at *8. The Court reasoned that, had the Policy intended to limit coverage to claims of vicarious liability, it could have done so. Id.