The Appellate Division (4<sup>th</sup> Dep’t) recently determined that even where a complaint does not include specific claims or allegations bringing it within the scope of a policy’s coverage, an insurer’s duty to defend may still be triggered if the complaint suggests a “reasonable possibility” that the claims may fall within the scope of the policy. In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2022/10/Main-St.-Am.-Assurance-Co.-v.-Merchants-Mut.-Ins.-Co..pdf">Main St. Am. Assurance Co. v. Merchants Mut. Ins. Co., </a></em>the Court addressed this issue in a case involving a plaintiff who was injured during the course of his work as a subcontractor on a construction project. The subcontractor obtained insurance through Merchants Mutual Insurance Company for the contractor’s benefit. The policy with Merchants Mutual provided coverage to the contractor, but “only with respect to liability for ‘bodily injury’ . . . caused, in whole or in part, by . . . [insured’s] acts or omissions.”
Merchants Mutual argued it did not have a duty to defend the contractor because the complaint alleged Labor Law violations on the part of the contractor, and not negligence by the subcontractor, as contemplated by the policy. The Appellate Division disagreed with Merchants Mutual, holding that even though the underlying complaint did not allege negligence by the subcontractor, it suggested a reasonable possibility that its negligence was a proximate cause of his injuries, thereby bringing the claim potentially within the policy. Accordingly, the Court held, Merchant Mutual’s duty to defend the contractor as an additional insured was triggered, despite the fact that the complaint did not actually allege that subcontractor had been negligent. This decision is somewhat troubling for insurers as it shows that a court may find a duty to defend even where the underlying complaint did not specifically include claims or allegations falling within the scope of a policy’s coverage.
Thanks to Erin Gallagher for her contribution to this post. Should you have any questions, please feel free to contact <a href="mailto:firstname.lastname@example.org">Tom Bracken</a>.