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No Negligence Needed: Court Upholds Broad Application of Additional Insured Endorsement (NY)

January 3, 2020

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<p style="text-align: justify;">In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2020/01/Firemans-Fund-Ins.-Co.-v-State-Natl.-Ins.-Co..pdf">Fireman's Fund Ins. Co. v State Natl. Ins. Co.</a>,</em> the New York Appellate Division, First Department addressed the issue of how to construe broadly worded additional insured endorsements.  The coverage dispute arose out of an underlying slip and fall personal injury that occurred on a newly refinished catwalk passageway.  While navigating this passageway, Mary Jane Schudde fell and sustained injuries due to the color of the floor surface which made it difficult to perceive the change in elevation and caused her to trip.</p>
<p style="text-align: justify;">She sued her building and management company, Windsor and Argo, for negligence.  Windsor and Argo in turn commenced a third-party action for contractual indemnification against Upgrade, the contractor that refinished the passageway.  The building had contracted with Upgrade to waterproof the passageway, but Upgrade did not choose the surface color. Upgrade’s insurance policy with State National contained a blanket additional insured clause which provided coverage to Windsor and Argo “with respect to operations performed by or on behalf of” Upgrade and stated that it was primary for damages to any additional insured arising out of Upgrade's operations.  On the other hand, Windsor and Argo’s insurance policy, issued by Fireman’s Fund, provided that coverage was excess when its insureds, Windsor and Argo, have other primary insurance available.  On this basis the Supreme Court held that Windsor and Argo were additional insureds because the accident “arose out of” Upgrade’s operations of painting the steps where the injury occurred.</p>
<p style="text-align: justify;">On appeal, defendant argued that Windsor and Argo were not additional insureds because there was no finding of negligence against Upgrade since Upgrade did not choose the ill-fated color and thus did not proximately cause the accident.  But the First Department did not buy it.  The court held that even though Upgrade was not at fault for the injury, the accident still “arose out of” Upgrade's operations and therefore it fell within their policy’s broadly worded additional insured clause.</p>
<p style="text-align: justify;">This decision underscores the importance of policy drafting on the part of insurers, especially for insurers of contractors and subcontractors, since New York Courts will broadly construe additional insured clauses even without a finding of negligence by the contractor.</p>
<p style="text-align: justify;">Thanks to Andrew Debter for his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.</p>

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