New York Insurance Coverage Law Update

April 29, 2021 | Alan C. Eagle | Insurance Coverage

Court Finds That Subcontractor’s Insurer Owed Additional Insured Coverage Under “Caused, In Whole Or In Part, By” Endorsement Because Subcontractor Found More Than 0% Liable

Kenneth Jacobson was injured on a construction site, and he sued the owner of the premises and the general contractor (“GC”).  The owner and GC filed a third-party action for contribution against a subcontractor insured by Excelsior Insurance.  The jury found that the owner and GC were 65% at fault and that the subcontractor was 35% at fault.  The United States District Court for the Southern District of New York held that Excelsior’s obligation to provide additional insured coverage to the owner and GC for bodily injury “caused, in whole or in part, by” the subcontractor’s acts or omissions, “leads to the logical conclusion” under New York precedent that “where liability is not attributed to the [putative additional insureds’] sole negligence, and … the named insured is more than 0% liable for the underlying plaintiff’s injuries, additional insured coverage is triggered.”  The court concluded that Excelsior’s argument that it was only responsible for the 35% it paid on behalf of its named insured subcontractor is “too clever by half” as it “conflates Excelsior’s liability to Jacobson on behalf of [its named insured] with Excelsior’s separate obligation to provide coverage” to its additional insureds.  [Starr Indem. & Liab. Co. v. Excelsior Ins. Co., 2021 U.S. Dist. LEXIS 18706 (S.D.N.Y. Feb. 1, 2021).]

SDNY Holds That SEC Investigation Did Not Trigger Coverage Because It Was Not A “Security Claim” Or Claim Against “Individual Insureds”

Hertz Global Holdings filed a declaratory judgment complaint against its insurers seeking coverage for millions of dollars it spent defending an SEC investigation before a settlement was reached.  The United States District Court for the Southern District of New York granted the insurers’ motion to dismiss on the basis that the investigation was not a “Securities Claim” which the policies defined as “‘a Claim, other than an investigation of an Organization…alleging’ violation of securities laws or reg-ulations.”  The court stressed that policy considerations are not the basis for “textual interpretation.”  The court also rejected Hertz’s argument that the costs should be covered as a “Claim” against an “Insured Person” because “the mere fact that individuals at the company were cooperating with the SEC’s investigation against [the Plaintiff] does not constitute a ‘Claim’ against those persons.” [Hertz Global Holdings v. National Union Fire Ins. Co., 2021 U.S. Dist. LEXIS 60911 (S.D.N.Y. Mar. 30, 2021).]

SDNY Finds That Breach Of Contractor Conditions Endorsement By Named Insured Did Not Preclude Coverage For Additional Insureds

A worker was injured on a construction project, and he sued the general contractor (“GC”) and subcontractor (“Sub”).  The insurer for the GC/Sub sought additional insured coverage on their behalf from Colony Insurance Company which issued an insurance policy to a sub-subcontractor on the project, JPB Fabrications.  Colony dis-claimed because JPB failed to comply with a Contractor Conditions Endorsement providing that, as “a condition precedent” to coverage, “the insured … warrants and agrees” that any contractor or sub-contractor “hired to perform work for the insured or on the insured’s behalf,” has “maintained ‘adequate insurance.’”  The United States District Court for the Southern District of New York rejected Colony’s disclaimer, reasoning that the language of the Endorsement “makes clear” that a breach by “the” particular insured “bars coverage only for that same insured”, not the additional insureds seeking coverage.  The court also found that Colony waived its right to deny coverage to the additional insureds based upon their failure to comply with the Endorsement because it was not raised in Colony’s disclaimer. [U.S. Specialty Ins. Co. v. Wesco Ins. Co., 2021 U.S. Dist. LEXIS 59681 (S.D.N.Y. Mar. 29, 2021).]

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