New York Insurance Coverage Law Update

Court Finds Coverage For Owner As Additional Insured And Rejects Insurer’s Late Notice Argument

In October 2012, an employee of Tyco Integrated Security LLC went to a construction site to meet with the construction manager about providing security services for the project, and he allegedly tripped and fell entering a bathroom before the meeting began.  He sued the owner and the construction manager. The owner learned about the possibility of a lawsuit in February 2013, and sought additional insured coverage from the construction manager’s insurer in July 2013.  The construction manager’s insurer disclaimed, and the owner’s insurer sued.  The court held that the owner was entitled to defense and indemnity as an additional insured under the construction manager’s insurance policy, reasoning that the claimant’s alleged injuries arose from an act or omission that was part of the construction manager’s “ongoing operations.” The court rejected the “late notice” defense asserted by the construction manager’s insurer, finding that it had not demonstrated that it had been prejudiced by the alleged late notice. The court rejected the insurer’s “conclusory” assertions without evidence that it was precluded from photographing the accident site, interviewing witnesses and engaging in negotiations during the five month delay. [Wausau Underwriters Ins. Co. v. Old Republic General Ins. Co., No. 14-CV-3019 (JMF) (S.D.N.Y. Aug. 7, 2015).]

Additional Insured Coverage Did Not Depend On Negligence Of Named Insured, First Department Rules

A New York City Transit Authority (“NYCTA”) worker was injured from an explosion in a subway tunnel that was being excavated, and he sued the City. The City filed a third-party action against NYCTA and the Metropolitan Transit Authority (“MTA”).  NYCTA and MTA sought additional insured coverage from the insurer of Breaking Solutions.  The explosion occurred when Breaking Solutions’ excavation machine came in contact with an energized electrical cable buried in the tunnel. Discovery in the underlying action showed that the Breaking Solutions employee who operated the excavation machine had not been negligent and the explosion had been caused by NYCTA’s failure to identify and mark the electrical cable, which had come into contact with the excavator.  Breaking Solutions’ insurer disclaimed additional insured coverage to NYCTA and MTA, maintaining that the claimant’s injury had not been “caused, in whole or in part,” by any “act or omission” of its named insured.  The Appellate Division, First Department, rejected the insurer’s argument and ruled that NYCTA and MTA were entitled to a defense and indemnity as additional insureds even though the named insured’s causal “act” had not been negligent. It reasoned that the injury to the claimant (who was not an employee of the named insured) was causally connected to an “act” of the named insured: its excavator’s distur-bance of the buried electrical cable, which triggered the explosion. The appellate court concluded that the existence of coverage did not depend upon a showing that the named insured’s causal conduct had been negligent or otherwise at fault. [Burlington Ins. Co. v. NYCTA., 2015 N.Y. Slip Op. 06481 (1st Dep’t Aug. 11, 2015).]

Excess Coverage Not Triggered Where WCEL Policy Was Unlimited, Second Department Rules

When a construction company settled underlying bodily injury actions against it for $9 million, its workers’ compensation and employer’s liability (“WCEL”) insurance carrier paid $6.5 million and its commercial umbrella liability insurance insurer paid $2.5 million. The umbrella carrier sought a declaration that the WCEL insurer had to reimburse it for $2.5 million, because the umbrella policy provided that it was excess to all available insurance.  The Appellate Division, Second Department agreed, reasoning that the WCEL policy contained a New York limit of liability endorsement that provided that, in cases of bodily injury to an employee arising out of and in the course of employment that was subject to and compensable under the Workers’ Compensation Law, the WCEL insurer could not limit its liability. The Second Department concluded that, in light of the unlimited nature of the WCEL policy, the excess coverage provided by the umbrella policy was not triggered. [Tully Constr. Co., Inc. v. Illinois Nat’l Ins. Co., 2015 N.Y. Slip Op. 06582 (2d Dep’t Aug. 19, 2015).]