What You Need to Know About Additional Insured Endorsements in New York

ThinkstockPhotos 508133776By I. Paul Howansky and Dawn M. Foster 

In the construction industry, upstream parties, such as project owners and general contractors, typically seek to secure insurance risk transfer protection from accidents that occur on the job. An indemnification clause in a contract with a subcontractor is one way to achieve that goal. Another way is to require the subcontractor to include an additional insured endorsement in their general liability coverage to extend coverage to an upstream party as an additional insured (AI).

 The Insurance Services Office Inc. (ISO) develops and publishes, among other things, various standard insurance policy forms used by many insurance companies to help ensure compliance with a given state’s insurance regulations. In 2004, ISO revised its form and currently, under ISO form CG 2010 0704, an upstream party is entitled to insured status only if the damages are “caused in whole or in part by” the named insured’s acts or omissions or the acts or omissions of those acting on behalf of the named insured.

Although commentators believed that the form would be construed to limit AI coverage to only those circumstances where the downstream party played an active part in the injury, in New York, Courts in the First Department have continued to hold that the phrase “caused by” is no different than the phrase “arising out of” used in the earlier ISO form in interpreting the AI endorsement at issue which focuses on the general nature of the operation during which the injury was sustained. In the case of Strauss Painting, Inc. v. Mt. Hawley Ins. Co., 105 A.D.3d 512 (1st Dep’t 2013), a finding of negligence against the named insured [plaintiff’s employer/downstream party] was not required to trigger additional insured coverage where the AI endorsement speaks in terms of "acts or omissions," not negligence.

The Court continued, “In the unlikely event that it would be found that some non-negligent act by plaintiff [on behalf of the Named Insured] caused the accident, the Met [upstream party] would still be entitled to coverage under the additional insured endorsement.”   

The Court’s foreshadowing was played out in the case of Burlington Insurance Co. v. NYC Transit Authority, 132 A.D.3d 127, 14 N.Y.S.3d 377 (1st Dep’t 2015), where the First Department held that additional insured coverage for an upstream party (NYCTA) was required even though the injury occurred as a result of a non-negligent act or omission on the part of the downstream party. The Court looked to the plain language of the AI endorsement which did not contain any explicit reference to negligence or fault of the named insured.

Therefore, at least in New York, when considering ISO’s post-2004 update to its Additional Insured endorsement form, the upstream party will likely be afforded coverage as long as the injury arose out of the Named Insured’s acts or omissions and the determination of whether an upstream or downstream party bears any fault or negligence for an injury appears to be of no consequence. 

Paul Howansky HOM2I.Paul Howanksy (pictured left) is a partner in the Insurance Defense practice group at Harrington, Ocko & Monk LLP, a full service law firm with offices in White Plains, N.Y., and New York City. 

 

Dawn Foster HOM1Dawn M. Foster (pictured left) is an associate in the Insurance Defense practice group at Harrington, Ocko & Monk LLP. 

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