Is an Additional Insured Entitled to Coverage for its Sole Negligence?
July 1, 2011 § Leave a comment
A recurring issue in insurance coverage litigation is the scope of coverage afforded to an additional insured under CGL policies. Is an additional insured’s covered for its own negligence or is coverage limited to the additional insured’s vicarious liability for the named insured’s acts? Is the additional insured provided the same coverage as that provided to the named insured? Notwithstanding the myriad of different additional insured endorsements utilized by insurers to provide more clarity, these issues are a never-ending source of litigation. A recent case highlights a recurring issue: whether an additional insured is entitled to coverage for its sole negligence.
The resolution of this issue is typically dependent upon the language of the additional insured endorsement and the law of the applicable jurisdiction. In 2004, ISO introduced revised versions of the most widely used additional insured endorsements eliminating the commonplace “arising out of” standard and inserted in its stead that coverage applied only to injury or damage “caused in whole or in part” by the acts or omissions of the named insured.
On June 24, 2011, the U.S. District Court for the Southern District of Texas in Town Center Mall v. Zurich American Ins. Co., 2011 U.S. Dist. LEXIS 67834, addressed an additional insured endorsement in a CGL policy that afforded coverage to an additional insured for liability “caused, in whole or in part” by the named insured’s acts or omissions. In Town Center, plaintiff owned a mall at which the named insured was providing elevator maintenance. During the course of the work, an employee of the named insured was injured and filed suit against the mall’s owner. For obvious reasons, the employee did not sue the named insured, his employer.
In holding that the mall was not entitled to additional insured coverage, the court noted that plaintiff’s “cannot meet the causation requirement of the CGL Policy.” The court went on to note an additional provision of the additional insured endorsement, providing that the insurance only applied to liabilities “arising solely out of the negligent acts” of the named insured. Given the allegations of negligence in the underlying complaint against the mall, the claim could not fall within the scope of coverage provided to additional insureds under the policy.
There is not yet a full body of law addressing the 2004 ISO revisions to the additional insured endorsements. As exemplified by the Town Center case however, it appears courts are prepared to narrowly construe the scope of coverage afforded to additional insured under endorsements utilizing the “caused in whole or in part” language.