New York State Court of Appeals Broadens Additional Insured Coverage
June 17, 2010 Posted By Douglas R. Rosenzweig Insurance Coverage
The clause "arising out of your operations" is commonplace in almost all insurance policies and has just recently (June 3, 2010) been interpreted by the Court of Appeals in connection with an injury to the primary insured's employee in Regal Construction Corporation v. National Union Fire Insurance Company of Pittsburgh, 883 N.Y.S.2d 207 (2010).
In Regal, The City of New York engaged URS Corporation (URS) as the construction manager for a renovation project at Rikers Island. By written agreement dated March 22, 1999, URS hired Regal Construction Corporation (Regal) to serve as a prime contractor for general construction at the project, including demolition and renovation. The written agreement between Regal and URS required Regal to procure a commercial general liability (CGL) insurance policy naming URS as an additional insured. Accordingly, Regal obtained a CGL insurance policy from plaintiff Insurance Corporation of New York (INSCORP), which named URS as an "additional insured." The policy provided that Regal's insurance covered URS "only with respect to liability arising out of [Regal's] ongoing operations performed for [URS]".
In March 2001, Regal's project manager, Ronald LeClair, was walking through the facility with Regal's superintendent and an employee of Regal's demolition subcontractor. Because the area was in the process of demolition, the flooring consisted of temporary sheets of plywood spread over steel floor joists. LeClair stepped from the plywood onto a floor joist to indicate a wall that needed to be demolished. According to LeClair, the joist on which he stepped had been recently painted and the paint caused him to slip, resulting in a back injury. LeClair claimed that an unnamed person from URS told him that URS employees had painted the joist.
Regal and INSCORP commenced a declaratory judgment action against URS and its insurer, National Union Fire Insurance Company, seeking a declaration that URS was not entitled to coverage as an additional insured under the INSCORP policy.
The Court of Appeals held that the additional insured endorsement at issue provided that URS is an additional insured under the CGL policy issued by INSCORP to Regal only with respect to liability arising out of [Regal's] operations. "We have interpreted the phrase 'arising out of' in an additional insured clause to mean originating from, incident to, or having connection with. It requires only that there be some causal relationship between the injury and the risk for which coverage is provided".
Regal's employee, LeClair, was walking through the work site to indicate additional walls that needed to be demolished by Regal's subcontractor when he slipped on a recently-painted metal joist. Although Regal and INSCORP contend that LeClair's injury did not arise from Regal's demolition and renovation operations performed for URS, but that it was URS employees who painted the joist on which LeClair slipped, the focus of the inquiry "is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained" Accordingly, the injury "arose out of" Regal's operations notwithstanding URS's alleged negligence, and fell within the scope of the additional insured clause of the insurance policy.
Thus, has the Court of Appeals broadened the extent of additional insured status to include almost any circumstance in which the primary insured's employee becomes injured on the jobsite. Given the broad nature of this holding, it would take extraordinary circumstances to convince a Court that the employee's injury did not arise out of the operations of the primary insured.
Our firm continues to take the position, however, that injuries to non-employees which occur on a client's sidewalk bridge, scaffold, etc. do not necessarily arise out of the ongoing operations of that contractor, particularly in circumstances where the contractor is no longer present on the jobsite and turn over care, custody and control of construction equipment to a general contractor.