- Court of Appeals Finds Additional Insured Endorsement Requires Insured to Be Proximate Cause of Injury Giving Rise to Liability
- August 23, 2017
A divided New York Court of Appeals has held that "where an insurance policy is restricted to liability for any bodily injury 'caused, in whole or in part' by the 'acts or omissions' of the named insured, the coverage applies to injury proximately caused by the named insured". Burlington Ins. Co. v NYC Tr. Auth., --- N.E.3d ----2017 WL 24273002017 N.Y. Slip Op. 04384 (June 6, 2017).
The Court reversed a 2015 decision of the Appellate Division, First Department which had held that plaintiff owed additional insured coverage under that language even though its named insured was not negligent. Under its analysis of the plain language of the additional insured endorsement, the four judge majority found that the endorsement requires more than "but for" causation (sometimes known as "causation in fact"), and that "coverage for additional insureds is limited to situations where the insured is the proximate cause of the injury." Two judges, applying their own reading of the plain language, dissented.
The Court's decision changes the view taken by some courts that the phrase "caused by" in a blanket additional insured endorsement does not materially differ from the phrase, "arising out of". Under that approach, it was thought that additional insured coverage was available so long as there was some causal relationship between the injury and the risk for which coverage is provided. The Burlington Court now instructs that "'arising out of' is not the functional equivalent of 'proximately caused by'". While the "causal relationship" test may still apply to policies using the "arising out of" language, the Court made it clear that "'caused in whole or in part'" . . . requires the insured to be the proximate cause of the injury giving rise to liability, not merely the 'but for' cause."
This decision raises numerous questions about its effect in other situations upon coverage under this very common policy endorsement. It also shakes the foundations of related precedents addressing additional insured coverage upon which courts and litigants have come to rely.A copy of the Burlington decision is attached. If you have questions about insurance coverage under any additional insured endorsement or would like to know more about the impact of the Burlington decision, contact Michael E. Gorelick or Thomas R. Maeglin.