New York Law Review

Tag: Arising Out Of

  • Regal Construction Corp. v. National Union Fire Insurance, 15 N.Y.3d 34 (2010): Scope of “Arising Out Of” in Additional Insured Clauses

    15 N.Y.3d 34 (2010)

    An additional insured clause in a commercial general liability (CGL) policy, covering liability “arising out of” the named insured’s operations, applies when there is a causal relationship between the injury and the named insured’s work, regardless of whether the additional insured’s negligence contributed to the injury.

    Summary

    Regal Construction Corporation’s employee was injured at a renovation project managed by URS Corporation. Regal’s insurance policy with INSCORP named URS as an additional insured for liability “arising out of” Regal’s operations. The employee sued URS, who sought coverage from INSCORP. INSCORP initially accepted the defense but then filed a declaratory judgment action arguing URS wasn’t covered. The Court of Appeals held that URS was entitled to coverage because the injury was causally connected to Regal’s ongoing operations, despite URS’s alleged negligence. The focus is on the general nature of the operation, not the precise cause of the accident.

    Facts

    URS Corporation was the construction manager for a renovation at Rikers Island. URS hired Regal Construction Corporation as a prime contractor. The contract required Regal to obtain a CGL policy naming URS as an additional insured. Regal obtained a policy from INSCORP. Regal’s project manager, LeClair, was injured when he slipped on a painted floor joist while supervising demolition work. LeClair claimed a URS employee painted the joist.

    Procedural History

    LeClair sued URS in 2003. URS tendered its defense to Regal and INSCORP based on the additional insured clause. INSCORP initially accepted the defense but later filed a declaratory judgment action against URS and its insurer, National Union Fire Insurance Company, seeking a declaration that URS was not entitled to coverage. Supreme Court ruled in favor of URS. The Appellate Division affirmed. The New York Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether URS is entitled to coverage as an additional insured under Regal’s CGL policy with INSCORP, given that the injury to Regal’s employee occurred at a project managed by URS, and the policy covered liability “arising out of” Regal’s operations.

    Holding

    Yes, because 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.

    Court’s Reasoning

    The Court emphasized the broad duty to defend. An insurer must defend if the complaint suggests a reasonable possibility of coverage. The phrase “arising out of” means originating from, incident to, or having a connection with. It requires only some causal relationship between the injury and the risk for which coverage is provided. Here, LeClair was injured while supervising demolition work. The court stated, “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.” The Court distinguished this case from Worth Constr. Co., Inc. v Admiral Ins. Co., 10 NY3d 411 (2008), where the subcontractor had completed its work and was not on site when the injury occurred. In Worth, the staircase was merely the situs of the accident, lacking a connection to the subcontractor’s work. Here, there was a direct connection because the injury was sustained by Regal’s employee while supervising Regal’s subcontractor. The court stated, “That the underlying complaint alleges negligence on the part of URS and not Regal is of no consequence, as URS’s potential liability for LeClair’s injury ‘ar[ose] out of’ Regal’s operation”.

  • Worth Construction Co. v. Admiral Insurance Co., 10 N.Y.3d 411 (2008): Arising Out of Clause and Additional Insured Coverage

    10 N.Y.3d 411 (2008)

    An additional insured endorsement that limits coverage to liability “arising out of” the named insured’s operations requires a causal connection between the injury and the insured’s work; mere presence of the insured’s materials at the accident site is insufficient when negligence related to those materials is disproven.

    Summary

    Worth Construction, a general contractor, sought defense and indemnification from Farm Family, an insurer for Worth’s subcontractor, Pacific Steel. An employee of another subcontractor, Murphy, was injured at the construction site after slipping on fireproofing on a staircase that Pacific Steel had installed. Worth was an additional insured under Pacific’s policy, but only for liability “arising out of” Pacific’s operations. The Court of Appeals held that Farm Family had no duty to defend or indemnify Worth because the accident, after Worth conceded Pacific was not negligent, did not arise out of Pacific’s operations, even though the injury occurred on a staircase installed by Pacific. The mere presence of Pacific’s work was insufficient for coverage.

    Facts

    Clayton Park Development hired Worth Construction as the general contractor for an apartment complex. Worth subcontracted with Pacific Steel to construct a staircase and handrailings, requiring Pacific to name Worth as an additional insured on its commercial general liability insurance policy with Farm Family. Pacific installed steel pan stairs, and Worth hired a concrete subcontractor to fill the pans. Before Pacific could install the handrailings, Murphy, an ironworker employed by Fasciano Iron Works, slipped on fireproofing applied to the stairs by another subcontractor, Central Enterprises. Pacific had no role in the fireproofing application and did not subcontract with Fasciano. Murphy sued Worth and Clayton Park, claiming he was injured on the staircase installed by Pacific.

    Procedural History

    Murphy sued Clayton Park and Worth. Worth sought defense and indemnification from Farm Family based on the additional insured endorsement in Pacific’s policy. Farm Family did not respond, and Worth sued Pacific for contribution and indemnification and sued Farm Family for a declaratory judgment seeking defense, indemnification, and attorneys’ fees. The Supreme Court initially ruled in favor of Worth. Pacific then successfully moved for summary judgment dismissing Worth’s third-party complaint in the underlying action after Worth conceded it had no factual basis to assert a negligence claim against Pacific. Farm Family then successfully moved to renew its motion, and the Supreme Court reversed its original decision, finding no duty to defend or indemnify. The Appellate Division reversed, holding that it was sufficient that Murphy’s injury was sustained on the stairs installed by Pacific. The Court of Appeals reversed the Appellate Division, reinstating the Supreme Court’s ruling in favor of Farm Family.

    Issue(s)

    Whether an additional insured endorsement providing coverage for liability “arising out of” the named insured’s operations requires the insurer to defend and indemnify the additional insured when the injury occurred on the named insured’s work product but was not caused by the named insured’s negligence?

    Holding

    No, because the phrase “arising out of” requires a causal relationship between the injury and the risk for which coverage is provided, and Worth conceded that Pacific was not negligent regarding the staircase, the required causal link was broken.

    Court’s Reasoning

    The court emphasized that an insurer’s duty to defend arises when the underlying complaint potentially gives rise to a covered claim. The additional insured endorsement in this case limited coverage to liability “arising out of” Pacific’s operations. The court stated that “arising out of” means “originating from, incident to, or having connection with” and requires a causal relationship between the injury and the covered risk. While the absence of negligence alone does not automatically negate coverage, Worth’s concession that its negligence claims against Pacific lacked merit was critical. The court found that the general nature of Pacific’s operations involved installing a staircase and handrails. Because a separate company applied the fireproofing and Pacific had completed its work on the stairs before the accident, the staircase was merely the location of the accident, and the causal link to Pacific’s operations was broken. The court distinguished the case from those where the negligence of the insured was still a potential factor. Furthermore, the court noted that while the stairs constituted materials furnished by Pacific, this alone did not trigger coverage because Worth conceded that the stairs were not a proximate cause of the injury. The court directly referenced and quoted from Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472 (2005), reaffirming the established definition of “arising out of”. The court also distinguished the matter from Impulse Enters./F & V Mech. Plumbing & Heating v St. Paul Fire & Mar. Ins. Co., 282 AD2d 266, 267 (1st Dept 2001), noting that in this case there was no connection between Murphy’s accident and the risk for which coverage was intended.

  • Maroney v. New York Central Mutual Fire Ins. Co., 5 N.Y.3d 467 (2005): Interpreting ‘Arising Out Of’ in Uninsured Premises Exclusions

    5 N.Y.3d 467 (2005)

    The phrase “arising out of” in an uninsured premises exclusion in a homeowner’s insurance policy is interpreted broadly to include injuries causally connected to the use of the uninsured premises, not just injuries stemming from the physical condition of the premises.

    Summary

    This case concerns the interpretation of an “uninsured premises” exclusion in a homeowner’s insurance policy. A child was injured on property owned by the insureds (the Morrises) but excluded from their homeowner’s policy because they operated a horse-boarding business there. The New York Court of Appeals held that the injury “arose out of” the uninsured premises because it was causally connected to the use of the property for horse boarding, even though the injury was not caused by a physical defect of the property. The court reasoned that insurers need to be able to define and price the risks they are willing to cover, and this interpretation allows them to do so.

    Facts

    The Morrises owned property insured under a homeowner’s policy with NYCM. They started a horse-boarding business on a portion of that property. NYCM amended the policy to exclude the property where the horse-boarding business was located, and the Morrises obtained separate insurance for that property with BCC. A six-year-old child, under the care of the Morrises’ daughter, was kicked by a horse on the uninsured portion of the property while Deborah Morris was leading the horse to pasture. The child sustained serious injuries.

    Procedural History

    The child’s mother sued the Morrises for personal injury. She then sued NYCM, seeking a declaration that NYCM was obligated to defend and indemnify the Morrises in the personal injury action. NYCM counterclaimed and brought a third-party action against the Morrises, seeking a declaration of its obligations under the policy. The Supreme Court ruled in favor of the plaintiff, but the Appellate Division reversed, holding that the exclusion applied. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the phrase “arising out of a premises” in an uninsured premises exclusion of a homeowner’s insurance policy is limited to injuries caused by the physical condition of the premises, or whether it includes injuries causally connected to the use of the premises.

    Holding

    No, the phrase “arising out of” is not limited to the physical condition of the premises, because it requires only some causal relationship between the injury and the risk for which coverage is provided.

    Court’s Reasoning

    The court reasoned that the phrase “arising out of” has broader significance than simply “caused by.” It means “originating from, incident to, or having connection with.” The court emphasized that an insurer needs to be able to define the risks it is willing to cover and determine a premium accordingly. It stated, “[w]hen injury-causing conduct is causally related to the purposes for which the premises are used, then the injury is deemed to ‘arise’ from the premises.” In this case, the injury was causally related to the use of the property for horse boarding. The court distinguished this situation from one where the injury occurred on the insured premises, stating, “there is no direct causal connection between the injury and the insured premises. Rather, the direct connection is between the injury and the uninsured location.”

    The dissent argued that the phrase “arising out of a premises” is ambiguous and could reasonably be interpreted to refer only to injuries caused by a dangerous condition of the premises. According to the dissent, ambiguities in insurance policies should be construed against the insurer. The dissent also argued that NYCM waived its “business pursuits” exclusion by not providing a sufficiently specific notice of disclaimer.