In previous blog posts this year, and to keep up with how courts are interpreting the New York Court of Appeals 2017 decision in Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313 (2017), we discussed the trial court’s decision in M & M Realty of New York, LLC v. Burlington Ins. Co. and the First Department’s reversal in the same case. Recently, a New York Supreme Court Judge decided American Empire Surplus Lines Ins. Co. v. Arch Specialty Ins., No. 655234/2018, 2019 WL 1330911 (N.Y. Sup. Ct., New York Co. Mar. 25, 2019), which was a case involving additional insured coverage where the judge made an implicit determination regarding Burlington’s impact on the duty to defend standard.
In American Empire, the underlying action was brought by an employee of subcontractor 365 Mechanical against, inter alia, a property owner, the general contractor, and the property’s managing agent. American Empire, the general contractor’s CGL carrier sought additional insured coverage for the owner, general contractor, and the managing agent under the policy that Arch issued to 365 Mechanical. When Arch denied the coverage tender, American Empire filed this coverage lawsuit, and Arch filed a pre-answer motion to dismiss. The motion sought a determination that the owner, general contractor, and managing agent were not entitled to additional insured status under the Arch policy because the accident was not caused by 365 Mechanical’s acts or omissions. The motion also pointed out that 365 Mechanical had not agreed to provide additional insured coverage for the managing agent and therefore that entity was not entitled to additional insured status.
In its opposition, American Empire pointed out that the underlying plaintiff had not sued 365 Mechanical because he was precluded from doing so under the Workers Compensation Law. American Empire argued that the fact that the underlying plaintiff was an employee of 365 Mechanical was enough to suggest a reasonable possibility that the accident was caused by 365 Mechanical’s acts or omissions, which was all that is required to trigger the duty to defend.
Ultimately, the trial court denied Arch’s pre-answer motion to dismiss and concluded that that there was a question of fact regarding whether the owner and general contractor were entitled to additional insured coverage because proximate causation had not been adjudicated in the underlying action. The court cited the court of appeals decision in Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313 (2017) and pointed out that the underlying plaintiff had not alleged negligence against 365 Mechanical, but also did not acknowledge that the plaintiff was precluded from doing so under the Workers Compensation Law.