Injured Employee Triggers Additional Insured Coverage

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While awaiting the Appellate Division’s decision in M & M Realty of New York LLC v. Burlington Ins. Co., No. 153949/16, 2019 WL 1028971 (1st Dept. Mar. 5, 2019), we discussed the New York Supreme Court decision in a post in January. Last week the first department finally weighed in.

Recall that the coverage dispute arises out of an underlying bodily injury case to an employee of L&M, which was hired by owner M&M to work on a project. M&M sought additional insured coverage under the policy issued to L&M. The trial court determined that under the agreement between L&M and M&M, L&M had agreed to provide M&M with additional insured status. However, the court determined that M&M was not entitled to additional insured coverage because there were no allegations in the underlying complaint against L&M and therefore the accident was not caused by L&M’s acts or omissions. 

In our prior blog post, we noted that the trial court did not address the fact that L&M employed the underlying the plaintiff and therefore the underlying the plaintiff was precluded from naming L&M as a defendant in that action.

The first department reversed the trial court decision on two bases. First, the court determined that the contract between L&M and M&M was ambiguous regarding whether L&M agreed to provide M&M with additional insured coverage and determined that there was a question of fact regarding the intent of the parties. The court then determined that, assuming the contract was sufficient to convey additional insured status to M&M, then L&M’s carrier had a duty to defend M&M in the underlying action because the allegations in the underlying complaint suggested a reasonable possibility of coverage.

The court’s decision was extremely brief and did not specifically address why the trial court had been wrong and did not mention that the underlying the plaintiff, because he was an employee of L&M, would not have been able to make L&M a party to the underlying action. However, the court did cite to the Court of Appeals decision in Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61 (1991) in support of its decision. Fitzpatrick holds that a carrier must consider extrinsic facts if they demonstrate a reasonable possibility of coverage. Thus, although the court was not clear, it appears to have relied on the underlying plaintiff’s employment status with the carrier’s named insured to reach the conclusion that the duty to defend was triggered.