The Phrase "Arising Out Of” And Its Expanding Reach In The Additional Insured Context
November, 2009
In Regal Constr. Corp., et al. v. National Union Fire Ins. Co. of Pittsburgh, PA, et al., 64 A.D.3d 461 (1st Dep't 2009), the First Department provided additional clarification on the expansive reach of the phrase "arising out of" in the additional insured context. In this declaratory judgment action, the Appellate Division affirmed the trial court determination and held that, when analyzing an additional insured provision extending coverage based on liability "arising out of" a subcontractor's operations, the focus is on the "general nature" of the subcontractor's operation in which the claimant was injured.
This lawsuit stems from a construction site accident occurring at the Rikers Island Renovation Project (the "Project"). In March, 1999, the City of New York retained URS Corporation ("URS") to serve as the Project's construction manager. URS then retained Regal Construction Corporation ("Regal") as the prime contractor for general construction at the Project. Regal was required to perform, among other things, demolition and renovation. Regal, as part of its duty as prime contractor, hired subcontractors to perform portions of the demolition and renovation work at the Project. Ronald LeClair ("LeClair") was Regal's project manager for the Project.
In March, 2001, LeClair slipped and fell on a freshly painted steel floor joist while instructing a Regal subcontractor that a specific wall was to be demolished. Id. at 462. LeClair later testified that it was his belief that a URS employee was responsible for painting the subject steel floor joist and for removing the floor board covering the joist prior to his accident. LeClair's underlying personal injury action against URS was filed in January, 2003.
Regal was insured for the Project under a commercial general liability policy issued by The Insurance Corporation of New York ("INSCORP"). In February, 2003, URS wrote to Regal demanding defense and indemnification for LeClair's personal injury claims, and/or that URS be an additional insured under the INSCORP policy. This declaratory judgment action was commenced by Regal and INSCORP against URS and its insurer in April, 2007, seeking, among other relief, a determination of URS's additional insured status under the INSCORP policy. The trial court ruled in favor of URS and held that INSCORP must defend and indemnify URS for the claims in LeClair's bodily injury action. The relevant issue before the Appellate Division was whether URS was an additional insured under the INSCORP policy.
The Appellate Division ruled that the INSCORP policy provided additional insured coverage "only with respect to liability arising out of [Regal's] ongoing operations performed for that [additional insured]." Id. at 462. The Appellate Division relied on Worth Constr. Co., Inc. v. Admiral Ins. Co., 10 N.Y.3d 411, 415 (2008), where the Court of Appeals held that the phrase "‘arising out of' means ‘originating from, incident to, or having connection with.'" The Appellate Division, using Worth's analysis of "arising out of' as a guide, determined that because Regal was the prime contractor for demolition and construction work at the Project, that there was a casual connection between LeClair's accident and Regal's work as the Project's prime contractor, the risk for which coverage was provided. Regal Constr. Corp., at 463.
In reaching this holding, the majority opinion rejected a lengthy argument supported by the dissent -- that URS is not entitled to additional insured coverage because LeClair's personal injury complaint did not contain any allegations of negligence against Regal, and that LeClair's accident did not arise out of Regal's "operations performed for that [additional insured]." Id. at 466. The dissent argued that a determination that URS is an additional insured under the INSCORP policy is a windfall for URS's own insurance carrier. In rebutting the dissent's argument, the majority stated, "generally, the absence of negligence, by itself, is insufficient to establish that an accident did not arise out of an insured's operations." Id. at 463. Further, the majority specified that "the focus of a clause such as the additional insured clause here 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." Id.
Learning Point: This case stands for the proposition that the phrase "arising out of" will be given expansive reach in the additional insured context, and that the focus of the analysis will be on the "general nature" of the named insured's operations, looking for a mere "casual connection", and not on specific operations at the time of the accident.
Back to New York CM Report of Recent Decisions (2009v3) 2009 Volume 3 Table of Contents
