Additional Insured Entitled To Defense and Indemnification
Noting that it was “once again asked to determine the obligation of an insurer to defend and indemnify,” New York highest court ruled that an additional insured was entitled to defense and indemnification. In Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, New York City hired URS Corporation (URS) as the construction manager for a Rikers Island renovation project and URS hired Regal Construction Corp. (Regal) to be the main demolition, renovation and other contractor. Under the agreement between URS and Regal, Regal had to obtain a commercial general liability (CGL) insurance policy naming URS as an additional insured. Regal obtained a CGL insurance policy from plaintiff Insurance Corporation of New York (INSCORP) that named URS as an “additional insured” and covered URS only with respect to liability “arising out of” Regal’s ongoing operations performed for URS.
In March 2001, Regal’s project manager, Ronal LeClair, stepped onto a floor joist (to indicate a wall that needed to be demolished) and according to LeClair, the joint had been recently painted and the paint caused LeClair to slip and injure his back. LeClair alleged that an unnamed person from URS told him that URS employees had painted the joist.
In 2003, LeClair commenced a personal injury action against the City and URS. While LeClair did not name his employer, Regal, as a defendant, URS forwarded a copy of the complaint to Regal and to its insurer, INSCORP, demanding defense and indemnification based upon the additional insured clause of the CGL policy. Ultimately, Regal and INSCORP commenced a declaratory judgment action against URS and its insurer seeking a declaration that URS Was not entitled to coverage as an additional insured under the INSCORP policy.
The Court of Appeals ruled that an insurer’s duty to defend its insured is “exceedingly broad” and that an insurer must provide a defense “whether the allegations of the complaint suggest . . a reasonable possibility of coverage.” In other words, if the complaint contains any facts or allegations which bring the claim “even potentially within the protection purchased, the insurer is obligated to defend.”
The Court of Appeals found that the additional insured endorsement provided that URS was an additional insured “only with respect to liability arising out of [Regal’s] operations].” Although Regal and INSCORP claimed that LeClair’s injury did not arise for Regal’s demolition and renovations operation but from URS’ employees’ painting of the joist, the Court of Appeals ruled that “the focus of the inquiry ‘is not on the precise cause of accident but the general nature of the operation in the course of which the injury was sustained.’” As the Court of Appeals found that the injury “arose out of” Regal’s operation notwithstanding URS’s negligence, the injury fell within the scope of the additional insured clause of the insurance policy.
The Court of Appeals said its decision was factually distinguishable from its prior decision in Worth Const. Co., Inc. v. Admiral Ins. Co., 10 N.Y.3d 411, because in this case, there was “a connection between the accident and Regal’s work, as the injury was sustained by Regal’s own employee while he supervised and gave instructions to a subcontractor regarding work to be performed.” Consequently, the Court ruled that the fact that the underlying complaint alleged negligence on URS’s party and not Regal was of “no consequence” as URS’s potential liability for LeClair’s injury “arose out of” Regal’s operation and therefore, URS was entitled to a defense and indemnification.
