October 4, 2024
The insurance coverage dispute arose out of an underlying action in which a construction worker alleged he was injured as a result of a fall on a scaffold. The underlying plaintiff, an employee of the demolition sub-subcontractor, sued the Owner, General Contractor and the Demolition Subcontractor. Third-party actions were filed against the Scaffolding Subcontractor. London Fischer’s client Houston Casualty Company (“HCC”) insured the General Contractor; Accredited insured the Demolition Contractor; and Southwest Marine insured the Scaffolding Subcontractor. Both the Accredited and Southwest Marine policies provide additional insured (“AI”) coverage for bodily injury caused, in whole or in part, by their named insured’s acts or omissions. After Accredited and Southwest Marine denied AI coverage to the General Contractor, HCC undertook the defense of the General Contractor and filed a declaratory judgment action in the E.D.N.Y.
Accredited argued that there were no specific allegations that its insured, the Demolition Subcontractor, proximately caused the underlying plaintiff’s injuries. The Court rejected that argument, finding that allegations of negligence directed against all the defendants, including the Demolition Subcontractor, were sufficient to trigger AI coverage for the General Contractor.
Unlike the Demolition Subcontractor, the Scaffolding Subcontractor (Southwest Marine’s insured) is not a named defendant in the underlying action. However, the General Contractor and Demolition Subcontractor filed third-party complaints alleging negligence against the Scaffolding Subcontractor. The Court found that those third-party complaints, along with the plaintiff’s statement that the accident occurred on a scaffold, triggered Southwest Marine’s duty to defend. The Court further noted that Southwest Marine’s attempt to shift the blame from its insured (the Scaffolding Subcontractor) to the Demolition Subcontractor and the plaintiff’s employer (sub-subcontractor for demolition) did not eliminate the possibility that the Scaffolding Subcontractor was also liable since there can be multiple proximate causes for an injury.
The Court proceeded to find that the Accredited and Southwest Marine policies apply as primary coverage for the General Contractor while the General Contractor’s own policy with HCC applies as excess coverage. Accredited and Southwest Marine thus share a duty to defend to General Contractor, HCC is entitled to withdraw from the defense, and Accredited and Southwest must reimburse HCC for reasonable defense costs incurred in defending the General Contractor, along with pre-judgment interest.
The Court’s opinion reaffirms New York law on an insurer’s duty to defend an additional insured where there may be multiple proximate causes of the injury. The decision should prove helpful for general contractors and their insurers in enforcing contractual obligations of subcontractors and their insurers to provide additional insured coverage.
Attorney Jan H. Duffalo represented HCC. The case is Houston Cas. Co. v. Accredited Sur. & Cas. Co. A copy of the Court’s Memorandum and Order is attached. The decision is reported at 2024 U.S. Dist. LEXIS 174861 (E.D.N.Y. Sept. 26, 2024).
