Originally published by Kevin Merriman.
A recent decision from the Third Circuit highlights the continuing struggle that courts have had in understanding and applying the “caused, in whole or in part, by” wording found in many additional insured endorsements. In Ramara, Inc. v. Westfield Ins. Co., 2016 U.S. App. LEXIS 2656 (3d Cir. Feb. 17, 2016), the court addressed whether a parking garage owner was an additional insured under a policy issued to a subcontractor of the general contractor that was hired by the owner to perform work on the parking garage for a bodily injury claim brought by an employee of the subcontractor injured on the job. The subcontractor’s employee sued the owner and general contractor, but the complaint did not allege any claims against the subcontractor, because such claims were barred by Pennsylvania’s Workers’ Compensation Act.
The contract between the general contractor and subcontractor required the subcontractor to procure and maintain a general liability policy naming the owner as an additional insured. The subcontractor’s policy contained a blanket additional insured endorsement, which provided, in relevant part, as follows:
A. Section II – Who Is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability for “bodily injury,” “property damage,” or “personal and advertising injury” caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf;in the performance of your ongoing operations for the additional insured.
The insurer argued that for the owner to be an additional insured under the subcontractor’s policy, and thus for it to have a duty to defend the owner, the complaint had to allege explicitly that the subcontractor’s acts or omissions were a proximate cause of plaintiff’s injuries. The owner argued that proximate cause is not required; instead, all that is required is that the subcontractor be a “but for” cause of the alleged injuries, and that the complaint adequately pleaded facts from which such causation could be inferred. The owner also argued, somewhat creatively, that requiring proximate causation would be inconsistent with the policy’s Other Insurance clause, which provided, in relevant part:
When required by written contract with any additional insured owner, lessee, or contractor to provide insurance on a primary and noncontributory basis, Condition 4. of Section IV – Commercial Liability Conditions is deleted and replaced by the following:
4. Other Insurance
If other valid and collectible insurance is available for a loss we cover under Coverage A or B of this Coverage Part, our obligations are limited as follows:
a. Primary Insurance. This insurance is primary and non-contributory except when b. below applies.
b. Excess Insurance. This insurance is excess over any of the other insurance, . . .
(4) If the loss is caused by the sole negligence of any additional insured owner, lessee, or contractor.
Specifically, the owner argued that if the subcontractor were required to be a proximate cause in order to trigger additional insured status, then the provision making the policy excess over other insurance where the loss was caused by the sole negligence of the additional insured could never be triggered, because if the subcontractor were a proximate cause (thus triggering the owner’s additional insured status), then the additional insured could not be solely negligent, and the Other Insurance provision would be meaningless.
The court sided with the owner, holding that, even under a proximate cause standard, the complaint alleged enough to trigger coverage for the owner. In particular, the court cited allegations that the plaintiff was employed by the subcontractor, that the general contractor hired the subcontractor as an independent contractor, that the plaintiff was injured in the course of his normal duties at the job site, and that the owner had “act[ed] by and through its agents, servants and/or employees” and “fail[ed] to adequately inspect and monitor the work performed.” The court held that these allegations “raise at least the potential that [the subcontractor’s] conduct was a proximate cause of [plaintiff’s] injuries.” The court also noted that the complaint pleaded that the owner was negligent in hiring and supervising the work performed by its contractors and subcontractors.
The court went on to state that, although the owner qualified as an additional insured under either a proximate cause or “but-for” cause standard, the correct interpretation of the additional insured endorsement was that it required only “but-for” causation. In particular, the court agreed with the owner that the policy must be read as a whole, and under the insurer’s proximate causation interpretation, “it would be impossible for an additional insured to have excess coverage under the Other Insurance [clause].”
It will be interesting to see whether courts will apply the same “but-for” interpretation to the “caused, in whole or in part, by” language in future cases, where the policy at issue does not have similar Other Insurance language. In the meantime, Ramara is another reminder that courts are still coming to terms with interpreting the meaning of the “caused, in whole or in part, by” language that is commonly found in additional insured endorsements.
Submitted by David M. Knapp, Ward Greenberg Heller & Reidy, LLP
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
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