When a named insured is only 1% responsible for an accident, what percentage of indemnity coverage is owed to an additional insured? A recent New York federal court says 100%. In New York, additional insured coverage may very well extend to the additional insured’s own independent negligence, so long as the named insured was at least 1% negligent. This is in contrast to other states where additional insured coverage might apply only to vicarious liability for the named insured’s negligence.

At the outset, the specific policy language will always control an insurer’s obligations. A standard blanket additional insured endorsement will have two requirements: (1) that the named insured has agreed in a written contract to provide additional insured coverage to an organization; and (2) that the additional insured’s liability was caused, in whole or in part, by the named insured’s acts or omissions in the performance of its ongoing operations. We refer to the first prong as the “written contract” requirement, and the second prong as the “nexus” requirement. Either prong can be modified by policy language. For example, the written contract prong can require direct contractual privity between the named insured and additional insured. The nexus requirement can be expanded to liability “arising out of” the named insured’s work.

Where both prongs are potentially satisfied, an insurer owes a duty to defend. The duty to indemnify is narrower than the duty to defend, however. There is an argument that additional insured coverage should apply only to vicarious liability for the named insured if the nexus requirement is “caused, in whole or in part,” language. If the named insured is only 30% responsible for the accident, the additional insured should not be covered for the remaining 70% that was not caused by the named insured.

The Southern District of New York has rejected this argument. In Starr Indem. & Liab. Co. v. Excelsior Ins. Co., No. 19 CIV. 3747 (KPF), 2021 WL 326209 (S.D.N.Y. Feb. 1, 2021), the underlying plaintiff was injured on a job site performing drywall and ceiling work when his scaffolding tipped. He filed a New York Labor Law action against the owner and general contractor, and the owner and general contractor sought additional insured coverage from subcontractor Tri-State Computer Flooring Co.’s  commercial general liability insurer, Excelsior. Ultimately, Tri-State was found to have been 35% at fault for the accident, and the owner/general contractor were found to have been 65% at fault.

The Excelsior policy had two additional insured endorsements. Both required a written contract obligating Tri-State to name the owner and general contractor as additional insureds, which was satisfied. The first endorsement stated that coverage was available only with respect to liability “arising out” of Tri-State’s ongoing operations. The second endorsement stated there was coverage for liability “caused, in whole or in part” by Tri-State’s acts or omissions. Both endorsements stated that additional insured coverage did not apply to bodily injury arising from the sole negligence of the additional insured.

Excelsior had agreed to defend the owner and general contractor under a reservation of rights, but refused to indemnify the owner/general contractor for their 65% share, arguing that the additional insured coverage did not apply to the sole negligence of the additional insured.

The Court held that Excelsior owed a complete duty to indemnify, under either endorsement. It acknowledged that the “arising out of” nexus requirement is broader than the “caused, in whole or in part by,” nexus, based on Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313, 79 N.E.3d 477 (N.Y. 2017).[1] However, even under the narrower “caused, in whole or in part by” language, the Court held that “so long as the named insured is more than 0% liable for the underlying plaintiff’s injuries, additional insured coverage is triggered. For, in such circumstances, the plaintiff’s damages are caused, in whole or in part, by the named insured’s operations.” Starr at *8. Tri-State had caused the accident in part because it was 35% responsible for the plaintiff’s damages. While the Court did not focus on the exclusionary language in the endorsement, it did hold that the owner/general contractor were not solely negligent and were therefore entitled to complete indemnity as additional insureds.

This case means that when an additional insured endorsement has standard “caused, in whole or in part,” language, so long as the named insured is more than 0% negligent, the additional insured is entitled to 100% coverage. This is so even if the endorsement states there is no coverage if the liability arises from the sole negligence of the additional insured.

It is critical to remember that other states may interpret this language differently and that specific policy language will control. For example, just across the Hudson River in New Jersey, courts have come out on both sides of this question. Compare Schafer v. Paragano Custom Bldg., Inc., 2010 N.J. Super. Unpub. WL 624108 (App. Div. Feb. 24, 2010), cert. denied, 202 N.J. 45 (2010) (finding coverage only for vicarious liability under “caused, in whole or in part” language) with Friedland v. First Specialty Ins. Corp., No. ESX-L-4155-15, 2016 WL 4162282, at *7 (N.J. Super. Ct. Law Div. 2016) (“Accordingly, if IPC is found to be 1% responsible for the incident, the Mall Defendants will be entitled to full indemnification pursuant to the endorsement. Conversely, if IPC is found to be 0% liable, the Mall Defendants will not be entitled to indemnification at all.”). 

To the extent an insurer wishes to limit additional insured coverage to its named insured’s fault percentage, it may do so — even in New York — by using express language indicating that intent. See, e.g., Crespo v. City of New York, 2 Misc. 3d 1008(A), 784 N.Y.S.2d 919 (N.Y. Sup. Ct., Bronx Cty, 2004) (finding additional insured coverage applies to vicarious liability percentage where endorsement states “only to the extent that such person or organization is held liable for your acts or omissions…”).

[1] For a further discussion of this case, please see https://www.cozen.com/news-resources/publications/2017/new-york-high-court-no-coverage-for-additional-insured-where-named-insured-is-not-partially-liable.