The Burlington Ins. Co. v. NYC Transit Authority, 2017 NY Slip Op 04384 (June 6, 2017)
In a 4-2 decision written by Judge Jenny Rivera, the New York Court of Appeals reversed the order of the Appellate Division, First Department and granted summary judgment to the firm’s client, The Burlington Insurance Company, declaring that Burlington did not owe additional insured coverage to the NYC Transit Authority with respect to an underlying personal injury action. Interpreting standard ISO policy language in Burlington’s policy, the Court held that the phrase “caused, in whole or in part” by the “acts or omissions” of the named insured refers to “proximate cause,” thereby requiring negligence by the named insured as a condition of coverage for additional insureds under the policy.
The underlying personal injury action was commenced by a Transit Authority employee who was allegedly injured when he tripped following an explosion in a subway tunnel that occurred when a chipping machine operated by Burlington’s insured came into contact with an electrified cable. After initially providing the Transit Authority with a defense subject to a reservation of rights, Burlington had disclaimed any coverage obligation to the Transit Authority upon the revelation that Transit was 100% at fault for the accident due to its failure to properly identify and de-energize the cable prior to the work.
Although Burlington’s coverage denial was initially upheld by the trial court, the First Department reversed, citing the recent line of cases in that Department holding that the phrase “caused by” does not materially differ from the phrase “arising out of,” which phrase had been utilized in earlier versions of the standard ISO additional insured endorsement. In so holding, the First Department arguably interpreted the words “caused by” even more broadly than the prior policy language, effectively applying a “but for” causation test. Whereas recent panels of the First Department had found a causal link in cases involving injuries to employees of the named insured, the panel’s decision here extended the ruling for the first time to injuries involving non-employees.
On appeal to the Court of Appeals, the Court agreed with our position that the plain meaning of the endorsement required proximate, not but for, causation. As its rationale, the Court relied on Ford Marrin’s argument that the language “caused, in whole or in part” cannot refer to “but for” cause because logically there can be no partial “but for” causes. The Court also agreed with the firm’s argument that the endorsement’s language effectively describes proximate cause in lay terms and thereby did not require a redundant usage of the word “proximate” in order to avoid ambiguity.
This ruling has far-reaching implications for New York insurance coverage law. In addition to aligning New York law with that of other jurisdictions and the intent of the policy drafters, the decision now provides insurers with a coverage defense to additional insured coverage claims where the named insured is somehow causally connected to the accident, but otherwise without fault. We expect that the decision may spur a number of appeals and motions to reargue.
Partners Joseph D’Ambrosio and John Mattoon and Associate Gregory Bruno worked on this matter.
