I have always done a lot of additional insured coverage work in my practice (and its first cousin, contractual indemnity).  But lately it seems like every other new assignment I receive from a client has, as its central issue, a complex dispute over the availability of coverage for an additional insured. 

And there’s more – I read a lot of coverage decisions.  I am seeing countless new decisions addressing additional insured issues.  Granted, there’s never been a shortage, but the number seem to be exploding. 

And lots of them are of the “Insurer v. Insurer” variety.  So it’s not just a party claiming to be an additional insured under a policy – but also insurers disputing which policy provides coverage when there is an additional insured in play.  There are also disputes over priority of coverage between the policy providing the additional insured coverage and the additional insured’s own policy.

And let us not forget that these tend to be complex cases, often because additional insured endorsements have varying policy language and the claims often involve fact-intensive scenarios.  This is often a recipe for a complex coverage dispute. 

Of the many recent additional insured cases I could have addressed here, I chose Navigators Specialty Ins. Co. v. Citizens Ins. Co., No. 22-1866 (D.N.J. July 3, 2024).  I did so because it involves a fundamental question that often arises in additional insured cases – regardless of the factual context.  So despite all the variety in AI cases, this one has wide-spread relevance.      

A construction worker, an employee of a subcontractor, was injured on a job site.  He sued his employer [you don’t always see that] and the general contractor. The GC sought coverage from the subcontractor’s insurer as an additional insured. 

The additional insured endorsement included the standard ISO policy language: the general contractor is covered with respect to liability for “bodily injury” “caused, in whole or in part by” the acts or omissions of the subcontractor or someone acting on the subcontractor’s behalf.

A dispute arose between the insurer for the general contractor and the insurer for the subcontractor.

The insurer for the subcontractor said that the GC was not entitled to coverage as an additional insured: “[T]he ‘caused, in whole or in part, by’ language means there is a duty to defend only in vicarious liability situations — when the additional insured (here, the [GC]) is allegedly liable solely on a derivative basis, on account of the alleged conduct of the primary insured (here, the Subcontractor).”

The insurer for the GC saw it differently, maintaining that the GC was entitled to coverage as an additional insured under the subcontractor’s policy: “[T]here is a duty to defend in vicarious liability situations — but also in direct liability situations, when the additional insured is allegedly liable at least in part based on what it itself did.”  

So that was the issue before the New Jersey federal court: Does “caused, in whole or in part by” the acts or omissions of the subcontractor provide additional insured coverage for the general contractor for solely its vicarious liability or is AI coverage available for the GC’s own negligence?  

The court went through a detailed analysis – starting with New Jersey state and federal court decisions.  Concluding that they provided some guidance, but it was not dispositive, the court turned to a review of case law nationally on the issue.

Citing numerous decisions from across the country, the court observed that “[t]he overwhelming majority rule is that the Insurance Contract’s ‘caused, in whole or in part, by’ language is consistent with a duty to defend that applies in both direct and vicarious liability contexts.”

The court also looked to the policy language itself: “The Contract extends coverage ‘to liability for ‘bodily injury’, . . . caused, in whole or in part by [the named insured’s] acts or omissions, or the acts or omissions of those acting on [the named insured’s] behalf[.]’”  But this does not purport to limit coverage to an ‘injury’ that is ‘caused’ in one particular way or another, direct or vicarious. ***The insurance contract could have imposed this sort of limit. But it did not.”

Thus, the court held that AI was coverage was owed to the GC for both its vicarious and direct liability.

I was not surprised by this decision.  That is the majority rule nationally.  While it is well beyond the scope here to address this, there is much that can be said about what was achieved by ISO’s change, 20 years ago, in its additional insured endorsements,” from “arising out to” to “caused, in whole or in part by,” as the key causation test.