ABA Section of Litigation Insurance Coverage Litigation Committee CLE Seminar, March 3-5, 2011: AI Coverage: Additional But no Less Important

AI Coverage: Additional But No Less Important

Amy Woodworth, Esq. MEAGHER & GEER, PLLP 33 South Sixth Street, Suite 4400 Minneapolis, Minnesota 55402 Email: awoodworth@meagher.com Seth M. Friedman, Esq. Steven D. Caley, Esq. Linda B. Foster, Esq. Rahul Karnani, Esq. WEISSMAN, NOWACK, CURRY & WILCO, P.C. 3500 Lenox Road 4th Floor Atlanta, Georgia 30326 Email: sethf@wncwlaw.com

Introduction

One recurring problem in insurance coverage law is the scope of coverage afforded to an additional insured (AI) by an AI endorsement to a CGL policy. Recently, courts have struggled with the following question: is an AI covered under the primary CGL policy for property damage, bodily injury, or personal injury caused by its own negligence, or is coverage limited only to the AI’s vicarious liability? This question is especially significant in construction disputes.

For example, assume that the owner of a construction project hires a general contractor to build the

project. In the contract between the owner and the general contractor, the general contractor agrees to ask its liability carrier to add the owner as an additional insured. Assume that the general contractor carries through with its promise and the liability carrier does add the owner either through a “blanket” AI endorsement or a specific endorsement. While working on the construction site, an employee of the contractor is injured. The employee subsequently sues the owner for its negligence in failing to provide a safe workplace. Is the owner covered under the contractor’s policy for the employee’s claims of negligence? Unfortunately, there is no easy answer to this question. First, much depends on the scope of what was promised in the contract between the owner and the contractor over the wording of the AI endorsement. Moreover, the case law differs, and is in fact sometimes directly contrary, from state to state.

The following is a survey of the case law in selected states examining the issue of whether additional insured coverage extends to cover the additional insured's own negligence or is limited to cover only the additional insured's vicarious liability for the actions of the named insured.

Table of Contents

I. FLORIDA LAW................................................................................. 1 

II. GEORGIA LAW............................................................................. 3 

III. ILLINOIS LAW............................................................................... 3 

IV. KANSAS LAW................................................................................. 8 

V. LOUISIANA LAW .................................................................... 10 

VI. MARYLAND LAW.................................................................. 10 

VII. MASSACHUSETTS LAW .................................................... 10 

VIII. MICHIGAN LAW ................................................................ 15 

IX. MINNESOTA LAW ...................................................................... 15 

X. NEW HAMPSHIRE LAW ................................................................. 16 

XI. NEW JERSEY LAW................................................................ 17 

XII. NEW YORK LAW ....................................................................... 18 

XIII. NORTH CAROLINA LAW ................................................. 22 

XIV. OHIO LAW............................................................................ 23 

XV. OREGON LAW........................................................................... 24 

XVI. PENNSYLVANIA LAW............................................................... 25 

XVII. TEXAS LAW............................................................................ 26 

XVIII. UTAH LAW........................................................................ 29 

XIX. WEST VIRGINIA ................................................................. 29 

XX. WYOMING LAW................................................................... 29 

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I. FLORIDA LAW Garcia v. Federal Ins. Co., 969 So.2d 288 (Fla. 2007)

In Garcia, a homeowner’s employee sought coverage as an additional insured under a homeowner’s insurance policy. While Garcia did not involve a claim under a CGL policy, the Florida Supreme Court relied heavily on cases which have interpreted similar additional insured provisions in CGL policies in reaching its holding. And it has been relied on by at least one Florida Federal District Court analyzing additional insured coverage under a CGL policy. See Monticello Ins. Co. v. City of Miami Beach, 2009 WL 667454 (S.D. Fla. 2009).

Garcia worked as a caregiver for the named insured, Laura Anderson. As part of her caregiver duties, Garcia used the insured’s vehicle. While using the named insured’s vehicle, Garcia was involved in an accident and seriously injured a pedestrian. The victim sued the insured and Garcia, alleging that each was independently negligent.

At the time of the accident, the insured was covered by a Federal homeowner’s insurance policy. The policy defined a covered person to include, in part: “any other person or organization with respect to liability because of acts or omissions of you or a family member . . .” Garcia alleged that she met the definition of insured because she qualified as “any other person or organization with respect to liability because of acts or omissions” of the named insured. Federal denied coverage and argued that the clause only covered individuals who become vicariously liable for the acts or omissions of the named insured. Federal argued that because the victim had sued Garcia for her own negligent acts, she did not qualify as an additional insured.

The Florida Supreme Court noted that the particular language at issue had not been interpreted by any Florida court. The court noted it had, however, considered similar language and specifically referenced its decision in Container Corp. of America v. Maryland Cas. Co., 707 So.2d 733 (Fla. 1998), in which the court held that an endorsement naming the owner as an additional insured “but only with respect to operations by or on behalf of the Named Insured” did not limit coverage to vicarious liability. In Container Corp the court held that coverage would not be limited to a claim of vicarious liability unless so specified.

With respect to the language at issue in Garcia, the court noted that two phrases were particularly relevant: “with respect to” and “because of.” The court determined that, based on dictionary definitions, the phrase “with respect to” meant “concerning” and the phrase “because of” meant “by reason of.” When considered in that context, the court held that an additional insured is only entitled to coverage “concerning” liability that is “caused by” or occurs “by reason of” acts or omissions of the named insured. Thus, the court held that a clause covering “any other person with respect to liability because of acts or omissions” of the named insured covers only vicarious liability for the negligence of the named insured. The court reasoned that the policy language was clear and unambiguous in its intent to limit coverage to the vicarious liability of the named insured.

Koala Miami Realty Holding Co., Inc. v. Valiant Ins. Co., 913 So.2d 25 (Fla.D.Ct.App. 2005)

In Koala, a victim of a slip-and-fall in the restroom of a building owned by Koala Miami Realty Holding Company sued Koala and its maintenance company, Aetna Maintenance Company, for his injuries. The complaint alleged that Aetna was responsible for janitorial services for the building and that all of the defendants had a duty to inspect and maintain the restrooms in a condition reasonably safe for their intended use. Koala and Aetna had entered into a contract which required Aetna to list Koala as an additional insured on Aetna’s general liability policy with Valiant Insurance Company. The Valiant policy indicated that Koala was an additional insured as follows: “Who Is An Insured (Section II) is amended to include as an insured the person or organization shown in the schedule, but only with respect to liability

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arising out of your ongoing operations performed for that insured.” Valiant argued the policy did not provide coverage to Koala for Koala’s own negligence.

The Florida Court of Appeals disagreed and noted that the phrase “arising out of” as used in the Valiant policy had been held to be ambiguous by other Florida courts because it could not be determined from the language of that phrase whether it is the named insured’s or the additional insured’s own negligence which is covered. Accordingly, the court held that Koala was entitled to coverage as an additional insured for Koala’s own negligence.

Monticello Ins. Co. v. City of Miami Beach, 2009 WL 667454 (S.D. Fla. 2009)

In Monticello, the City of Miami Beach sought coverage as an additional insured under an insurance policy issued to Hurricane Beach Rentals, a beach concessionaire, for two drownings that occurred in the Atlantic Ocean. The policy issued to Hurricane Beach Rentals contained an additional insured endorsement which stated that the City of Miami Beach was an insured “but only with respect to liability arising out of the operations performed for [the City of Miami Beach] by or on behalf of [Hurricane Beach Rentals]”. The court noted in its findings of fact that the policy issued did not contain specific language stating that coverage for the city was limited to its vicarious liability for the negligence of Hurricane Beach Rentals or that there was no coverage for the city’s own negligence. Notably, the court held that while the term “arising out of” was not ambiguous, there was still a question regarding whether the remaining language in the additional insured endorsement is ambiguous to the extent it is unclear whether the endorsement covers the additional insured for its own negligence or only for the vicarious liability for the negligence of the named insured. Relying on the Florida Supreme Court decisions in the Container Corp. of Am. v. Maryland Cas. Co. and Koala Miami Realty Holding Co. v. Valiant Ins. Co. cases, the court held that the policy endorsement at issue in the Monticello case was ambiguous as to the scope of coverage. Specifically, the court noted that under one interpretation, the endorsement could be viewed to limit coverage to circumstances in which the named insured’s negligent acts or operations directly caused the plaintiff’s injury, that is, circumstances in which the additional insured is held vicariously liable for the named insured’s negligence. But, under another interpretation, the endorsement could likewise be read to cover the additional insured’s direct negligence, so long as the plaintiff’s injury has some connection to the operations that the named insured performed for the additional insured.

Container Corp. of America v. Maryland Casualty Co., 707 So.2d 733 (Fla. 1998)

A plant owner brought a declaratory judgment action against a contractor’s liability insurance carrier to establish coverage as an additional insured for a suit brought against it by the contractor’s employee for injuries he sustained on the job site. The policy contained an endorsement naming the owner as an additional insured “but only with respect to operations by or on behalf of the Named Insured.” The insurance carrier argued that the additional insured coverage was limited to the plant owner’s vicarious liability, and that because the employee’s suit was for the plant owner’s own negligence, there was no coverage. The court disagreed, holding that “[b]ecause the endorsement in the instant case contains no limiting language, we hold that [the plant owner] was entitled to coverage [for claims of its own negligence].” Id. at 736. The implication is that, in Florida, unless the AI endorsement specifically limits coverage to vicarious liability, coverage will not be so limited.

Florida Power & Light Co. v. Penn America Ins. Co., 654 So.2d 276 (Fla. Dist. Ct. App. 1995)

Florida P & L hired a contractor to renovate one of its electrical substations. According to the agreement between Florida P &L and the contractor, the contractor was to provide insurance coverage for general liability. A contractor’s employee was electrocuted while

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working on the substation. The employee brought suit against Florida P & L for negligence. The contractor’s insurance carrier brought a declaratory judgment action against Florida P & L, arguing that the contractor’s policy did not provide coverage to Florida P & L. The court held that Florida P & L qualified as an additional insured under the contractor’s blanket additional insured endorsement, which afforded coverage to any person “to whom or to which the named insured is obligated by virtue of a written contract…to provide insurance such as is afforded by the terms of this policy, but only with respect to operations by or on behalf of the Named Insured or to facilities used by the Named Insured….” The court held that no language in the provision required fault on behalf of the contractor before Florida P & L could be considered an additional insured. Thus, additional insured coverage would not be limited to Florida P & L’s vicarious liability, but would be extended to claims against Florida P&L for its own negligence.

Liberty Mutual Insurance Co. V. Capeletti Bros., Inc., 699 So.2d. 736 (Fla. Dist. Ct. App.

1997) Capeletti, a general contractor, hired Community Asphalt Co. to work on a road construction

project. As a part of their agreement, Capeletti was to be named an Additional Insured on Community Asphalt’s public liability insurance policy with Liberty Mutual. The AI endorsement to the Liberty policy provided that Capeletti would be an AI only with respect to liability arising out of Community Asphalt’s work or for any of Capeletti’s acts or omissions in connection with the general supervision of Community Asphalt’s work. By Exclusion (3) to the AI, the insurance did not apply to any bodily injury or property damage arising out of the AI’s acts, other than its general supervision of the Named Insured’s work. When a motorist traveling through the work zone suffered injury and brought suit against Capeletti for failure to follow standard procedures to ensure the safety of motorists, Liberty Mutual assumed the defense of Capeletti under a reservation of rights, citing Exclusion (3). Capeletti filed a declaratory judgment action and the trial court granted Capeletti’s motion for summary judgment. The appellate court reversed, citing the clear and unambiguous language of the exclusionary provision.

II. GEORGIA LAW

BBL-McCarthy, LLC v. Baldwin Paving Co., 285 Ga.App. 494, 646 S.E.2d 682 (2007). General contractor and its liability insurer brought action against subcontractors and their

liability insurers to recover for breach of duties to defend and indemnify general contractor in underlying tort suits. The subcontractor was hired to construct a deceleration lane going into an office complex. An accident occurred in the deceleration lane whereby several motorists were killed, and their estates sued the general contractor. The general contactor tendered the defense of the suit to the subcontractor’s carrier as an additional insured under the policy, but the tender was denied. In holding that the general contractor was an AI under the subcontractor’s policy, the Court held that the “arising out of” language in an AI endorsement means “[a]lmost any causal connection or relationship . . .” and grants coverage “without regard to whether the injury was attributable to the named insured or the additional insured.” III. ILLINOIS LAW

State Automobile Mut. Ins. Co. v. Kingsport Development, LLC, 846 N.E.2d 974 (Ill.Ct.App.

2006) Kingsport, the general contractor on a residential construction project, subcontracted

carpentry work on the project to W.A. Anderson Construction Company. An employee of Anderson, John Halek, allegedly fell while performing carpentry work on the project and

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suffered personal injuries. Halek brought a one-count complaint against Kingsport alleging that Kingsport failed to provide a safe workplace. At the time of the accident, Anderson was insured by State Auto. The certificate of insurance named Kingsport as an additional insured under the policies. The insurance stated that any person required to be an additional insured was an additional insured “with respect to liability arising out of: . . . (b) . . . your work . . . for that additional insured for or by you.”

Kingsport argued that it was entitled to coverage from State Auto because the additional insured endorsement required only that Kingsport’s liability arise out of Anderson’s work. Kingsport alleged that Halek’s complaint shows that Kingsport’s liability for Halek’s injuries at least potentially arose out of Anderson’s work because, but for Halek’s employment with Anderson and its presence on the job site, Kingsport would not have been sued. The court agreed with Kingsport and held that the claims against it potentially fell within the coverage provided by the State Auto policy. The court noted that “but for Halek’s work for Anderson and Anderson’s presence on the construction site, Halek would not have been injured. Accordingly, Halek’s injuries potentially arose out of Anderson’s work, and, based on the policy language, State Auto has a duty to defend Kingsport in the underlying suit.”

Pekin Insurance Co. v. Hallmark Homes, LLC, 912 N.E.2d 250 (Ill. Ct. App. 2009)

Hallmark Homes, a contractor on a construction project, requested that another entity involved in the project, MC Builders, include Hallmark as an additional insured under a policy issued to MC by Pekin Insurance Company. The Pekin policy included the following endorsement: “Who is an additional insured is amended to include as an 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 incurred solely as a result of some act or omission of the named insured and not for its own independent negligence or statutory violation.”

Bremer, an employee of a sub-contractor on a project, was injured on a construction site and sued Hallmark and MC. The first two counts of the amended complaint were directed against Hallmark and sought to hold Hallmark Homes liable under two theories of negligence, set out in sections 414 and 343 of the Restatement (Second) of Torts. Under Section 414, both direct and vicarious liability claims could be advanced. The other negligence count was set forth under Section 343 of the statement and asserted a theory of premises liability. Hallmark Homes tendered its defense to Pekin. Pekin then sought a declaration of its obligation to Hallmark Homes. While the court noted that Hallmark Homes, under the language of the policy at issue, was an additional insured only so long as it is or potentially could be liable solely as a result of M.C. Builders’ acts or omissions, that the facts as alleged in the underlying complaint potentially asserted a claim of vicarious liability. Thus, because Hallmark Homes could potentially be vicariously liable solely on the basis of the acts or omissions of M.C. Builders, the court determined that Hallmark Homes was entitled to a defense by Pekin Insurance Company.

Casualty Insurance Co. v. Northbrook Property & Casualty Co., 150 Ill.App.3d 472, 501

N.E.2d 812, 103 Ill. Dec. 495 (1st Dist. 1986) An employee of a subcontractor hired for all above-ground concrete work on a multi-

story office building was injured by a cable dislodged from a crane owned by a third company. The general liability policy issued by Casualty to the subcontractor included an endorsement naming the construction manager of the project owner as an additional insured (AI). After the employee brought suit against the construction manager and others, the construction manager tendered the claim to its own insurer, Northbrook. Northbrook subsequently tendered the

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defense to Casualty, which refused to defend on the basis there was no coverage for the construction manager as an AI. Casualty filed a declaratory judgment action accordingly. The appellate court affirmed the lower court’s ruling in favor of Northbrook and the construction manager, relying on the “but for liability arising out of “ language interpreted in Maryland Casualty Co. v. Chicago & Northwestern Transportation Co., 126 Ill.App.3d 150, 153, 81 Ill.Dec. 289, 466 NE.2d 1091 (1st Dist. 1984). The Northwestern Transportation court held the “arising out of “ language in the AI endorsement is broad and ambiguous and should be liberally construed in favor of the insured. Therefore, “proximate causation” is not required; rather, the “but for causation” is the appropriate test: but for the victim’s employment on the premises, the victim would not have suffered the injury. The court rejected Casualty’s argument that Consolidation Coal Co. v. Liberty Mutual Insurance Co., 406 F. Supp 1292 (W.D. Pa. 1976) should apply because the AI endorsement in that case contained qualifying language (acts or omissions of the named insured) not found in the Casualty AI endorsement.

American States Insurance Co. v. Liberty Mutual Insurance Co., 291 Ill.App3d 336, 683

N.E.2d 510, 225 Ill.Dec. 342 (1st Dist. 1997) Liberty Mutual issued a general liability policy to the subcontractor on a medical center

project with an endorsement naming the general contractor as an Additional Insured (AI). When an employee of the subcontractor was injured on the job at the project site and filed suit, American States provided a defense under a reservation of rights and claimed Liberty Mutual, who insured the general contractor, had a duty to share in the defense costs. Liberty Mutual contended that its policy was excess because of an endorsement in the policy that provided the policy did not apply “to that portion of the loss for which the insured has other valid and collectible insurance, as an Additional Insured on a Liability Insurance policy issued to a subcontractor of the Named Insured…”. Liberty Mutual filed a motion for summary judgment in the action filed against it by American Casualty, citing this endorsement as the basis for Liberty Mutual having no duty to defend. The trial court granted summary judgment in favor of Liberty Mutual and the appellate court affirmed. American Casualty tried several avenues to have the decision of the trial court reversed, including that its policy might not cover all of the causes of action and that the Liberty Mutual policy would fill in the gap. The appellate court disagreed, saying “but for” the employee’s working at the construction site for the subcontractor, he would not have been injured. The court saw “no real possibility of non-coverage by the American policy”. As a final attempt to prevail, American States claimed the Liberty policy could not be excess because the contractor paid more for the policy than the subcontractor paid for the American policy. The court concluded policy fees are not determinative of primary/excess status.

American Country Insurance Co. v. Kraemer Brothers, Inc., 298 Ill.App.3d 805, 699 N.E.2d

1056, 232 Ill.Dec. 871 (1st Dist. 1998) Kraemer Brothers, Inc. (Kraemer) agreed to act as a general contractor for a hotel project

and hired D. H. Johnson Construction Co. (Johnson) for the masonry work. Johnson added Kraemer to its policy of insurance with American Country. The AI limited coverage to the AI solely for liability resulting from conduct of the Named Insured that might be imputed to the AI. When a Johnson employee slipped and fell on excessive snow and ice at the site, he filed suit, naming Kraemer only and citing is negligence in maintenance and supervision of the project. Johnson was not named in the suit but Kraemer filed a third-party complaint for contribution, alleging Kraemer’s negligence. Kraemer tendered the defense to American Country and advised that they had also put its own carrier, USF&G on notice but had instructed the company not to engage in the suit. This would prove to be a fatal decision. American Country declined the tender and filed a declaratory judgment action based on three theories: (1) the AI language

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limiting coverage to imputed liability; (2) the requirement in its policy that the suit be promptly tendered to any other insurer which also has available insurance; and (3) the Other Insurance clauses of the two policies, which when read together, would render the American Country policy excess over the USF&G policy. Kraemer and Johnson raised arguments including that since only a binder of insurance was in effect at the time of the accident, the exclusions could not be raised since they were not in existence at that time, that the imputed negligence endorsement did not apply because Kraemer had filed a third-party complaint against Johnson, and that the endorsement requiring notice to other carriers was against Illinois public policy. The trial court granted summary judgment to Kraemer and Johnson. The appellate court disagreed and reversed, basing its decision on Kraemer’s failure to comply with the provision requiring it to tender the defense to its own insurer. The court found that the disclaimers in the certificate gave notice to Kraemer that it had to look to the policy itself to determine the extent of coverage and any exclusions and was bound accordingly. The appellate court also refuted Kraemer’s public policy argument about the notice provision and its reliance on Institute of London Underwriters v. Hartford Fire Ins. Co., 234 Ill.App.3d 70, 175 Ill.Dec. 297, 599 N.E. 2d 1311 (1992) that gave an insured the right to choose which of its insurers should defend the action. The distinction between London and this case was due to the difference in policy language in the two policies. The court found the “notice to all insurers” language in the American Country policy was not in contravention of public policy. Although the court acknowledged its ruling that Kraemer breached a policy provision was determinative, it also discussed whether there was any duty to defend the AI when there were no allegations of negligence by the Named Insured that could be imputed to the AI, except in the third-party complaint. Kraemer argued that without a determination in its favor, coverage under the AI endorsement would be illusory. The court found that there was “real coverage for strict liability” and thus the coverage for those claims was not illusory under the AI endorsement. However, when the allegations in the complaint were read with the policy, the liability attributable to Kraemer was not covered.

American Country Insurance Co. v. Cline, 309 Ill.App3d 501, 722 N.E.2d 755, 242 Ill.Dec.

971 (1st Dist. 1999) This case expands on the judicial dictum in American Country Insurance Co. v. Kraemer

Brothers, Inc., 298 Ill.App.3d 805, 699 N.E.2d 1056, 232 Ill.Dec. 871 (1st Dist. 1998) regarding imputed liability and its effect on coverage under the AI endorsement. In Cline, Pepper Construction Co. (Pepper) agreed to serve as the general contractor on a demolition project for Andersen Consulting, owner of the property (Andersen). Pepper hired Hinsdale Electric (Hinsdale) as an electrical subcontractor, which agreed to provide CGL insurance naming Pepper and Andersen as additional insureds for the Andersen project. The American Country policy contained a “Blanket Endorsement” for additional insureds in exchange for a premium of $150. The Form AC 2030M defined Additional Insureds and stated that coverage afforded to those entities was solely limited to liability specifically resulting form the conduct of the Named Insured that could be imputed to the AI. There was also an exclusion confirming the lack of coverage for any liability for an AI’s own negligence. A Hinsdale employee was injured on the jobsite and brought suit against Pepper and Andersen, alleging their negligence was responsible for the accident. Pepper tendered the claim to American Country, which declined. Pepper then filed a third-party complaint against Hinsdale, which was later dismissed. American Country filed a declaratory judgment action against Cline, Pepper and Andersen and moved for judgment on the pleadings. Pepper and Andersen filed a motion for summary judgment, which the trial court granted, finding that a court should find in favor of the insured when there is any doubt about the duty to defend. The appellate court reversed, giving credence to American Country’s arguments about why Kraemer should control. First, since Hinsdale received an unlimited number of blanket AI endorsements for a single $150 premium, it made sense that the additional

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insureds would receive coverage for a narrow class of claims, as specified in the policy provisions. Secondly, the court looked to the intent of the parties and found that American Country agreed to provide coverage only for the risk of liability arising out of Hinsdale’s work, and not for new risks from the many additional insureds. The court also concluded that the endorsement on file with the Illinois Department of Insurance with its implied approval, lent great weight against any contention the endorsement was against public policy. The court looked at the two sophisticated parties entering into the subcontract and found that any questions about insurance could have been negotiated prior to execution of the contract. Finally, the court addressed Pepper and Cline’s argument that in determining the duty to defend, an insurer must consider whether the pleadings “impliedly recognize the possibility that parties other than the additional insured, such as the named insured, may have had control over the plaintiff’s injuries”. The court found that Kraemer was well reasoned and controlled this case. The complaint did not allege any negligence by the named insured that could be imputed to the additional insureds, as required for coverage under the AI endorsement in the American Country policy.

Great American Insurance Co. v. West Bend Mutual Insurance, Co., 311 Ill.App.3d 534, 723

N.E.2d 1174, 243 Ill.Dec. 573 (1st Dist. 2000) The appellate court found that the Additional Insured Endorsement would extend

coverage to an additional insured for violations of the Structural Work Act by the subcontractor, where there was no policy provision specifically excluding coverage for violations of the Act or other statutory torts.

Sportmart, Inc. v. Daisy Manufacturing Co., 268 Ill. App.3d 974, 645 N.E.2d 360, 206

Ill.Dec. 355 (1st Dist. 1994) This case interprets the Additional Insured Endorsement for Vendors. The endorsement

attached to a CGL policy issued to Daisy, a BB gun and ammunition manufacturer, contained language providing coverage for vendors of products manufactured by Daisy “but only with respect to bodily injury or property damage arising out of [Daisy’s] products…which are distributed or sold in the regular course of the vendor’s business…”. A minor injured while shooting BB pellets purchased at Sportmart brought suit against the retail sporting goods store for negligently selling the ammunition to him. Sportmart tendered the defense of the company to Daisy and ultimately to Continental, pursuant to the Vendors Endorsement. After both refused to defend, Sportmart initiated a declaratory judgment action. The trial court agreed with Daisy and Continental that the Vendors Endorsement covered only injury arising from a defect in Daisy’s product. However, the appellate court reversed the trial court, citing prior decisions that “arising out of” is broad and vague and should be construed against the insurer. Only a mere causal connection is required to invoke coverage. The Continental policy neither limited covered claims only to those alleging a product defect nor did it exclude claims where the injury was directly caused by the product but also attributable to the negligence of others. The court concluded that the minor’s injury would not have occurred “but for” his use of the pellets.

Cincinnati Ins. Co. v. Dawes Rigging & Crane Rental, Inc., 321 F.Supp.2d 975 (C.D. Ill.

2004). Dawes Rigging leased a crane to Kelly Construction for use at a manufacturing company

in Illinois. The lease required Kelly to maintain liability insurance that named Dawes as an additional insured. Kelly was responsible for maintaining the equipment. By a side oral agreement, Kelly paid Dawes a weekly fee to have a Dawes mechanic available for repairs and maintenance. While assisting a Dawes mechanic in the installation of a new hydraulic valve on the crane, a Kelly employee suffered serious physical injuries. As a result of those injuries, the Kelly employee filed a lawsuit seeking to recover damages from several companies (including

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Dawes) that allegedly contributed to the unsafe working environment. Dawes tendered the action to Cincinnati Insurance Company which insured Kelly under a CGL and umbrella policy. The CGL policy contained Endorsement GA 472 01 95, “Automatic Additional Insured-Contractor”. Under this endorsement, “Additional Insured” was defined as a “person or organization in the schedule but only with respect to liability arising out of [Kelly’s] ongoing operations performed for that insured.” The “Schedule” portion of the document lists “[a]ny person or organization for whom [Kelly] is required in a written contract, oral agreement or oral contract where there is a Certificate of Insurance showing that person as an ADDITIONAL INSURED under this policy.” Cincinnati filed a declaratory judgment action and both parties filed motions for summary judgment on the duty to defend issue. The district court, applying Illinois law, found in favor of Dawes and against Cincinnati, refuting Cincinnati’s claims that the Additional Insured Endorsement applied only to liability caused by Kelly’s negligence imputed to Dawes but not for the additional insured’s own negligence. The court found the cases relied upon by Cincinnati were inapplicable because the language in the endorsements in those cases was significantly different and more limiting than that of the endorsement attached to the Cincinnati policy. The court found that under the facts of this case, Kelly was performing operations for Dawes by assisting in the maintenance of the crane and therefore was part of the ongoing operations Kelly was performing for Dawes. This interpretation is consistent with the decision in Casualty Insurance Co. v. Northbrook Property Casualty Ins. Co., 150 Ill.App.3d 472, 103 Ill.Dec. 495, 501 N.E.2d 812 (1986).

IV. KANSAS LAW

McIntosh v. Scottsdale Insurance Co., 992 F.2d 251 (10th Cir. 1993) A patron (McIntosh) of an outdoors festival run by Wichita Festivals, Inc. (Festivals) for

Wichita took a shortcut to the restroom facilities and jumped over a low retaining wall. He fell 20 feet and brought suit against the City of Wichita for the city’s failure to warn of a dangerous condition. Wichita was an additional insured under Festivals’ insurance policy with Scottsdale. The endorsement provided that the AI was included as an insured “but only with respect to liability arising out of operations performed for such insured by or on behalf of the named insured”. Wichita tendered defense of the claim to Scottsdale and then to its own insurer, Hanover, after Scottsdale declined to defend. Before trial, Scottsdale stipulated that it was 100% at fault. McIntosh settled with Wichita in exchange for a release against Hanover and an agreement not to execute against Wichita’s assets. McIntosh then filed a garnishment action against Scottsdale. Upon cross-motions for summary judgment, the district court ruled that Wichita was not covered under the AI for its own negligence. The Court of Appeals disagreed and reversed the lower court. The appellate court applied rules of construction when terms of the policy are ambiguous and found that the language but only with respect to liability arising out of [Festivals’] operations is ambiguous as to whose negligence is covered. Because this ambiguous language appeared to limit coverage, the court had to construe it narrowly and in favor of the insured. Therefore, the AI endorsement did not limit coverage only to claims arising out of Wichita’s vicarious liability for Festivals’ negligence. The appellate court further concluded that Wichita’s liability “arose out of” Festivals’ operations. Previous Kansas decisions found the term ambiguous and requiring a more liberal concept than proximate causation. A remote connection would not be sufficient but the facts of the case demonstrated the necessary causal connection. McIntosh was walking from a dance sponsored by Festivals to portable toilets set up by Festivals. A reasonable insured would believe that McIntosh’s injury and Wichita’s liability arose out of Festivals’ operations.

Atlantic Mutual Companies v. Home Depot U.S.A., Inc., 2003 WL 202607 (D.Kan. January

27, 2007).

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This case addresses the issue of whether an Additional Insured Endorsement to a manufacturer’s policy extends coverage to a vendor for injuries sustained by a customer while looking at a storm door display. Larson constructed, installed and maintained door displays in retail stores, including Home Depot, to promote its products. The actual door used in the display was not for sale, according to deposition testimony of the Home Depot employee. Home Depot and Larson entered into a Vendor Buying Agreement which required Larson to obtain CGL insurance naming Home Depot as an Additional Insured under a Broad Form Vendor’s Endorsement. In addition, Larson also executed a Vendor’s In Store Responsibilities Agreement which included a provision that Larson was to “maintain the area including displays and point of purchase materials.” These agreements were in effect on the day of the accident when the frame of the door display suddenly came loose and struck a customer. The customer filed suit against Home Depot and Larson Manufacturing Company. Home Depot tendered the claim to Larson’s CGL insurer, Atlantic Mutual, which twice denied any duty to defend or indemnify. Atlantic Mutual subsequently filed a declaratory judgment action stating that it did not have any obligation to Home Depot. Both parties filed motions for summary judgment. The U.S. District Court found that, as a matter of law, Atlantic Mutual was required to defend and indemnify Home Depot for the customer’s claims. Atlantic Mutual asked the court to determine that Home Depot was not an additional insured under the Vendor’s Endorsement because the display system was not sold in the regular course of Home Depot’s business, relying on the “Who Is An Insured” section of the policy as modified by the Vendor’s Broad Form Endorsement. The endorsement modified the “Who Is An Insured” to include all vendors “but only with respect to “bodily injury”… arising out of “your products”… which are distributed or sold in the regular course of the vendor’s business, subject to the following additional provisions.” This endorsement contained an exclusion for demonstration, installation, servicing or repair operations, except such operations performed at the vendor’s premises in connection with the sale of the product. The court agreed with an earlier South Dakota decision stating that “arising out of” has much broader significance than “caused by”. The display system involved in the accident clearly included a Larson product which was on display rather than for sale at the time of the accident. However, the court stated that just because one door had been pulled from the inventory for display purposes, the door was not divested “of its membership in the universe of Larson doors distributed or sold in the regular course of Home Depot’s business”. The injuries suffered arose out of the product, in that the injuries flowed from the Larson storm door which was a central component in the display system, thus falling within the terms of the policy. The court also stated that had Atlantic Mutual intended to exclude all display products it could have excluded all demonstration operations including those performed at the vendor’s premises rather than as the exclusion read.

Dillon Companies, Inc. v. Royal Indemnity Co., 369 F.Supp.2d 1277 (2005).

PSI and Dillon grocery store in Kansas contracted for PSI to provide guards. A PSI employee was overpowered by would-be robbers in the store. During the course of the attempted robbery, a customer was severely beaten and shot. At the time of the robbery Dillon’s was an additional insured on PSI’s policy. The policy limited the additional insured status to liability for “acts or omissions of the named insured arising out of the named insured’s security or investigative operations or out of operations from the service noted on the Schedule on behalf of the said additional insured.” The injured customer sued both Dillon’s and PSI alleging negligence on the part of both. Dillon’s tendered coverage for the suit to PSI’s insurance carrier, which declined the claim. The insurer took the position that the additional insured clause in the policy limited Dillon’s coverage to those losses Dillon’s suffered as a result of vicarious liability for PSI’s negligence. The insurance carrier asserted that because PSI was exonerated by the state court in the underlying action, the insurer could have no contractual obligation to indemnify

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Dillon’s, whose rights were derivative of Dillon’s right to indemnification. The district court found that the limiting clause of the additional insured endorsement was ambiguous because it was capable of two reasonable interpretations. A reasonable insured could understand the clause to limit coverage to situations where the additional insured (Dillons) was held vicariously liable for the negligence of the named insured (PSI), interpreting “acts or omissions” to mean negligent “acts or omissions.” A reasonable person could also construe the additional insured endorsement to cover all “acts or omissions,” whether negligent or not, by a PSI employee arising out of PSI’s security operations, interpreting “acts or omissions according to their dictionary definition. While the court did reject the argument that its interpretation of the insurance policy should be controlled by the language in the underlying contract between Dillon’s and PSI, the court did conclude that Dillon’s was an additional insured under the policy because there was a causal connection because the injury and PSI’s employee’s conduct. The court concluded that the fact that PSI had been found by the state to not owe a specific duty to the underlying plaintiff as a customer was not determinative of whether Dillon’s was an additional insured under the policy.

V. LOUISIANA LAW

Leaming v. Century Vina, Inc., 908 So.2d 21 (La. App. 4th Cir. 2005). Customers at a restaurant in Louisiana slipped and fell in a strip mall parking lot.

Customers sued the owner of the parking lot and its insurer, as well as the insurance carrier for the restaurant, asserting in part that the parking lot owner was an additional insured under the restaurant insurer’s policy. The restaurant insurance policy contained a blanket additional insured endorsement that provided that who was an insured was amended to included as an insured any person or organization whom the named insured had agreed in written contract to name as an additional insured but only with respect to liability arising out of the named insured’s work or their ongoing operations for that additional insured. The court held that the restaurant was not responsible for the patrons while they were in the parking lot. The accident occurred in an area under the responsibility of the parking lot owner so there was no act or omission or negligence on the part of the restaurant owner which triggered liability under the lease, so indemnity was not owed to the parking lot owner and they did not qualify as an additional insured under the policy.

VI. MARYLAND LAW

G.E. Tignall & Co., Inc. v. Reliance Nat’l. Ins. Co., 102 F.Supp.2d 300 (D. Md. 2000) A subcontractor’s employee sued a general contractor for negligence, alleging lead

poisoning while on the job. The general contractor claimed AI coverage under the subcontractor’s policy. The subcontractor’s policy named the general contractor as an additional insured, “but only with respect to liability arising out of [the subcontractor’s] ongoing operations performed for that insured.” The court held that the “arising out of” language limited coverage to vicarious liability, and thus there was no coverage for the employee’s suit, which alleged only negligence against the general contractor.

VII. MASSACHUSETTS LAW

Parker v. John Moriarty and Assoc., Inc., 2007 WL 242 9719 (Mass. Sup. Ct. 2007) David Parker sue a general contractor, John Moriarty and Associates, for injuries he

incurred while working at a construction site. Parker was an employee of Accord Steel and Precast who was hired by a subcontractor of Moriarty, James F. Stearns Company, Inc., to work on a project regarding the erection of steel on the building. Parker suffered injuries when he fell down a ladder at the worksite. Parker filed a complaint asserting a negligence claim against Moriarty for negligently failing to maintain a safe workplace. Moriarty then brought claims against the subcontractor, Stearns, and its insurance carrier Evanston Insurance Company. Moriarty claimed to be an additional insured under the Evanston policy issued to Stearns.

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Stearns and Accord were both named insureds under the policy. Stearns had agreed by contract to name Moriarty as an additional insured on its policy. The endorsement, which added Moriarty as an additional insured, provided as follows:

Who Is An Insured (Section II) is amended to include as an insured the person or organization shown in the schedule, but only with respect to liability arising out of “your work” for that insured by or for you and only as respects any claim, loss or liability arising out of the operations of the Named Insured, and only if such claim, loss or liability is determined to be solely the negligence or responsibility of the Named Insured. This coverage is limited to “your work” completed within the policy period.

In determining whether Moriarty was entitled to additional insured coverage, the court noted several limitations to coverage. First, the court noted that the endorsement required that in order for there to be coverage for Moriarty, the claim, loss or liability must arise out of the work of Stearns and Accord for Moriarty performed by or for Stearns and Accord and arising out of the operations of Stearns or Accord. The court determined that the claim clearly arose out of the work of Stearns and Accord for Moriarty, performed on their behalf by Parker, and out of their operations. Thus, the court concluded that the claims against Moriarty met the first two requirements for coverage under the endorsement.

The court noted that the endorsement had a third limitation indicating that it provided coverage only if “such claim, loss or liability is determined to be solely the negligence or responsibility of Stearns or Accord.” Evanston argued that pursuant to this limiting clause, the claims against Moriarty were not covered under the policy and Evanston did not have a duty to defend or indemnify Moriarty. The court noted, though, that the question of whether Moriarty was covered for the claims required a “determination” regarding the claims. The court interpreted that clause to mean a determination by a court, jury, arbitrator or other entity to which the parties submit their claims adjudication. Evanston argued, though, that there was no possibility of the claims being determined to be solely the negligence of Stearns because the complaint only alleged negligence on behalf of Moriarty and therefore, as a matter of law, Moriarty could not be held vicariously liable for the negligence of Stearns’ subcontractor. The court found that Evanston’s interpretation of the policy meant there would never be coverage under the policy for Moriarty as an additional insured. The court determined that the first two clauses in the endorsement provide coverage for claims arising out of work performed by or for Stearns for Moriarty. The court noted that the third clause limits coverage to vicarious liability for the sole negligence of Stearns, thus taking away coverage for the first two clauses provided. Consequently, the court noted that, at best, the conflict between the clauses rendered the endorsement ambiguous. At worst, the court indicated that to the extent the endorsement limits coverage to claims that are determined to be solely the negligence of Stearns, the third limiting clause rendered the policy illusory and was against public policy because it negated the very coverage that the policy purports to provide.

Moreover, the court went on to note that the endorsement limits coverage for claims determined to be “solely the negligence or responsibility” of Stearns. The court found that the policy did not address the meaning of the clause to the extent that it allows coverage with respect to claims against Moriarty that may not be solely the negligence of Stearns, but which are determined to be solely the responsibility of Stearns. The court noted that there was a third-party claim of Moriarty against Stearns that included a claim for indemnification under the subcontract between Stearns and another subcontractor. The court believed that if Moriarty prevailed on that claim, then Moriarty’s liability would have been determined to be solely the responsibility of Stearns. Accordingly, the court determined that there was a factual determination which rendered summary judgment inappropriate. The court did determine, though, that due to the

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uncertainty regarding the outcome of whether or not the liability was the sole responsibility of Stearns, Evanston had a duty to defend Moriarty until that outcome was determined.

Suffolk Construction Co. v. Royal and Sun Alliance Ins. Co., et al., 2002 WL 391345 (Mass.

Sup. Ct. 2002) This claim arose out of an accident at a construction site known as “the Mall at Lafayette

Place.” Suffolk was the general contractor of the construction site and Component Assembly Systems and S&F Concrete Contractors were both subcontractors on the project. Suffolk was an additional insured on Component’s insurance policy issued by Royal and an additional insured on the S&F insurance policy issued by Liberty. An employee of Component was allegedly injured in an accident at the construction site. Suffolk demanded coverage from both Royal and Liberty. Royal denied coverage. Liberty offered a defense under a reservation of rights but then refused to pay any outstanding legal fees and costs incurred in defending the claim.

The Royal policy provided that Suffolk was an additional insured “only with respect to

liability arising out of your ongoing operations performed for that insured.” The policy also stated that it covered Suffolk “only for vicarious liability arising soley out of the scope of the work as defined in the contract between our insured and this additional insured and performed by our named insured. This endorsement does not provide coverage for any acts of omissions of this additional insured or this additional insured’s employees or any other person or organization with which the additional insured has a contract.” The court determined that the policy language was ambiguous. Therefore, the court construed the language in favor of Suffolk and held that Royal was required to defend and indemnify Suffolk for the claims. Royal argued that the vicarious liability language in the contract expressly limits coverage to claims of vicarious liability and did not create an ambiguity in the policy. But the court found that the vicarious liability provision was inconsistent with the “arising out of your work” provision in the endorsement, and thus, an ambiguity was created in the policy that must be construed in favor of the insured.

Transamerica Insurance Group v. Turner Construction Co., 33 Mass. App. Ct 446, 601

N.E.2d 474 (1992) A subcontractor’s employee on a large office building was injured by a falling granite

slab and subsequently brought suit against the general contractor (Turner) rather than pursuing workers’ compensation benefits. Turner tendered the defense to Transamerica, the subcontractor’s insurer, who assumed the defense without a reservation of rights. Eight months later, on the brink of trial, Transamerica took the position the injury was caused by Turner’s sole negligence and the Additional Insured endorsement naming Turner didn’t apply. After settlement, Transamerica filed a declaratory judgment action in substance against Liberty, Turner’s liability insurer. The Appellate Court was asked to decide the matter, pursuant to Mass.R.Civ.P. 64. Transamerica argued that the words “arising out of” presuppose that the subcontractor was the proximate cause of the accident and that Turner was solely the cause of the accident based on its general responsibility for safety on the job. The court termed this argument “breathtakingly unpersuasive” and found the contractor qualified as and AI under the policy. Indeed, the precise purpose of requiring that the general contractor be named as an Additional Insured on the subcontractor’s policy is to avoid having the general contractor become the target for all claims due to its overall supervisory role. Interestingly, the Liberty policy issued to Turner contained the language cited above in American States Insurance Co. v. Liberty Mutual Insurance Co., 291 Ill.App3d 336, 683 N.E.2d 510, 225 Ill.Dec. 342 (1st Dist. 1997) making the Liberty policy excess to the Transamerican policy. The court said this language resulted in the policy being tailored to fit the allocation of risk made by the subcontract, a “happy – and perhaps

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uncommon – coincidence of plain language with plain purpose”.

Merchants Insurance Co. of New Hampshire, Inc. v. United States Fidelity and Guaranty Co., 143 F.3d 5 (1st Cir. Mass. 1998)

D’Agostino, a general contractor, was hired by two towns to remove and replace a bridge. D’Agostino hired a subcontractor and required that the general contractor be added as an Additional Insured to its commercial general liability policy with USF&G. Merchants insured D’Agostino. As often happens, one of the subcontractor’s employees was injured, this time when one of the general contractor’s employees accidentally caused the worker’s arm to become pinned between two pieces of demolition equipment. The injured employee brought suit against D’Agostino, claiming he was injured as a direct and proximate result of D’Agostino’s negligence. USF&G refused to defend on the basis that the AI endorsement did not afford coverage to D’Agostino for its own negligence. The case was subsequently settled and Merchants, who had defended and paid for the action, brought an action seeking contribution for one-half of the settlement and defense. (The two policies contained identical Other Insurance clauses which when read together required each company to pay half.) The District Court granted summary judgment in favor of Merchants. The Court of Appeals affirmed, finding that “’arising out of’ denotes a level of causation that lies between proximate and actual causation”. The causal connection between the employee’s injury and the subcontractor’s work for D’Agostino met the intermediate causation standard. Under Massachusetts law, the AI endorsement covered the general contractor for its own negligence and to the extent it might be vicariously liable for the subcontractor’s negligence.

Mitchell v. Stop & Shop Companies, Inc., 41 Mass. App. Ct. 521, 672 N.E.2d 544 (1996) This case provides the history of and explains the purpose the Vendors Additional

Insured Endorsement. Continental Baking, a self-insured company, issued a Vendors AI to Stop & Shop Grocery Stores that afforded the grocery stores the same position as an AI under a Products Liability policy. During delivery of Continental’s products to a Stop & Shop, a Continental employee was injured by a Stop & Shop truck at the loading dock. The employee brought suit against Stop & Shop, and Stop & Shop cross-claimed against Continental for costs of defense and indemnification, pursuant to the AI endorsement. After settlement of the employee’s claim, judgment was entered for Stop & Shop against Continental upon a motion for summary judgment. The appellate court reversed on the grounds that vendors’ coverage relates to injuries that arise out of the product itself or arise in the distribution or sales in the regular course of the vendor’s business. Here the accident arose during the distribution of Continental’s product to a vendor in the regular course of Continental’s business.

Makrigiannis v. Nintendo of America, Inc., 442 Mass 675, 815 N.E.2d 1066 (2004). In this case of first impression, the Supreme Judicial Court affirmed the lower court’s

decision that a Vendors Endorsement for a manufacturer covers claims for a vendor’s own negligence when the manufacturer’s product causes bodily injury. KCS Industries, Inc. manufactured a large Game Boy display unit for Nintendo, which sold the unit to Lechmere, Inc. The unit was shipped in three sections, requiring Lechmere to assemble it in the store. After assembly and installation, the unit fell on a five year old child. The child’s parents filed suit against Nintendo and later added Lechmere as a defendant, alleging negligent installation, and maintenance and inspection resulting in a dangerous and unsafe condition. At the time of the accident, Nintendo was insured under a General Liability policy issued by Sumitomo Marine and Fire Insurance Company, Ltd. (Sumitomo). This policy included a Vendors Broad Form Endorsement covering “[a]ll vendors authorized by the Named Insureds” which included Lechmere. Lechmere demanded defense and indemnification but Sumitomo refused, contending

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that the endorsement did not extend coverage for the plaintiffs’ claims. Lechmere then filed a third-party declaratory judgment action against Sumitomo seeking a declaration against Sumitomo. After the case was bifurcated, the negligence action resulted in a verdict of 100% negligence against Lechmere as the proximate cause of the minor’s injuries. In the bench trial of the third-party action, the judge ruled that Sumitomo owed Lechmere a defense and indemnification because the claims fell within the scope of the Vendors Endorsement. Sumitomo appealed. (During the course of the appeal, the duty to defend issue was settled.) The Supreme Judicial Court affirmed the lower court’s ruling. Sumitomo relied on the fact that the display unit itself was not for sale to the general public but rather was for promotional purposes. The court found Sumitomo’s reliance on the fact the display unit itself was not for sale as irrelevant because Sumitomo admitted that the unit was for promotional purposes and was thus a part of the operations and activities involved in promoting and selling Nintendo’s goods and services. The court also found that the language included in the exclusion to the Additional Insured Endorsement reinforced its interpretation that products on display are covered under the Vendors Endorsement. This exclusion provided that the insurance does not apply to the vendor for demonstration, installations, servicing or repair operations, except such operations performed at the vendor’s premises in connection with the sale of the product. (Emphasis added). The Vendors Endorsement did not limit coverage to claims of product defects nor did it exclude coverage for injuries resulting from a vendor’s negligence. If Sumitomo had intended to exclude coverage for such, it could have expressly stated so and excluded all demonstrations, including those performed at the vendor’s premises in connection with the sale of the precuts. In rebuttal to Sumitomo’s reliance on out-of-state cases, the court cited cases in this article including Sportmart, Inc. v. Daisy Manufacturing Co., 268 Ill.App.3d 974, 206 Ill. Dec. 355, 645 N.E.2d 360 (1994) and Pep Boys v. Cigna Indemnity Ins. Co., 300 N.J.Super. 245, 692 A.2d 546 (1997) where there was a nexus between the named insured’s product and the injury.

National Union Fire Insurance Company of Pittsburgh v. Lumbermens Mutual Casualty

Company, 385 F.3d 47 (1st Cir. 2004). At issue in this case was whether injured employees’ presence in the general work area

where the subcontractor’s work was being performed was sufficient to invoke coverage under the Additional Insured Endorsement. Two employees of KC Electric, a subcontractor performing work for S.A. Healey on the Deer Island Tunnel Project, were injured when they slipped and fell while in the tunnel. One was walking through the tunnel toward a man lift that would take him to the surface and the other was in the tunnel to check on mine phones. Under the subcontract between Healey and K. C. Electric, K. C. Electric was required to obtain CGL insurance naming Healey as an additional insured. The policy issued by Lumbermens to K. C. Electric contained an Additional Insured Endorsement that limited coverage to “liability arising out of … work” performed by the subcontractor for the contractor. The employees brought separate actions against Healey alleging that they incurred their injuries as a result of Healey’s negligence in failing to maintain a safe work site. Both actions were settled before trial with Lumbermens and National Union (Healey’s insurer) each contributing to the settlement. National Union then instituted two actions seeking a declaration that Healey was an additional insured under the Lumbermens policy and that the National Union policy was in excess of Lumbermens policy pursuant to the policy’s Other Insurance provisions. Under the first theory, Lumbermens would be obligated to at least share in the defense and settlement costs. Under the second theory, Lumbermens solely would be liable for the defense and settlement costs. The district court denied National Union’s summary judgment motions, finding that Healey qualified as an additional insured and that both National Union and Lumbermens policy were primary, in effect denying that the National Union policy was an excess coverage policy. On appeal, the First Circuit Court found that the Lumbermens policy covered Healey but there were genuine

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issues of material fact as to whether the National Union policy was excess. In making its determination, this court more precisely defined the intermediate causation standard enunciated in Merchants Ins. Co. of New Hampshire v. United States Fidelity & Guaranty Co., 143 F.3d 5 (1st Cir. 1998) cited in these materials. The court held that the intermediate causation standard of Merchants Insurance is satisfied when the employee is injured within the general work area where the subcontractor’s work is being performed as long as his presence is work related. The court found that requiring the employee actually to have been engaged in work would lead to artificial distinctions between employees who are performing specific tasks versus those merely crossing the subcontractor’s general work area, waiting for instructions, or even pausing between tasks.

VIII. MICHIGAN LAW

LaFarge Midwest, Inc. v. Frankennuth Mutual Insurance Co., 2005 WL 1923158 (Mich. App. 2005) (unpublished)

A driver employed by Triple R Trucking, Inc. slipped when descending a stairway at LaFarge Midwest plant. The driver sued LaFarge and LaFarge sued Triple R’s insurance company asserting because it was listed as an additional insured the carrier must defend it. The carrier asserted that LaFarge only qualified as an additional insured with respect to liability arising out Triple R’s “ongoing operations performed for LaFarge,” and because the driver was not engaged in Triple R’s ongoing operations at the time of the accident, LaFarge was not entitled to coverage. The trial court found that the driver was doing nothing more than going to make a pot of coffee when the accident occurred and granted the carrier’s motion. On appeal the Michigan Court of Appeals reversed that decision following its discussion of the phrase “arising out of.” The court found the phrase to be expansive and concluded that the driver’s sole reason for being present at LaFarge’s plant was to pick up a load of cement in his capacity as a driver for Triple R. Rather than entering the building merely to satisfy his own needs, the driver went inside to inquire as to the cause of the delay and made the coffee while conducting that inquiry.

IX. MINNESOTA LAW

City of St. Paul v. Penn America Ins. Co., 2005 WL 1719198 (D. Minn. 2005)

In Penn America, the underlying lawsuit involved property known as Town Square Park in the City of St. Paul. The park was owned by the city but leased to a company called Town Square Garden (“TSG”) in March of 2002. The lease required TSG to pay rent to the city and required TSG provide the city with liability insurance and agreed to defend and indemnify the city for any damages caused by TSG’s negligence. Pursuant to the lease between TSG and the city, TSG purchased a commercial liability policy from Penn America which provided coverage from March 11, 2002 to March 11, 2003. The city was named as an additional insured in the policy. The additional insured endorsement provided as follows:

Who Is An Insured (Section II) is amended to include as an insured the person or organization shown in the schedule but only with respect to liability arising out of your ongoing operations performed for that insured.

Town Square Realty (“TSR”) owned property adjacent to and below the park. On August 30, 2002, the city was sued by TSR for damage that was allegedly caused to TSR’s property as a result of water intrusion onto the property. The city tendered the defense to Penn America. Penn America denied coverage to the city and indicated that the city was only an additional insured for liability arising out of TSG’s liability and TSG had denied all liability. The city contended the additional insured endorsement did not provide whose liability triggered coverage. The city asserted that if Penn America had wanted to preclude coverage for the city’s acts or omissions, it could have done so as evidenced by the language in the policy’s contractual

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liability amendment that explicitly excluded claims resulting from the sole negligence of the indemnitee. The city also relied on the Andrew Nordquist v. Cincinnati Ins. Co. case.

The court determined that the policy’s additional insured endorsement did not exclude from coverage the claims brought against the city based solely on the city’s actions or omissions. Rather, the court noted that the policy covered the city if there was a causal relationship between the place covered by insurance and the acts giving rise to legal liability. The court found that such a causal relationship existed between the park and the water intrusion alleged in the underlying suit. Thus, the court determined that Penn America had an obligation to defend and indemnify the city even if the water intrusion occurred solely due to the city’s actions or omissions.

Andrew L. Youngquist, Inc. v. Cincinnati Ins. Co., 625 N.W.2d 178 (Minn. Ct. App. 2001)

A contractor sought declaratory judgment to compel a subcontractor’s carrier to defend and indemnify the contractor in a negligence suit brought by an employee of the subcontractor. The AI endorsement to the subcontractor’s policy named the contractor as an additional insured, “but only with respect to liability arising out of [the subcontractor’s] ongoing operations performed for that insured.” The court held that the “arising out of” language was to be interpreted under a “but for” analysis. Because the employee was injured on the job, there was a “but for” causal connection between his injuries (but for the fact he was performing the subcontractor’s operations for the contractor, he would not have been hurt), and therefore, AI coverage would apply. Thus, the court held that AI coverage extended to claims alleging negligence against the additional insured.

United States Fidelity & Guaranty Insurance Co. v. Commercial Union Midwest Insurance

Co., 403 F.3d 929 (8th Cir. 2005) Two insurers litigated over whose policy covered the premises owner’s liability related to

the death of a worker on property in Minnesota. The District Court had used the scope of the indemnity obligation in the construction contract to determine the relative obligations of the carriers. The Eighth Circuit emphasized the policy language of the contactor’s policy. The contractor’s policy covered “Any . . .organization with . . .which [contractor] had agreed in writing . . . to provide insurance such as is ordered by this . . . policy, but only with respect to [contractors] operations….“The Eighth Circuit found that Minnesota courts have held in similar circumstances that as long as there is a “but-for” causation between the loss and the named insured’s operations, the additional insured coverage provides coverage for the additional insured’s own liability, irrespective of any limitations of liability between the named insured and the additional insured. The court concluded that the loss at issue had a but-for connection to the contractor’s operations: the employee of the contractor would not have been killed on the premises owner’s property if the contractor had not been performing its obligations under the contract. The court went on to find that having satisfied the contingency of the policy, the contractor’s policy provided coverage for the premises owner’s liability arising from its own fault regardless of the Construction Contract Indemnity Agreement.

X. NEW HAMPSHIRE LAW

Pro Con Cost., Inc. v. Acadia Ins. Co., 794 A.2d 108 (N.H. 2002) A subcontractor’s employee slipped and fell while walking from the work area to a coffee

truck for a break. The subcontractor’s employee sued the general contractor for negligence. The general contractor brought a declaratory judgment against the subcontractor’s insurance carrier seeking additional insured status. The additional insured endorsement contained the “arising out of” language. The court held that the phrase “arising out of” means “originating from or flowing

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out from.” The court therefore stated that, in order for coverage to apply, the ongoing operations of the named insured did not have to be the proximate cause of the injury, but that the causal connection between the two need be “more than tenuous.” The court held that because the employee was not even engaged in the work to be performed by the subcontractor, there was not a “more than tenuous” connection between the subcontractor’s operations and the injuries. The court refused to accept a “but for” analysis of the “arising out of” language. However, the court did not make clear what its “more than tenuous” standard required. The court implied in dicta that if the subcontractor’s employee had been injured while performing work assigned to the subcontractor, the court may have held that the injuries “arose out of” the subcontractor’s work for the general contractor because the injuries would have had a “more than tenuous” link to the subcontractor’s operations.

XI. NEW JERSEY LAW

Pep Boys v. Cigna Indemnity Insurance Company of North America, 300 N.J.Super. 245, 692

A.2d 546 (1997) Pep Boys required that all vendors selling products to Pep Boys for resale to third parties

have liability insurance with coverage to Pep Boys for any injuries arising out of the sale, either by an Additional Insured endorsement or a broad form vendor’s endorsement. Interdynamics, a manufacturer of freon, had such a broad form endorsement on its policy issued by Cigna. The lengthy AI endorsement extended coverage to any vendor, but only with respect to bodily injury arising out of Interdynamics’ product, sold or distributed in the regular course of the vendor’s business. The endorsement also contained multiple exclusions. Three minors purchased multiple cans of freon from Pep Boys for the purpose of “huffing”. Upon the death of one minor, the administrator of the estate filed an action against Pep Boys, alleging negligence in the sale of the freon to a minor, a statutory violation, and other negligence claims. Pep Boys tendered the claim to Cigna, which denied the tender on the grounds that the death was caused by Pep Boys’ own negligence and did not come within the endorsement. Pep Boys filed an action seeking a declaratory judgment of coverage. Pep Boys settled the tort claim and then sought reimbursement from Cigna. The lower court granted summary judgment to Cigna. The appellate court reversed, holding that the language in the vendor’s endorsement providing coverage for bodily injury “arising out of” the manufacturer’s product was broad enough to cover Pep Boys’ liability for its alleged negligence in selling the freon to a minor leading to another minor’s death. The court noted that only a substantial nexus between the occurrence and the use of the product was necessary for coverage to attach. Citing the extensive list of exclusions in the Cigna AI endorsement, the court found that if claims arising from the vendor’s own negligence were to be excluded, then that exclusion would have been spelled out. The court also found that “bodily injury arising out of the” use of the freon was not ambiguous in the context of this case. Cigna owed a duty to defend and indemnify.

Krastanov v. K. Hovnanian/Shore Acquisitions, LLC, 2008 WL 2986475, (N.J. Super. Ct.

App. Div. Aug. 6, 2008). F & W is a plumbing contractor that entered into a subcontract with K. Hovnanian

Construction Management, Inc. to install plumbing systems in a residential construction project owned by Hovnanian Enterprises, Inc. The construction project was part of an adult residential community known as the Four Seasons at Mirage (the property). Krastanov, an employee of F & W, was a member of the five-man crew working on the property site. At the end of one work day, Krastanov decided to “cool-off” by swimming in the man-made lake located on the property. Rather than going home, the crew drove toward the lake and Krastanov jumped into the water and drowned.

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Krastanov sued several parties including Hovnanian who in turn sought indemnification from F & W under the subcontract between the parties. Hovnanian’s insurer was also sued, who in turn sued F & W’s insurer seeking a declaration that Hovnanian was an additional insured under F & W’s policy for Krastanov’s claims. The trial ruled that XII. NEW YORK LAW

Dayton Beach Park No. I Corp. v. National Union Fire Insurance Co., 175 A.D.2d 854, 573 N.Y.S.2d 700 (1991)

The owner of an apartment, Dayton, entered into a full-service maintenance contract with a maintenance company, Gotham. The insurance provisions of the maintenance contract required Gotham to have public liability insurance and name Dayton as an Additional Insured. The endorsement provided that Dayton was to be an AI with respect to liability arising out of (1) operations performed for Dayton by Gotham…or (2) acts or omissions of Dayton in connection with its general supervision of maintenance operations. A tenant was assaulted on the property and brought suit against both Gotham and Dayton on the grounds that both breached their duty to properly maintain locks and doors. National, the insurer for Gotham, declined Dayton’s tender to defend and indemnify and Dayton filed a declaratory judgment action. Before the declaratory judgment action was decided, the jury returned a verdict for the plaintiff in the negligence action, apportioning liability 60% to Dayton and 40% to Gotham. The Supreme Court denied Dayton’s motion for summary judgment in the declaratory judgment action on several grounds, including that the jury’s apportionment of liability between the parties rendered the coverage position moot. The appellate court reversed, holding that the National policy provided coverage to Dayton for any liability “arising out of” actions performed by Gotham for Dayton and that the policy did not limit the scope of coverage to liability imposed solely upon a respondeat superior theory but instead, broadly created coverage for liability “arising out” of operations performed by Gotham on Dayton’s behalf.

Morse Diesel International v. Olympic Plumbing & Heating Corp., 299 A.D.2d 276, 750

N.Y.S.2d 72 (2002) Morse Diesel, a general contractor, was an Additional Insured under a policy issued to

subcontractor, Olympic Plumbing. An Olympic employee tripped on exposed mesh in a concrete stairwell and brought suit against Morse for its negligence in constructing and maintaining the staircase. Morse Diesel tendered the defense to U. S. Fire Insurance Company, who declined on the basis that the injury did not arise out of any act or omission by Morse in supervision performed for its Named Insured, Olympic, but rather from supervision of work performed by the concrete subcontractor. The Supreme Court denied Morse Diesel’s motion for summary judgment in the action brought to determine whether U. S. Fire owed a duty to defend and indemnify to Morse. The appellate court reversed, holding that multiple exclusions did not apply and that U. S. Fire had a duty to defend and indemnify. The AI endorsement indicated the claims against the contractor arising under the Labor Law should not be excluded. Additionally, U. S. Fire failed to meet the heavy burden of showing the allegations in the complaint fell wholly within the supervision exclusion. Finally, as concerned the contractual liability exclusion, the court found that any ambiguity must be resolved against the insurer. “Had the insurer intended to exclude liability imposed vicariously upon an additional insured by operation of law, it would have been a simple matter to have stated as much.”

Impulse Enterprises/F & V Mechanical Plumbing & Heating v. St. Paul Fire & Marine

Insurance Co., 282 A.D.2d 266, 723 N.Y.S.2d 177 (2001) The insurer for a subcontractor attempted to avoid its duty to defend and indemnify a

general contractor, an Additional Insured under the policy issued to the subcontractor, on the

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grounds that the injury arose out of the contractor’s own negligence in not maintaining the area for pedestrian traffic and not out of work that the subcontractor was doing for the general contractor. The plaintiff was injured when he tripped over equipment belonging to the subcontractor in the staging area of the renovation project reserved for the subcontractor. The appellate court affirmed with modification the Supreme Court’s ruling that St. Paul did have a duty to defend and indemnify, holding that any negligence by the AI is not material to the application of the AI endorsement. The focus of the policy is not on the precise cause of the accident but rather on the general nature of the operation when the injury was sustained.

Worth Const. Co. v. Admiral Ins. Co., 888 N.E.2d 1043, 1044–45 (N.Y. 2008). Clayton Park Development, LLC, (“Clayton”) retained Worth Construction Co., Inc.

(“Worth”) as general contractor for the construction of an apartment complex. Worth subcontracted with Pacific Steel, Inc., “Pacific” for construction of a staircase and handrailings. As part of the subcontract, Pacific provided a CGL policy naming Worth and Clayton as additional insureds. Pacific's work at the site involved the fabrication and installation of a staircase, which consisted of steel pan stairs and hand-railings. A worker employed by Fasciano Iron Works Inc., sustained injuries when he slipped on fireproofing that had been applied to the stairs by subcontractor Central Enterprises. Pacific played no role in either contracting for or applying the fireproofing, nor did it subcontract with Fasciano for the performance of any work at the site. Murphy filed a personal injury action against Clayton and Worth. Because the complaint alleged that Murphy was injured on the staircase installed by Pacific, Worth forwarded a copy of the complaint to Pacific’s insurance carrier demanding defense and indemnification as an additional insured under the terms of the policy. The insurer did not respond, and Worth filed a declaratory judgment action against the insurer.

The additional insured endorsement stated that Worth was an additional insured “only with respect to liability arising out of [Pacific's] operations.” Worth argued that because the worker slipped on the staircase, as a matter of law that tje accident arose out of Pacific's work because the staircase was part of the “materials” that Pacific was utilizing to fulfill its subcontract. In reversing the trial court, the Court of Appeals found that Worth was not entitled to AI coverage under the policy. The court held that because an entirely separate company was responsible for applying the fireproofing material, and because Worth admitted that Pacific was not negligent, the liability did not arise out of Pacific’s work.

Regal Const. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 883 N.Y.S.2d 207, 208 (App.

Div. 2009). The City of New York engaged URS as the construction manager for the Rikers Island

Renovation Project. By written agreement, URS hired plaintiff Regal Construction Corporation (Regal) to serve as the prime contractor for general construction and to perform construction services, including demolition and renovation, at the project. Regal obtained a CGL policy that provided additional insured coverage. While Regal was supervising the demolition of the building's bath and shower area as well as the replacement of flooring in the main area, a worker slipped on a freshly painted steel floor joist. The worker then filed suit against the City and URS. URS then tendered the lawsuit to Regal’s insurer seeking coverage as an additional insured. Regal’s policy provided for additional insured coverage “only with respect to liability arising out of [Regal's] ongoing operations performed for that [additional] insured.” The court held that URS was an AI under Regal’s policy because there was causal connection between the worker’s injury and Regal’s work. Regal had responsibilities that encompassed all of the demolition and construction work to be done, which included the painting of floor joists.

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Consolidated Edison Co. Of New York, Inc. v. Hartford Insurance Co., 203 A.D.2d 83, 610

N.Y.S.2d 219 (1994) Con Ed was added as an Additional Insured by endorsement to the Hartford policy issued

to Tara Mechanical Company, a contractor for insulation work for Con Ed. One of Tara’s subcontractor’s employees was injured while working on the project under the contract between Tara and Con Ed. Hartford declined to defend and indemnify Con Ed in the negligence action and the Supreme Court agreed. The appellate court reversed that portion of the Supreme Court’s decision, holding that Hartford was obligated to defend Con Ed under the AI endorsement which provided that Con Ed would be insured but only with respect to liability arising out of operations performed for the utility by or on behalf of the insured contractor. This language focuses on the general nature of the operation and not on the precise cause of the accident. Whether the cause of the injury arose out of the AI’s negligence is immaterial. Further, this language did not constitute an exclusion of coverage for claims arising out of the AI’s negligence but rather, as an endorsement, constitutes an addition of coverage. In the court’s opinion, if the parties wanted to exclude coverage for claims arising out of Con Ed’s own negligence, they could easily have done so. See also: Tishman Construction Corp. of New York v. CNA Insurance Co., 236 A.D.2d 211, 652 N.Y.S.2d 742 (1997)

Raymond Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 5 N.Y.3d 157, 833 N.E.2d 232, 800 N.Y.S.2d 89, 2005 N.Y. Slip. Op. 05453 (N.Y. June 29, 2005 (No. 3, 95).

Arbor Handling Services, Inc., as a vendor of Raymond Corporation, entered into a contract to sell two new Raymond sideloaders to be installed in J. T. Ryerson’s new facility. However, because the facility was to be completed prior to the availability of the sideloaders, Arbor was to obtain rental sideloaders to substitute until the new sideloaders could be delivered. Arbor located one rental side loader and later agreed to install any other Raymond sideloader Ryerson could locate and rent as if it were Arbor’s own. After installation, a Ryerson employee suffered serious head and brain injuries due to improper installation of the sideloader rented by Ryerson. Raymond and Arbor settled the employee’s personal injury action by contributing $6,000,000. Raymond then looked to its general liability insurance carrier, National Union Fire Insurance Company, which issued the policy with a Vendors Endorsement. Raymond filed a declaratory judgment action and both parties moved for summary judgment. The Supreme Court denied Raymond’s motion and granted National Union’s motion, holding that Raymond’s policy of insurance did not cover Arbor as an additional insured. On appeal, the Appellate Division of the Supreme Court reversed the lower court’s decision, agreeing with Raymond Corporation that the “arising out of” language should be construed broadly to include bodily injuries that a vendor’s negligent installation or service causes. The Court of Appeals of New York reversed that decision and reinstated the order of the trial court, holding that the vendor’s endorsement was designed to cover only the liability arising from product itself and not liability arising from the vendor’s independent acts of negligence.

Greater New York Mut. Ins. Co. v. Mutual Marine Office, Inc., 3 A.D.3d 44, 769

N.Y.S.2d 234 (2003). Seward Park Housing Corporation (Seward) entered into a 10 year lease of the “entire

garage building, including roof, as presently constructed” attached to a cooperative apartment corporation with Ulltra East Parking Corp. (Ulltra). Ulltra was to maintain the premises but Seward was solely responsible for repairs to the structure of the parking garage. The lease also required Ulltra to provide liability insurance coverage for itself and Seward to be named as an additional insured. Mutual Marine Office, Inc. (MMO) issued a CGL policy to Ulltra with the Garage Keepers Endorsement No. 3 and an Additional Insured Endorsement. Endorsement No.

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3 defined “Garage Operations” as the “ownership, maintenance or use of locations for the “purpose of a business of … parking automobiles …” The AI provision provided that the policy should include as an additional insured any entity to which Ulltra had agreed by written contract to provide such coverage but only with respect to operations preformed by or on behalf of Ulltra. Seward was the named insured under a general liability policy issued by Greater New York Mutual Insurance Company (GNY) which covered claims arising out of the ownership of the building, as contrasted with the MMO policy which provided additional insured coverage for Seward only for claims arising out of Ulltra’s parking garage operations. In the declaratory judgment action filed by GNY, the Supreme Court granted GNY’s motion for summary judgment and MMO appealed. The Appellate Division reversed, looking to the circumstances and the language of the lease and found that the collapse of the parking garage roof clearly did not arise out of the parking garage operations but rather out of a structural defect of the building housing the parking garage. Pursuant to the terms of the lease, Seward had the duty of repair. The appellate court examined the distinctions in Tishman Construction Corp. v. CNA Ins. Co., 236 A.D.2d 211, 652 N.Y.S.2d 742 (1997) and Consolidated Edison Co. of New York, Inc. v. Hartford Ins. Co., 203 A.D.2d 83, 610 N.Y.S.2d 219 (1994) cited in this article and found that the significantly different relationship between owner/general contractor and lessor/lessee garage keeper, did not provide any rationale for extending additional insured coverage to an owner under a CGL policy with a Garage Keepers Endorsement. The appellate court also looked to the reasonable expectations of the parties and found that there was no serious support that Ulltra’s insurance carrier ever contemplated that Ulltra would bear the responsibility for damages arising out of the collapse of Seward’s garage roof in light of the terms of the lease.

Chelsea Associates, L.L.C. v. Laquila-Pinnacle, 21 A.D.3d 739, 801 N.Y.S.2d 15 (2005).

Turner Construction Company was the general contractor for the construction of a high-rise apartment building. Turner subcontracted the concrete work to Laquila-Pinnacle. An employee of Laquila-Pinnacle was injured and sued Turner, the property owner and the developer for injuries allegedly sustained when in route to his work he tripped on plywood used as a temporary ramp near the entrance to the jobsite. Turner commenced a third-party action against Laquila. Subsequently Turner settled with the underlying plaintiff and moved for summary judgment against Laquila and its insurance carrier for defense and settlement costs incurred in the underlying litigation. The lower court denied Turner’s motion, finding there was a question of fact regarding Turner’s negligence liability to the underlying plaintiff, there was no conclusive determination that the underlying plaintiff was actually injured while working and Turner’s previous motion for indemnification had been denied. The Appellate Court concluded that it was clear that the subcontractor’s carrier was legally obligated to defend and indemnify Turner because it was undisputed that the underlying plaintiff was injured as he was entering the jobsite in route to his work assignment. The court concluded that any negligence by Turner was not material to the additional insured endorsement and that the subcontract expressly exempted Turner from any disclaimer of coverage based on its own negligence. The court took the opportunity to once again reject the argument that the subcontract language should not control, rather the insurance policy language should control that issue. The insurance policy provided that who was an insured was amended to included “the personal organization shown in the Schedule, but only with respect to liability arising out of “your work” performed for that insured by you or on your behalf.” The dissent criticized the majority’s interpretation of the additional insurance clause - - that it is activated if the occurrence giving rise to the injuries arose “out of the work.” This interpretation was based on the court’s decision in Consolidated Edison Company of New York v. Hartford Insurance Co., 203 A.D.2d 83, 610 N.Y.S.2d 219 (1994), which while interpreting a clause similar to the one at issue here, held that the clause focuses not on the cause of the accident but upon the general nature of the operation in the course of which

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the injury was sustained.” The court in Consolidated held that the additional insured endorsement covered the contractor because the injury occurred in the course of the subcontractor named insured’s work. The dissent criticized that such an interpretation reads out of the clause the key words pertinent to its application here: “but only with respect to liability arising out of [Laquila’s] work.”

XIII. NORTH CAROLINA LAW

St. Paul Fire & Marine Ins. Co. v. Hanover Ins. Co., 187 F.Supp.2d 584 (E.D.N.C. 2000)

An employee of a secondary subcontractor was injured while doing work for a primary subcontractor. After the injury, the employee filed suit against the general contractor for negligence. The general contractor sought coverage as an additional insured under the primary subcontractor’s policy. In this case, the subcontractor’s additional insured endorsement contained language that specifically excluded coverage for liability arising from independent acts or omissions of the additional insured. The court held that language to be sufficient to limit the additional insured coverage to vicarious liability, and as there were no claims for vicarious liability asserted in the complaint, the subcontractor’s carrier had no duty to defend the general contractor. In dicta, the court stated “indeed, an agreement between [the subcontractor and general contractor] to provide insurance for [the general contractor] would be void against public policy in North Carolina. Under North Carolina law, a general contractor cannot require a subcontractor to insure it against its own negligent acts.” Id. at 590 n.7. That dicta suggests that, at least in conflicts between general contractors and subcontractors in North Carolina, even if the subcontractor’s AI endorsement did not contain language limiting coverage to vicarious liability, coverage will be limited to vicarious liability as a matter of public policy.

Pulte Home Corp. v. Am. S. Ins. Co., 647 S.E.2d 614, 616 (N.C. Ct. App. 2007).

Pulte, acting as a general contractor, hired TransAmerica, as a subcontractor, to frame houses in a residential subdivision. The contract between TransAmerica and Pulte required TransAmerica to have Pulte named as an additional insured under the subcontractor's commercial general liability coverage. TransAmerica obtained an additional insured endorsement to its policy that provided Pulte was covered "as an insured but only with respect to liability arising out of [TransAmerica's] operations or premises owned by or rented to [TransAmerica]." Pulte, TransAmerica, and a third company, Morlando Enterprises, L.L.C., were sued by a worker, who had helped to install trusses on the houses being built. The worker alleged he was injured when a crane operated by Morlando knocked him from the roof to the ground.

Pulte tendered the worker’s claims to TransAmerica’s insurer seeking legal defense and indemnity under the TransAmerica’s policy. TransAmerica’s insurer denied Pulte’s tender. The insurer argued that the language in the AI endorsement meant that it has insured Pulte only for vicarious liability based on the negligence of TransAmerica and not for any independent negligence of Pulte itself. Since the worker only sued Pulte for its independent negligence the insurer argued that the complaint does not assert claims within the scope of the policy's coverage. The Court rejected the insurer’s argument. The Court held that because the AI endorsement was granting coverage, the phrase “arising out of” only requires a simple “causal nexus,” and not causation rising to the level of proximate cause. The Court further held that the additional insured endorsement must be broadly interpreted to provide coverage for liability arising from Pulte's independent negligence if there is a causal nexus with TransAmerica's operations. In reviewing the worker’s complaint, the Court found that the allegations set forth a sufficient connection between the work that worker was performing-part of TransAmerica's framing operations-and the liability that the worker sought to impose on Pulte to hold that the

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conduct alleged in the complaint is covered by the additional insured endorsement.

XIV. OHIO LAW Toledo Edison Co. v. ABC Supply Co. 2002 WL 2025960 (6th Cir. 2002) (unpublished

opinion) An employee of a supply company sued a power company and a tree trimming company

for negligence when the boom of his truck struck a power line which was allegedly hidden by improperly trimmed trees surrounding the power line. The employee reached a settlement with the tree trimming company. The case against the power company proceeded to trial, and the supply company employee received a verdict. The power company demanded indemnification from the tree trimming company’s insurance carrier as an additional insured. The tree trimming company’s policy added all organizations as an additional insured “with respect to liability arising out of the operations conducted by or on behalf of the insured.” The 6th Circuit, applying Ohio law, held that the plain language of the endorsement, specifically the “arising out of” clause, covered only claims arising out of the tree-trimmer’s performance of its tree-trimming contract with the power company, and did not expressly provide for coverage of claims stemming from the additional insured’s own negligence.

Davis v. LTV Steel Co., 128 Ohio App.3d 733, 716 N.E.2d 766 (1998)

Employees of a contractor hired to clean waste at a coke plant were injured while working at the plant, and sued the plant owner. The contractor’s carrier sought a declaratory judgment holding that the AI endorsement to the contractor’s policy did not cover the owner against the employee’s claims. The AI endorsement covered the plant owner, but only with respect to liability arising out of the contractor’s operations or premises owned by or rented by the contractor. The court held that the “arising out of” language limited AI coverage to vicarious liability, and thus, the employee’s negligence claims were not covered under the policy.

Currier v. Penn-Ohio Logistics, 927 N.E.2d 604, 605–606 (Ohio Ct. App. 2010).

Employee of a tenant who was killed as a result of injuries sustained when a floor collapsed while the employee was loading steel, sued the tenant and landlord. The tenant had obtained insurance which named the landlord as an additional insured. The insurer intervened and was granted summary judgment that it had no duty to defend or indemnify the landlord as an additional insured. The Court of Appeals affirmed that trial court’s grant of summary judgment to the insurer because the court found that the additional-insured coverage, covered the landlord only for vicarious liability resulting from tenant’s negligence and not for the landlord’s independent acts of negligence. The court found that since the only claim in the complaint against the landlord was based on its alleged independent acts of negligence, rather than vicarious liability, the landlord was not entitled to coverage under the policy as an additional insured. Buckeye Union Ins. Co. v. Zavarella Bros. Constr. Co., 121 Ohio App.3d 147 (1997)

A general contractor’s insurer sued a subcontractor’s insurer, seeking indemnity for the amounts it paid to defend and settle a personal injury action brought against the contractor by an employee of the subcontractor. The Court of Appeals rejected the general contractor’s insurer’s argument that the general contractor’s liability for its own negligence was covered by the a.i. endorsement in the subcontractor’s policy. According to the court, the a.i. endorsement could not cover the general contractor’s own negligence, because that would violate Ohio’s statute prohibiting one from being indemnified for one’s own negligence in the construction context.

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XV. OREGON LAW

Hartford Accident and Indemnity Co. v. U. S. Natural Resources, Inc., 897 F. Supp 466 (D. Ore. 1995)

U. S. Natural Resources, Inc. (USNR) entered into a contract with Temple-Eastex (Temple) for installation of machinery at a sawmill being built for Temple. The contract contained an indemnification clause and a clause requiring USNR to maintain certain kinds of insurance. Specifically, the Public Liability Insurance Clause required that Temple be named an Additional Insured to this policy. The insurance policy provided by Hartford to USNR contained a Broad Form Endorsement that was amended to include as an “insured” any organization to whom the “named insured” was obligated to provide insurance pursuant to a written contract, only with respect to operations performed by or on behalf of the “named insured” or facilities owned or used by the “named insured”. An employee being supervised by USNR was injured and brought suit against Temple. Temple tendered the claim to Hartford and USNR. Both declined, saying that the contract did not require USNR to defend or indemnify Temple for its sole negligence. Temple tendered the claim to its own insurer and the case was settled. Hartford re-evaluated the claim and contributed half of the settlement and then sought reimbursement of the deductible from USNR. Hartford’s motion for summary judgment was granted. The court found that Temple was an AI because both of the requirements for an organization to become an AI were met (obligated by virtue of a written contract and notice to the insurer within 180 days after the effective date of the written contract). The court further found that the plain language of the contract suggests that coverage is identical for each person or organization that qualifies as an insured and thus additional insureds are covered to the same extent as named insureds. Further, USNR’s contention that the insurance coverage for Temple and the indemnity provision of the contract are co-extensive, precluding coverage for injuries caused by its own negligence fails because there was no limiting language in the contract connecting the insurance requirements to the indemnity clause. Coverage was not limited only to Temple’s vicarious liability for acts of the named insured but for its own negligence.

MW Builders, Inc. v. Safeco Insurance Co. of America, 2004 WL 2058390 (D. Or. September

14, 2004). This dispute arose out of a construction contract between MW Builders and Candlewood

Hotel Company for construction of a hotel to be clad with EIFS. As a part of the subcontract between MW Builders and Portland Plastering, Portland Plastering was required to obtain an insurance policy naming MW Builders as an additional insured. The subcontract further provided that the insurance should be primary and neither contributing nor excess in nature. The original Safeco policy issued to Portland Plastering did not contain an Additional Insured Endorsement. However, the 1997-1998 policy contained an Additional Insured Endorsement Form CG 20-33 that provided Safeco would automatically add a party as an additional insured when Portland Plastering entered into a contract requiring such insurance. The 1998-1999 and 1999-2000 policies included a Liability Plus Endorsement Form CG 76 35. Trouble developed after the completion of the hotel and MW Builders along with Portland Plastering attempted to correct the problem. When it became evident that nothing was working and the work itself was faulty, causing extensive water intrusion, Larkspur, the subsequent owner of the hotel project, sought arbitration against MW Builders. Larkspur alleged negligence, breach of contract, breach of warranty, etc. which led to damage from the water intrusion. MW Builders denied liability and affirmatively asserted that the damages to the hotel were the primary fault of Portland Plastering. MW Builders tendered the defense to and sought indemnification from Safeco, which Safeco denied. MW Builders filed a separate arbitration demand against Portland

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Plastering but Portland Plastering filed Chapter 7. Ultimately, the case settled for $2,000,000. The bankruptcy stay was lifted to permit MW Builders to pursue claims against Portland Plastering to the extent of insurance coverage. It was then determined that Portland Plastering was 31% liable and thus Safeco owed MW Builders approximately 31% of the $2,000,000 award. When Safeco refused to pay, MW Builders filed suit against Safeco and both parties filed motions for summary judgment. Because the Safeco policies spanning the years of the construction project and the subsequent years differed in that one policy had no AI Endorsement and other policies had different forms of the AI Endorsement, the court analyzed MW Builders’ status as an additional insured for each policy year. For the year without an AI Endorsement, the court found in favor of Safeco, despite MW Builders’ production of a Certificate of Insurance issued by a broker about a year after the policy period had expired. The 1997- 1998 CGL policy contained an Additional Insured’s Endorsement granting owners, lessees or contractors automatic AI status when required under a contractual agreement with the named insured. Accordingly, the court found in favor of coverage for MW Builders for that policy period. The two later policies contained the Liability Plus Endorsement which extended additional insured coverage to persons for whom Portland Plastering was required by written contract to provide insurance. Again, the court found in favor of MW Builders for coverage. Finally, Safeco argued that Oregon statutory law precluded AI coverage for MW Builders under Portland Plastering’s policy. Safeco used the decision in Walsh Construction Co. v. Mutual of Enumcoaw, 76 P.3d 164 (Or. App. 2003) to argue that the agreement to procure insurance and any insurance issued pursuant to that agreement was unenforceable. However, the court examined the Walsh decision and Oregon statutory language and held that Walsh was inapplicable to the facts because the subcontract did not require Portland Plastering to obtain insurance for MW Builders’ own negligence but rather for Portland Plastering’s negligence and that of its subcontractor that might be imputed to MW Builders.

XVI. PENNSYLVANIA LAW

Twp. of Springfield v. Ersek, 660 A.2d 672, 673 (Pa. Cmwlth. 1995).

Employee of a tenant who was injured as a result of injuries sustained when the employee slipped and fell on the tenants premises, sued landlord. The tenant had obtained insurance which named the landlord as an additional insured. The landlord filed a declaratory judgment against the tenant and the tenant’s insurer seeking defense and indemnification for the employee’s lawsuit. The Court held that the AI endorsement provided coverage to the landlord regardless of whether the negligence which gives rise to the claim rests with the tenant or the landlord. The Court reasoned that had the insurer sought to restrict coverage to only claims arising from the negligence of tenant, it could have clearly so stated in the additional insured endorsement language, rather than stating that the landlord was insured with “respect to liability arising out of [tenant’s] operations.”

Rust Engineering. & Constr., Inc. v. J.C. Zampell Constr. Inc., 1997 WL 773153 (E.D.Pa.

1997) (unpublished opinion) An employee of a secondary subcontractor sued the engineer on the construction project,

the subcontractor, and the owner of the project for negligence in connection with personal injuries the employee suffered while working on the construction site. The engineer, subcontractor, and owner demanded that the secondary subcontractor’s insurance carrier defend and indemnify them against the suit as additional insureds. The secondary subcontractor’s policy included the engineer, subcontractor, and owner as additional insureds by virtue of the fact that the secondary subcontractor had agreed in writing to provide liability insurance. Specifically, the endorsement stated that “any person or organization for whom you have agreed in writing to

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provide liability insurance [is an insured], but only with respect to liability arising out of [the secondary subcontractor’s] operations or premises owned by or rented to [the secondary subcontractor].” The secondary subcontractor’s insurance carrier argued that the AI coverage did not extend to suits claiming negligence against the additional insureds. The court disagreed. The court instead used a “but for” analysis, holding that “but for” the fact that the employee was working at the site pursuant to the secondary subcontractor’s operations, he would not have been injured. Therefore, the court held that the carrier had an obligation to defend and indemnify the additional insureds, even though the claim against the additional insureds was for negligence.

Consolidation Coal Co., Inc. v. Liberty Mutual Insurance Co., 406 F.Supp. 1292 (W.D. Pa.

1976) A shipper brought an action against a carrier’s insurer for indemnity with respect to the

settlement of a negligence suit filed by an employee of the carrier who was hurt while working on the shipper’s property pursuant to a contract between the shipper and carrier. The AI endorsement to the carrier’s policy added the shipper as an additional insured “but only with respect to acts or omissions of the [carrier] in connection with the named insured’s operations on [the shipper’s] premises. The shipper argued that the court should use a “but for” analysis, and thus hold that the employee would not have been injured “but for” the fact he was performing operations for the carrier on the shipper’s premises. The carrier argued that the “acts or omissions” language specifically limited the AI coverage to its vicarious liability for the acts of the carrier. The court agreed with the carrier, holding that the “acts or omissions” language limited AI coverage to the shipper’s vicarious liability, and that, therefore, liability for the shipper’s own negligence was not covered. The court stated, however, that, had the “acts or omissions” language not been included in the endorsement, it would have used the “but for standard” advocated by the shipper, and would have found coverage for the shipper’s own negligence.

APAC-Atlantic, Inc. v. Protection Services, Inc., 397 F.Supp.2d. 792 (N.D. W. Va. 2005)

APAC contracted with the West Virginia Department of Transportation to perform improvements on a section of interstate. APAC entered into a subcontract with PSI by which PSI would handle the design, layout and placement of all traffic control devices. A motor vehicle accident occurred which resulted in a lawsuit in which the plaintiff sued APAC, the West Virginia DOT and the driver of the other vehicle. PSI was not named as a defendant, nor did APAC bring PSI in as a third-party defendant. The case did not go to trial and was settled prior to PSI ever becoming involved. APAC tendered the claim and lawsuit to PSI’s liability carrier because the subcontract required PSI to name APAC as an additional insured. The carrier sought summary judgment in its declaratory judgment action on the basis that APAC was an additional insured on the carrier’s policy only with respect to liability arising out of the subcontractor’ (PSI) work and the underlying complaint did not allege liability arising out of the subcontractor’s work. The West Virginia U.S. District Court determined that Pennsylvania law applied and concluded that the underlying plaintiffs did not allege any cause of action against the subcontractor and at no point in the underlying action did APAC join the subcontractor as a third-party. Therefore, the court could not find, under the policy, that the carrier had a duty to defend when it had not been established or even alleged that any liability as to the accident arose out of the subcontractor’s work.

XVII. TEXAS LAW

Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008)

Property owner brought third-party action against contractor's excess liability insurer for

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a declaratory judgment of coverage for liability for death of contractor's employee. The Court held that the death of contractor's employee after falling through storage tank roof occurred with respect to operations performed by contractor, and, thus, property owner was additional insured under contractor's excess liability policy, even if owner's negligence was sole cause of death. The AI endorsement stated that a party is an AI “only with respect to operations performed by you or on your behalf, or facilities owned or used by you.”

In abrogating Granite Constr. Co. v. Bituminous Ins. Cos., 832 S.W.2d 427 (Tex. App. 1992), the Court held that "with respect to operations" is to be construed under a broad theory of causation. The Court stated that an event "respects" operations if there exists "a causal connection or relation" between the event and the operations; proximate cause or legal causation not required. Further, when a premises condition causes a personal injury, the “injury respects an operation if the operation brings the person to the premises for purposes of that operation.” The Court said that the particular attribution of fault between insured and additional insured does not affect its analysis. The Court said that this analysis also applies to the “arising out of” language found in many other AI endorsements.

Admiral Ins. Co. v. Trident NGL, Inc., 988 S.W.2d 451 (Tex. App. 1999)

A contractor’s employee, attempting to service a compressor owned by Trident, was injured when the compressor exploded. The employee sued Trident, and Trident claimed coverage under the contractor’s AI endorsement. The endorsement named Trident as an additional insured, but only with respect to liability arising out of the [contractor’s] operations. The insurance carrier argued that the endorsement provided coverage only if the performance by the contractor “caused or contributed to” the injury-causing event, and that, because liability for the injury arose solely out of Trident’s operations, there was no AI coverage for the claim. The court disagreed. Instead, the court used a “but for” type analysis to hold that, because the accident occurred to the contractor’s employee while on the premises conducting the contractor’s operations, the negligence claim was covered by the AI endorsement. The court specifically disagreed with the holding in Granite Constr. Co. v. Bituminous Ins. Cos., 832 S.W.2d 427 (Tex. App. 1992) “to the extent [it is] contrary to [its] opinion.”

McCarthy Bros. Co. v. Continental Lloyds Ins. Co., 7 S.W.3d 725 (Tex. App. 1999)

In this case, an employee of a subcontractor slipped and fell while on the job. He sued the general contractor for negligence, and the general contractor sought coverage under the subcontractor’s AI endorsement. The endorsement named the general contractor as an additional insured, “but only with respect to liability arising out of [the contractor’s work] for the [general contractor].” The court, using a “but for” analysis, held that the employee’s negligence claim was covered under the AI endorsement because the injury occurred to the employee while performing the subcontractor’s work for the general contractor. The court specifically dismissed the Granite case as being improperly decided.

Global Sun Pools, Inc. v. Burlington Ins. Co., 2004 WL 878283 (Tex.App.-Dallas, April

26 2004) (unpublished memorandum opinion) A property owner contracted with Global Sun Pools (“Global”) to build an above-ground

swimming pool. Global contracted with a subcontractor to perform the actual construction. The property owner was injured when the pool deck railing collapsed, and brought a personal injury suit against Global, alleging that Global sent “its builders” to build the pool and deck, which was constructed in a negligent manner. The subcontractor’s policy named Global as an a.i., but the subcontractor’s insurer, Burlington, refused coverage.

The endorsement at issue named Global as an a.i. “with respect to liability arising out of

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[the subcontractor’s] operations or premises owned by or rented to [the subcontractor.” Burlington argued that the complaint did not allege that anyone else besides Global built the pool, and that there was therefore no duty to defend. The court disagreed, holding that the petition referred to “Global and its builders.” The court, “interpreting the matter liberally” concluded that the language of the petition and the insurance policy created the potential for a case under the complaint within the coverage of the policy, and that Burlington therefore had the duty to defend Global. Atofina Petrochemicals, Inc. v. Continental Cas. Co., 2005 WL 3445514m 48 Tex. Sup. Ct. J. 225 (Tex. Dec. 16, 2005) (No. 04-0170)

An employee of a subcontractor slipped and fell while on the job. The employee brought a suit against the premises owner, which in turn sought defense and indemnity as an additional insured under the subcontractor’s policy. The court addressed an additional insured endorsement that limited insurance for the additional insured as follows:

(1) That person or organization is only an additional insured for its liability arising out premises “you” own, rent, lease or occupy or for “your work” for or on behalf of the additional insured; and (2) the insurance afforded the additional insured under this endorsement does not apply to . . .any liability arising out of any act, error or omission of the additional insured, or any of its employees. . . .

The court rejected the insurer’s interpretation that the exclusion barred all coverage when

any negligence on the part of the premises owner is pleaded, unless the owner’s responsibility was based solely on vicarious liability for the acts of the contractor, on the basis that such an interpretation would render coverage under the endorsement largely illusory. Transport International Pool, Inc. v. Continental Insurance Co., 166 S.W.3d 781 (Tex. App. 2005)

Construction company employee was injured when a construction trailer he was occupying blew over in high winds. The construction trailer was owned by GE and was being leased to the injured person’s employer under a lease agreement. The lease agreement provided that the customer add GE as an Additional Insured under its policies. The injured person sued GE alleging that GE negligently and carelessly failed to properly anchor and tie the trailer down so that it was safe for its intended use as a construction office. GE filed a third-party petition against the contractor and the contractor’s carrier alleging their obligation under the lease and insurance policy to defend and indemnify GE. The Additional Insured endorsement included an exclusion indicating that the insurance did not apply “to bodily injury or property damage arising out of the sole negligence of [the Additional Insured].” The appellate court looked to the underlying plaintiff’s complaint and determined that the allegations do not suggest anything other than the conclusion that the plaintiff’s injuries resulted from GE’s failure to properly secure the trailer. The plaintiff’s petition did not allege any acts of negligence or omissions from any other persons or organization. GE argued that coverage was not negated by the exclusion because the contractor had sole responsibility for preparing the site, it was the contractor’s responsibility to provide firm and level ground for its safe and unobstructed installation, the site selection for the trailer was the responsibility of the contractor and the contractor assumed all maintenance duties. GE argued that the plaintiff’s complaint would require exploration played by the contractor in the plaintiff’s injuries. However, the court was unswayed. The court held that a determination of whether an insurer has a duty to defend does not consider matters outside the policy and pleadings in Texas. “We will not read facts into the pleadings, nor will we `imagine factual

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scenarios which might trigger coverage.’” Because the underlying plaintiff’s pleadings only alleged that GE’s conduct lead to his injuries and because the court looks only to the pleadings and the insurance policy, the court concluded that coverage under the endorsement did not apply.

XVIII. UTAH LAW

Meadow Valley Contractors, Inc. v. Transcontinental Ins. Co., 27 P.3d 594 (Utah App. 2001) A subcontractor was hired by a general contractor to construct a concrete drainage box.

During the subcontractor’s construction of the box, flooding occurred because there were inadequate ditches to drain the water. The court held that the term “arising out of” in the additional insured endorsement should be interpreted broadly to mean that there must be a “nexus” between the work performed by the named insured and the injury that occurred. Therefore, according to the court, it was not necessary to find that the subcontractor was itself liable for causing the flooding. Instead, because the construction of the drainage box required the diversion of water, and because the diversion of water caused the flooding because the general contractor had not provided adequate drainage, there was a nexus between the subcontractor’s work and the flooding. According to the court, the general contractor’s liability for the flooding due to the lack of ditches was covered under the additional insured endorsement on the subcontractor's insurance policy, even if the general contractor's sole negligence in providing inadequate ditches caused the flooding. According to the court, the flooding originated from, was incident to, and was in connection with the subcontractor's project.

XIX. WEST VIRGINIA

APAC-Atlantic, Inc. v. Protection Services, Inc., 397 F.Supp.2d. 792 (N.D. W. Va. 2005)

APAC contracted with the West Virginia Department of Transportation to perform improvements on a section of interstate. APAC entered into a subcontract with PSI by which PSI would handle the design, layout and placement of all traffic control devices. A motor vehicle accident occurred which resulted in a lawsuit in which the plaintiff sued APAC, the West Virginia DOT and the driver of the other vehicle. PSI was not named as a defendant, nor did APAC bring PSI in as a third-party defendant. The case did not go to trial and was settled prior to PSI ever becoming involved. APAC tendered the claim and lawsuit to PSI’s liability carrier because the subcontract required PSI to name APAC as an additional insured. The carrier sought summary judgment in its declaratory judgment action on the basis that APAC was an additional insured on the carrier’s policy only with respect to liability arising out of the subcontractor’ (PSI) work and the underlying complaint did not allege liability arising out of the subcontractor’s work. The West Virginia U.S. District Court determined that Pennsylvania law applied and concluded that the underlying plaintiffs did not allege any cause of action against the subcontractor and at no point in the underlying action did APAC join the subcontractor as a third-party. Therefore, the court could not find, under the policy, that the carrier had a duty to defend when it had not been established or even alleged that any liability as to the accident arose out of the subcontractor’s work.

XX. WYOMING LAW Marathon Ashland Pipe Line LLC v. Maryland Cas. Co., 243 F.3d 1232 (10th Cir. 2001) (predicting Wyoming law)

Marathon entered into a service contract with Steel Structures, Inc. (SSI). The contract required SSI to acquire liability insurance and name Marathon as an additional insured. The facts showed that Marathon often asked SSI to hire a specified employee as a temporary employee to work under Marathon’s control, including a seventeen-year-old student. The

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student lost a leg in an accident at work. The student filed suit against Marathon, alleging that he was hurt due to Marathon’s negligence. Marathon requested a defense from Maryland as an additional insured. When Maryland did not respond, Marathon initiated a declaratory judgment action.

The additional insured endorsement at issue named Marathon as an additional insured, “but only with respect to liability arising out of [SSI’s] ongoing operations performed for [Marathon].” The 10th Circuit rejected the district court’s holding that Marathon’s liability did not “arise out of” SSI’s activities. According to the court, “[u]nder Wyoming law, ‘arising out of’ language as used in insurance contracts carries a ‘natural consequence’ level of causation.” Id. at 1239. Therefore, the court held that “[w]hat is material, and indeed decisive, is that [the student] was present and working at Marathon’s site due to SSI’s agreement with Marathon to hire and pay individuals who were to work at Marathon’s complete discretion and control. Moreover, it was foreseeable that such individuals could be hurt as a result of Marathon’s negligence.” Id. Therefore, according to the court, SSI’s act of hiring and paying the student and sending him to work under Marathon’s sole control was an ongoing operation out of which the student’s injuries were a natural consequence. See id. The court further held that the endorsement did not limit coverage to the additional insured’s vicarious liability, but that the endorsement also covered the additional insured’s own negligence. See id. at 1240.