The Burlington Insurance Company, Appellant,v.NYC Transit Authority, et al., Respondents.BriefN.Y.April 26, 2017To be Argued by: GREGORY D. PODOLAK (Time Requested: 30 Minutes) APL 2016-00096 New York County Clerk’s Index No. 102774/11 Court of Appeals of the State of New York THE BURLINGTON INSURANCE COMPANY, Plaintiff-Appellant, – against – NYC TRANSIT AUTHORITY and MTA NEW YORK CITY TRANSIT, Defendants-Respondents. BRIEF FOR AMICUS CURIAE TURNER CONSTRUCTION COMPANY SAXE, DOERNBERGER & VITA, P.C. 35 Nutmeg Drive, Suite 140 Trumbull, Connecticut 06611 Tel.: (203) 287-2100 Fax: (203) 287-8847 SAXE, DOERNBERGER & VITA, P.C. C/O OCHS & GOLDBERG, LLP 60 East 42nd Street, Suite 4600 New York, New York 10165 Tel.: (212) 983-1221 Fax: (212) 697-0877 Attorneys for Amicus Curiae Dated: March 17, 2017 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES .................................................................................... ii STATUS OF RELATED LITIGATION ................................................................... 1 DISCLOSURE STATEMENT PURSUANT TO § 500.1(F) ................................... 2 QUESTIONS PRESENTED FOR REVIEW ............................................................ 3 SUMMARY OF ARGUMENT ................................................................................. 4 STATEMENT OF FACTS ........................................................................................ 7 ARGUMENT ............................................................................................................. 7 1. Any act or failure to act by the named insured that contributes, even in part, to producing a covered loss triggers the additional insured endorsement ....................................................... 8 a. A result is “caused by” the named insured’s act if that act is a link in the chain that leads to the result .......................... 9 b. “In whole or in part” means the named insured’s act can be a minor one, as long as it is part of the causal chain ............................................................................................ 9 c. “Acts or omissions” means all conduct by the named insured is relevant ..................................................................... 10 d. Taken together, the additional insured endorsement language triggers coverage when the named insured’s employee’s conduct results in a loss ......................................... 11 2. Negligence is not required ................................................................... 11 3. NY jurisprudence on ‘arising out of’ does not mandate a different result ..................................................................................... 15 CONCLUSION ........................................................................................................ 17 REQUEST FOR ORAL ARGUMENT ................................................................... 17 ii TABLE OF AUTHORITIES Page(s) Cases: Burlington Ins. Co. v. NYC Tr. Auth., 132 A.D.3d 127 (1st Dep’t 2015) .......................................................... 7, 8, 12 Dillon Companies, Inc. v. Royal Indem. Co., 369 F. Supp. 2d 1277 (D. Kan. 2005) ....................................................... 6, 13 Essex Ins. Co. v. Laruccia Const., Inc., 71 A.D.3d 818 (2d Dep’t 2010) ....................................................................... 9 Gilbane Bldg. Co./TDX Const. Corp. v. St. Paul Fire and Mar. Ins. Co., 143 A.D.3d 146 (1st Dep’t 2016) .............................................................. 9, 15 Harbor Ins. Co. v. Lewis, 562 F. Supp. 800 (E.D. Pa. 1983) ............................................................ 11-12 Itri Brick & Concrete Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 786 (1997) .................................................................................... 10 Maroney v. New York Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467 (2005) ...................................................................................... 16 Maryland Cas. Co. v. Regis Ins. Co., CIV. A. 96-CV-1790, 1997 WL 164268 (E.D. Pa. Apr. 9, 1997) ...... 6, 10, 14 Palsgraf v. Long Is. R. Co., 248 N.Y. 339 (1928) ...................................................................................... 13 PAR Elec. Contractors, Inc. v. BlueLine Rental LLC, 2:16-CV-0246-TOR, 2017 WL 374477 (E.D. Wash. Jan. 25, 2017) ........ 6, 12 People v Stewart, 40 N.Y.2d 692 (1976) ...................................................................................... 9 Peterson v. Discover Prop. & Cas. Ins. Co., 460 S.W.3d 393 (Mo. Ct. App. 2015) ....................................................passim Strauss Painting, Inc. v. Mt. Hawley Ins. Co., 105 A.D.3d 512 (1st Dep’t 2013), aff’d as mod, 24 N.Y.3d 578 (2014) ....................................................................... 5-6, 13-14 U.S. Fid. & Guar. Co. v. Annunziata, 67 N.Y.2d 229 (1986) .................................................................................. 5, 9 iii U.S. Fire Ins. Co. v. Aetna Life and Cas., 291 Ill. App. 3d 991, 684 N.E.2d 956 (Ill. App. Ct. 1997) ................. 6, 10, 14 W & W Glass Sys., Inc. v. Admiral Ins. Co., 91 A.D.3d 530 (1st Dep’t 2012) .................................................................... 15 Worth Const. Co., Inc. v. Admiral Ins. Co., 10 N.Y.3d 411 (2008) .................................................................................... 16 Statutes & Other Authorities: Black’s Law Dictionary, Cause (10th ed. 2014) ....................................................... 9 1 STATUS OF RELATED LITIGATION No related litigation currently exists. 2 DISCLOSURE STATEMENT PURSUANT TO § 500.1(F) Pursuant to § 500.1(f) of the Rules of the Court of Appeals, Amicus Turner Construction Company, by and through its attorneys, Saxe Doernberger & Vita, P.C., advises the Court as follows: Turner Construction Company is a wholly-owned subsidiary of The Turner Corporation, which is a wholly-owned subsidiary of Hochtief USA, Inc., which is a wholly-owned subsidiary of Hochtief Americas, GMBH, which is a wholly-owned subsidiary of Hochtief AG, of which ACS Actividades de Construcción y Servicios, S.A. owns 10% or more of the shares. 3 QUESTIONS PRESENTED FOR REVIEW Amicus relies on the questions presented by Burlington Insurance Company in its Brief, which indicates the following: 1. Whether a party is entitled to additional insured indemnity coverage—for injuries to its own employee—under a policy endorsement providing coverage for liability “caused by” the “acts or omissions” of the policy’s named insured, where the named insured is without fault and the putative additional insured’s negligence is the sole proximate cause of the injuries? 2. Whether an industry standard endorsement that limits additional insured coverage to liability “caused by” the “acts or omissions” of the named insured has the same meaning as prior standard endorsements which extended coverage broadly to liability “arising out of” the work or operations of the named insured? 4 SUMMARY OF ARGUMENT This brief is submitted on behalf of amicus curiae, Turner Construction Company (“Turner”), to address an issue with significant insurance coverage ramifications for the construction industry. This Court has been asked to consider New York law and precedent regarding what is required to satisfy insurance industry standard contract language. The insurer refused coverage based on an interpretation of a standard additional insured provision that is neither predicated on plain language of the insurance policy nor consistent with applicable case law. Risk transfer between the general contractor and subcontractor in construction projects is established by the subcontract and backed up by the subcontractor’s insurance policy. This mechanism allows the subcontractor to quantify the cost of the risk by paying for insurance and including the allocable insurance cost in their bid to the general contractor. This practice also allows the risk to be placed on the party with the greatest control over the safety of the endangered workers, their employer, the subcontractor. Affirmation of the decision of the Appellate Division, First Department, would reinforce the expectation of the parties and that of the industry at large, the contractual agreements between them, and the economic allocation of risk and 5 responsibility. Conversely, reversal would undermine a foundational component of risk transfer in the New York construction market. The expectations of the parties regarding transfer of the risk to the subcontractor is managed and effectuated by the subcontractor’s purchase of insurance, naming the general contractor as an insured to cover the subcontractor’s contractual responsibility. The plain language of the insurance policy supports the expectations of both the general contractor and subcontractor as reflected in the bargain they made when agreeing to the terms of the subcontract. New York law unequivocally enforces these expectations by requiring that the insurance contracts, drafted by the insurer, are given their plain and ordinary meaning, with any ambiguity construed against the drafter and in favor of coverage. Where the provisions of the policy are clear and unambiguous, they must be given their plain and ordinary meaning, and courts should refrain from rewriting the agreement . . . The policy must, of course, be construed in favor of the insured, and ambiguities, if any, are to be resolved in the insured's favor and against the insurer. U.S. Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986] (internal citations omitted). New York courts have also held specifically that “caused, in whole or in part, by [the named insured’s] acts or omissions” should be interpreted by its plain and ordinary meaning, without reading an unwritten negligence requirement into the language. E.g. Strauss Painting, Inc. v Mt. Hawley Ins. Co., 105 AD3d 512, 513 [1st 6 Dept 2013], affd as mod, 24 NY3d 578 [2014] (holding that “[t]he additional insured endorsement speaks in terms of ‘acts or omissions,’ not negligence. Thus, in the unlikely event that it would be found that some nonnegligent act by plaintiff [the named insured] caused the accident, the Met would still be entitled to coverage under the additional insured endorsement . . .”). New York is in good company, as at least five other jurisdictions that have addressed the same issue have come to the same conclusion. Peterson v Discover Prop. & Cas. Ins. Co., 460 SW3d 393, 405 [Mo Ct App 2015], reh and/or transfer denied (Mar. 3, 2015), transfer denied (May 26, 2015); PAR Elec. Contractors, Inc. v. BlueLine Rental LLC, 2:16-CV-0246-TOR, 2017 WL 374477, at *9 [ED Wash Jan. 25, 2017]; Dillon Companies, Inc. v Royal Indem. Co., 369 F Supp 2d 1277, 1288 [D Kan 2005]; Maryland Cas. Co. v Regis Ins. Co., CIV.A. 96-CV-1790, 1997 WL 164268, at *5 [ED Pa Apr. 9, 1997]; U.S. Fire Ins. Co. v Aetna Life and Cas., 291 Ill App 3d 991, 999, 684 NE2d 956, 962 [Ill App Ct 1997]). Accordingly, amicus respectfully requests that this Court affirm the judgment of the First Department, Appellate Division. 7 STATEMENT OF FACTS New York City Transit Authority (“NYCTA”) and Metropolitan Transit Authority (“MTA”) are additional insureds on a commercial general liability policy, issued to Breaking Solutions Inc. by The Burlington Insurance Company (“Burlington”), “only with respect to liability for ‘bodily injury,’ . . . caused, in whole or in part, by [the named insured’s] acts or omissions . . . [i]n the performance of [the named insured's] ongoing operations.” Burlington Ins. Co. v NYC Tr. Auth., 132 A.D.3d 127, 129 [1st Dep’t. 2015]. Coverage for the NYCTA and the MTA was triggered when a Breaking Solutions employee drove an excavator into an energized electric cable, causing an explosion that caused Thomas Kenny, an employee of NYCTA, to fall from an elevated work platform and sustain injury. Burlington has denied coverage based on an interpretation of its language that is neither predicated on its plain language nor consistent with applicable case law. Id. at 129. ARGUMENT Under the ISO-promulgated1 additional insured endorsement most commonly used in commercial general liability policies today, coverage for an additional insured applies “only with respect to liability for ‘bodily injury,’ . . . caused, in whole 1 Insurance Services Office Inc. (“ISO”) is an organization that collects statistical data, promulgates rating information, develops standard policy forms, and files information with state regulators on behalf of insurance companies. 8 or in part, by [the named insured's] acts or omissions . . . [i]n the performance of [the named insured's] ongoing operations.” Id. New York jurisprudence interpreting this language in the endorsement is consistent with both the plain meaning of the phrase “caused, in whole or in part” and the reasonable expectations of the parties. When each element of the triggering phrase in the additional insured endorsement is given its plain and ordinary meaning, it becomes evident that the decision of the First Department, Appellate Division, should be affirmed because the court correctly concluded that the triggering phrase does not contemplate an element of fault. 1. Any act or failure to act by the named insured that contributes, even in part, to producing a covered loss triggers the additional insured endorsement. Here, coverage for the NYCTA and the MTA is triggered because Burlington’s named insured drove an excavator that struck an energized electric cable (an act), which caused an explosion and knocked Thomas Kenny from an elevated work platform, resulting (caused, at least in part) in Mr. Kenny suffering bodily injury. See Peterson v Discover Prop. & Cas. Ins. Co., 460 SW3d 393, 399, 402-403 [Mo Ct App 2015], reh and/or transfer denied (Mar. 3, 2015), transfer denied (May 26, 2015) (holding that additional insured coverage was triggered because the plain and ordinary meaning of “caused by acts or omissions of you or 9 your subcontractor” required “only that the act or omission caused the injury” and that the liability or negligence of the named insured was immaterial).2 a. A result is “caused by” the named insured’s act if that act is a link in the chain that leads to the result. “Cause,” in its purest form, is simply “something that produces an effect or result . . . [t]he cause without which the event could not have occurred.” Black’s Law Dictionary, Cause (10th ed. 2014); see also Peterson, 460 SW3d at 405 (analyzing “caused by” in an additional insured endorsement using “the ordinary meaning of the word, as set forth in the dictionary.”). A result can have multiple causes; it need only be “a link in the chain of causes which actually brought about the [result].” People v Stewart, 40 NY2d 692, 697 [1976]. b. “In whole or in part” means the named insured’s act can be a minor one, as long as it is part of the causal chain. The use of the words “in whole or in part” further explains that the named insured’s involvement can be minor and still trigger additional insured coverage. 2 See also U.S. Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986] (“Where the provisions of the policy are clear and unambiguous, they must be given their plain and ordinary meaning, and courts should refrain from rewriting the agreement.”) (internal citations omitted); Gilbane Bldg. Co./TDX Const. Corp. v St. Paul Fire and Mar. Ins. Co., 143 AD3d 146, 151-52 [1st Dept 2016] (interpreting an additional insured endorsement and noting that “unambiguous provisions of an insurance policy, as with any written contract, must be afforded their plain and ordinary meaning . . . If, however, there is ambiguity in the terms of the policy, any doubt as to the existence of coverage must be resolved in favor of the insured and against the insurer, as drafter of the agreement . . .”). Essex Ins. Co. v Laruccia Const., Inc., 71 AD3d 818, 819 [2d Dept 2010] (“As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning . . .”). 10 There is no requirement that the named insured’s act or omission be the cause, whether sole, primary, major, or most proximate. If the named insured’s act is a link in the chain that led to the loss – a piece of the puzzle – additional insured coverage is triggered. The inclusion of the words “or in part by” signals an intent to expand the reach of the additional insured endorsement. See Itri Brick & Concrete Corp. v Aetna Cas. & Sur. Co., 89 NY2d 786, 794-95 [1997] (finding that the legislature’s inclusion of the words “or in part by” “clearly signalled its intention” to expand the reach of the anti-indemnity statute). In the present case, there may have been other actors involved in the accident, but there is little question that the named insured’s employee’s act of driving the excavator into the electric cable was, at least, a partial cause of the accident. c. “Acts or omissions” means all conduct by the named insured is relevant. “Acts or omissions” likewise expands the additional insured endorsement by clarifying that the potential causative conduct by the named insured includes the full range of potential activity; non-action can be a link in the chain that triggers coverage. See Maryland Cas. Co. v Regis Ins. Co., CIV.A. 96-CV-1790, 1997 WL 164268, at *5 [ED Pa Apr. 9, 1997] (“The plain or ordinary meaning of ‘act or omission’ only requires the named insured to do or fail to do something.”). Indeed, any “act or omission” will suffice. See U.S. Fire Ins. Co. v Aetna Life and Cas., 291 Ill App 3d 991, 999, 684 NE2d 956, 962 [Ill App Ct 1997]) (“[T]he phrase “acts or 11 omissions” is not ambiguous . . . Accordingly, since the phrase is devoid of any ambiguity, we must apply its plain and ordinary meaning. . . . the plain and ordinary meaning of ‘act or omission’ is not ‘negligence.’”). There is nothing in this part of the language that changes the analysis; the act of Burlington’s named insured was, at least, a partial cause of the accident. d. Taken together, the additional insured endorsement language triggers coverage when the named insured’s employee’s conduct results in a loss The direct chain of causation in this case is more than enough to trigger coverage. The additional insured endorsement starts out requiring mere causation (signaled by the “caused by” language), then expands causation to include partial causation (by including the phrase “in whole or in part by”). It then further broadens causation by allowing omissions to trigger coverage (evidenced by the “acts or omissions” language). Taken as a whole, the phrase “with respect to liability for ‘bodily injury,’ . . . caused, in whole or in part, by [the named insured’s] acts or omissions” results in additional insured coverage for the NYCTA and the MTA, and there is nothing in the policy that would alter this conclusion. 2. Negligence is not required The word “negligence” is not found anywhere in the endorsement. Insurance companies have long been versed in the significance of using the word “negligence” to connote a negligence standard. See, e.g., Harbor Ins. Co. v Lewis, 562 F Supp 12 800, 802 [ED Pa 1983] (analyzing an approximately thirty-five-year-old additional insured endorsement, specifying that “THE INSURANCE AFFORDED BY THIS POLICY SHALL APPLY TO THE FOLLOWING ADDITIONAL INSUREDS BUT ONLY TO THE EXTENT OF LIABILITY RESULTING FROM OCCURRENCES ARISING OUT OF NEGLIGENCE OF READING COMPANY AND/OR ITS WHOLLY OWNED SUBSIDIARIES.”) (emphasis added). In the underlying appeal, the First Department noted that if the intent of the drafters was truly to create a negligence or fault requirement, then the drafters should have used those words in the contract.3 The Eastern District of Washington came to a similar conclusion in PAR Electrical Contractors, Inc. v. BlueLine Rental LLC, when it declined to read “negligence” into the same endorsement. Ultimately, if Old Republic [the insurance company] wanted the provision to work as a vicarious liability provision, it could have easily done so by including key words like ‘vicarious’ and ‘negligent’ that would preempt any debate. . . . For these reasons, the Court holds that the phrase ‘acts or omissions’ used in the policy includes negligent and non-negligent acts or omissions. 2:16-CV-0246-TOR, 2017 WL 374477, at *9 [ED Wash Jan. 25, 2017]. Not only is the word “negligence” absent from the text, but none of the terms that are in the endorsement mean or imply a “negligence” standard. 3 “[T]he fact remains that no words referring to the negligence or fault of the named insured were included in the endorsement itself. We construe only the actual language used in the policy forms itself, without reference to extrinsic evidence of the subjective intentions of those who drafted the forms years before the parties contracted” Burlington, 132 A.D.3d at 138 (emphasis added). 13 Furthermore, cause is different from negligence. See Palsgraf v. Long Is. R. Co., 248 NY 339, 348 [1928, Andrews, J., dissenting] (defining negligence as an unreasonable act or omission); see also Dillon Companies, Inc. v Royal Indem. Co., 369 F Supp 2d 1277, 1288 [D Kan 2005] (holding that that negligence was not required to trigger a “caused, in whole or in part, by” additional insured endorsement because “a reasonable insured could understand ‘acts or omissions’ to mean all acts or omissions, negligent or not”). Likewise, in Peterson, the Missouri Court of Appeals for the Western District held that “caused by” does not connote negligence: Discover asks this court to determine that a lay person purchasing this insurance would understand the “caused by” language to amount to a pre-determination of negligence on the part of the named insured . . . [T]here is no hint from Webster's definition and the common-sense reading of the word “cause” that a pre-determination of fault or negligence or liability must exist prior to coverage taking effect . . . Similarly, in the case at bar, there is no policy language indicating that the act or omission of the named insured need entail a prerequisite liability determination or that it be the proximate cause of the damage or injury—only that the act or omission caused the injury. Peterson, 460 SW3d at 405. Act or omission also does not mean negligence. In Strauss Painting, Inc. v Mt. Hawley Insurance Co., the First Department held that “[t]he additional insured endorsement speaks in terms of ‘acts or omissions,’ not negligence. Thus, in the unlikely event that it would be found that some nonnegligent act by plaintiff caused the accident, the Met would still be entitled to coverage under the additional insured 14 endorsement . . .” 105 AD3d 512, 513 [1st Dept 2013], affd as mod, 24 NY3d 578 [2014]. Numerous courts agree with the First Department’s analysis. In Maryland Casualty Co. v Regis Insurance Co., the Eastern District of Pennsylvania reviewed a policy with similar language and held that “act or omission” did not imply negligence and that the phrase should be given its plain meaning: [T]he use of the words “act or omission” in the Additional Insured Endorsement does not require negligence on the part of the named insured. The plain or ordinary meaning of “act or omission” only requires the named insured to do or fail to do something. Negligence would require the named insured to do [or fail to do] something “which a reasonable [person] guided by those ordinary considerations which ordinarily regulate human affairs, would do [or would not do].” Maryland Cas. Co., 1997 WL 164268, at *5 (emphasis added) (internal citation omitted). An Illinois appellate court came to the same conclusion: “‘acts or omissions’ is not ambiguous . . . we must apply its plain and ordinary meaning. . . . ‘act or omission’ is not ‘negligence.’” U.S. Fire Ins. Co., 684 NE2d at 962 (internal citations omitted) 15 New York’s rules concerning insurance contract interpretation are designed to protect policyholders by giving unambiguous language its plain meaning and construing ambiguous language against the insurance company and in favor of the insured. See Gilbane, 143 AD3d at 151-52. This system does not expect an ordinary person to read words that are not there into a document that he did not write. See Peterson, 460 SW3d at 405 (declining “to determine that a lay person purchasing this insurance would understand the “caused by” language to amount to a pre- determination of negligence on the part of the named insured”). 3. NY jurisprudence on ‘arising out of’ does not mandate a different result Burlington argues that the plain reading of “caused, in whole or in part” is inconsistent with another line of cases discussing a different additional insured endorsement, which provides coverage for liability “arising out of” the acts or omissions of the named insured. Even if it were appropriate to consider other, generic contract language while conducting a plain language analysis of this endorsement, the two are consistent. As the First Department correctly analyzed, “arising out of” and “caused, in whole or in part, by” differ, just not materially. W & W Glass Sys., Inc. v Admiral Ins. Co., 91 AD3d 530 [1st Dept 2012]. Both endorsements require some causal connection, and the difference is one of mere degree. This Court has long held that the phrase “arising out of” requires “some causal relationship between the injury and the risk for which coverage is 16 provided.” Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472 [2005]. However, with “arising out of,” the focus “is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained.” Worth Const. Co., Inc. v Admiral Ins. Co., 10 NY3d 411, 416 [2008] (emphasis added). “Caused, in whole or in part” is narrower on its face. In practice, however, given the breadth of both, application will usually align. CONCLUSION For the foregoing reasons, this court should adopt the well-reasoned analysis of the First Department, Appellate Division, and uphold its decision in this matter. REQUEST FOR ORAL ARGUMENT The undersigned respectfully requests oral argument on behalf of amicus curzae. Dated: March 17, 20 1 7 Respectfully submitted, rego . Po olak, Esq. Tracy Alan S e, Esq. Geoffrey J. Miller, Esq. SAXE DOERNBERGER & VITA, P.C. c/o OCHS & GOLDBERG, LLP 60 East 42nd Street, 46th Floor New York, New York 10165 T: 203-287-2100 F: 203-287-8847 E: gdp@sdvlaw.com tas@sdvlaw.com gjm@sdvlaw.com 17 PRINTING CERTIFICATION STATMENT Pursuant to 22 N.Y.C.R.R.§ 500.1(j), the foregoing brief was prepared on a computer using Word. A proportionally-spaced typeface was used as follows: Name of Typeface: Times New Roman Point Size: 14 Line Spacing: Double The total number of words in the brief, inclusive of point headings and footnotes and exclusive of pages containing the state of related litigation, if any, table of contents, table of cases and authorities, proof of service, certificate of compliance, corporate disclosure statement, questions presented, statement of related cases, or any authorized addendum containing statutes, rules, regulations, etc., is 3,143 words. Dated: March 17, 2017 New York, New York ~~~~......____:;_· ~__;.__:;___~ aolak SAX 0 ERGER & VITA, P.C. c/o OCHS & GOLDBERG, LLP 60 East 42nd Street, 46th Floor New York, New York 10165 T: 203-287-2100 F: 203-287-8847 E: gdp@sdvlaw.com