Issuance of an “Additional Insured Endorsement” Makes Policy Primary

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echnology Insurance Company, Inc., as reinsurer and successor to Tower National Insurance Company (plaintiff), issued an insurance policy to plaintiff Roger S. Aumick covering certain property Aumick owns. Main Street America Assurance Company (defendant) issued a policy to Aumick’s tenant, defendant Darrius Outling, doing business as Krispie Kuts, who operated a barbershop on the premises. The policy named Aumick as an additional insured.

The insurer naming Aumick as an additional insured attempted to avoid its obligation to defend or indemnify him in Technology Insurance Company, Inc., As Reinsurer And Successor To Tower National Insurance Company, And Roger S. Aumick v. Main Street America Assurance Company, Defendant-Appellant, Darrius Outling, Doing Business As Krispie Kuts, No. 2022-00798, Supreme Court of New York, Fourth Department (February 4, 2022) only to have the issue resolved by a New York appellate court.

FACTS

In February 2014, a patron of Outling’s barbershop tripped on a snow-covered hole in the driveway while walking from the shop to his vehicle. The patron commenced a personal injury action against Outling and Aumick and plaintiffs thereafter commenced this action seeking declarations that defendant is required to defend and indemnify Aumick in the underlying action and that defendant’s policy provides coverage for Aumick on a primary and non-contributory basis.

THE TRIAL COURT DECISION

The trial court judgment declared that defendant-appellant is obligated to defend and indemnify plaintiff Roger S. Aumick in an underlying action, declared that plaintiff Technology Insurance Company, Inc., as reinsurer, and successor to Tower National Insurance Company, was entitled to attorney’s fees and declared that the coverage provided by defendant-appellant is primary and non-contributory.

ANALYSIS

In disputes over insurance coverage, the court must look to the language of the policy. The additional insured endorsement in the policy that defendant issued to Outling provided coverage to Aumick as an additional insured “with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [Outling].” The policy further provided that defendant would indemnify the insureds in actions regarding covered incidents, including suits arising from bodily injury.

The term “‘arising out of’” means” ‘originating from, incident to, or having connection with’” (Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34, 38 [2010], quoting Maroney v New York Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 472 [2005]). It requires only that there be some causal relationship between the injury and the risk for which coverage is provided.

In support of their motion, plaintiffs submitted the lease agreement between Aumick and Outling, pursuant to which Outling was responsible for the removal of snow and ice from the driveway. Plaintiff further submitted the injured patron’s deposition testimony that he did not see the hole partly because it was covered with snow. Moreover, based on the record before us, the lease agreement provided Outling with the ability to use the driveway. Indeed, the driveway was necessarily used for access in and out of the barbershop and was thus, by implication, part of the premises that Outling was licensed to use under the parties’ lease.

Thus, plaintiffs established from the lease agreement that the use of the driveway was included in the scope of the leased premises Because plaintiffs established that there was a causal relationship between the injury and the risk for which coverage was provided, Aumick is entitled to a defense and indemnification as an additional insured.

The appellate court concluded that the court did not err in granting that part of the motion seeking a declaration that defendant’s coverage of Aumick in the underlying personal injury action is primary and non-contributory. In determining whether defendant’s policy provides primary or excess coverage, the court examined the “other insurance” clauses in the policies issued by defendant and plaintiff. Each policy provided that its coverage was excess over any other insurance that insures for direct physical loss or damage; or any “other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.”

Construing defendant’s policy as a whole the appellate court concluded that the first section of the relevant “other insurance” provision does not apply here inasmuch as the phrase “[a]ny other insurance that insures for direct physical loss or damage” refers to property damage, not liability coverage for bodily injury. With respect to the second part of the provision, the appellate court concluded that the patron’s damages arose out of the premises for which Aumick was a named additional insured, and thus defendant’s policy provides primary coverage to Aumick, and plaintiff’s coverage was excess.

“Other Insurance” clauses tend to bring about disputes between insurers seeking a court’s help in determining which insurer is obligated to provide primary defense and indemnity to the insured when two insurers insure against the same risk of loss. In this case the clear and unambiguous language of the “other insurance” clauses made the insurer that named the defendant as an “additional insured” was primary and obligated to provide a defense to the additional insured regardless of the “other insurance” provision. The court required one insurer to be primary and non-contributory and that it was on the hook for the full cost of defense and indemnity up to the limits of the policy.

© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.

You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, zalma@claimschool.com and zalma@zalma.com . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma;  you can follow Mr. Zalma on Twitter at; you should  see Barry Zalma’s videos on https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/featured; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ 

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