6 words that can change your insurance risk: Caused, in whole or in part
Some things are bigger decisions than others – do I eat the whole donut or part of it? When it comes to additional insured endorsements, the stakes are much higher. As we move into 2018, there are changes to the additional insured endorsement that are important to understand and apply to your compliance process.
In this article, we’ll take a look at one of the key takeaways from a recent case being coined “The Burlington Decision”, and will share advice for how your compliance or risk management team must adapt to ensure continued compliance in the new year and beyond—regardless of what additional insured changes come your way.
What Is the Burlington Decision?
In a recent New York case which involved an additional insured, 6 words meant all the difference. Just what were those 6 words? “Caused, in whole or in part”.
Incorrect additional insured changes cause Insurance Risk
According to the New York Buffalo First article, “In 2004, the Insurance Services Office Inc. (ISO) released a new model additional-insured endorsement. That endorsement provided additional-insured status to a contracting party only if the underlying injury or damage was ‘caused, in whole or in part,’ by the named insured’s acts or omissions.”
Prior to that change in 2004, the article states that the ISO additional-insured endorsement required only that the bodily injury or property damage “aris[e] out of” the named insured’s acts or omissions in order to confer additional-insured status to a contractual indemnitee.
While this change might not seem monumental, the Burlington case put those 6 words to the ultimate test. A New York City Transit Authority (NYCTA) employee fell from a platform after an explosion. Later, the impacted employee brought an action against the city and Breaking Solutions Inc. (BSI). The city then impleaded NYCTA and MTA and asserted third-party claims for indemnification and contribution based on a lease between NYCTA and the city (Burlington).
In the midst of several back and forth claims, the article details that the court was faced with two arguments:
- NYCTA and MTA argued that the phrase “caused, in whole or in part,” merely requires any act by BSI resulting in injury to confirm their additional-insured status;
- Burlington contended that the phrase requires proximate causation (i.e., negligence by the named insured).
The Court’s Decision:
There were two outcomes from the case, as explained by Buffalo Law Journal: First, the New York Court of Appeals sided with Burlington, holding that the phrase “caused, in whole or in part,” means proximate causation, not “but for” causation. The court reasoned that “caused, in whole or in part,” must require proximate causation because “but for” causation cannot be partial — i.e., “an event may not be wholly or partially connected to a result, it either is or it is not connected.”
Finally, the court then reversed the First Department’s decision that an additional insured may recover for an injury caused solely by its own negligence.
The Key Takeaway For Your Compliance Team
The key takeaway from the Burlington Decision boils down to this important statement:
“While it is still unclear what impact Burlington will ultimately have on construction contracts, it is undeniably a case that contractors and insurers should consider when entering into contracts, drafting policy endorsements, making coverage decisions and hiring counsel.”
How the Burlington Decision Impacts Your Business
The ultimate shakout of the Burlington Decision is still underway, but regardless, companies must take note of the decision and be sure to examine subcontractor contracts, Certificates of Insurance, and additional insured endorsements very carefully.
The article leaves us with a final piece of advice:
“The presence of the named insured as a defendant in a lawsuit or the absence of allegations in the complaint regarding the named insured’s negligence become more important than ever.”
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