Question of Fact Precludes Summary Judgment on Additional Insured Coverage

CGL – ADDITIONAL INSURED – LIABILITY ARISING OUT OF "YOUR WORK" – INSURANCE LAW § 3420(D) INAPPLICABLE
KMAPS Corp. v. Nova Cas. Co.
(4th Dept., decided 7/3/2008)

New York reporters are replete with cases addressing when an owner's or general contractor's liability may be said to have "arisen" out of a named insured subcontractor's work for the owner or general contractor, for purposes of triggering additional insured coverage in favor of the owner or GC under the subcontractor's CGL policy. This is such a case, on Round #2 to the Appellate Division, Fourth Department. Since I represented and argued this case for Nova, I can share the lower court's Decision and Order and Appellant's Brief with you.

KMAPS hired separate subcontractors Nestor Santana and Victor Cobos to install television cable. KMAPS was itself a contractor for Paragon Cable. KMAPS sent Cobos to a job site where Santana was already working, and since he was working inside already, Santana told Cobos to install cable outside the building. Cobos had his own equipment and assistant. While installing the cable, Cobos fell and broke a window with his hand, injuring himself.

Cobos sued the property owners and Paragon Cable, which in turn impleaded KMAPS. KMAPS and its CGL insurer, Security Indemnity Insurance Company, tendered KMAPS' defense and indemnification to Santana's CGL insurer, Nova Casualty Company. Santana's policy covered KMAPS as an additional insured "but only with respect to liability arising out of * * * '[Santana's] work' for the additional 'insured' [KMAPS][.]" Nova, while acknowledging that KMAPS was listed as an additional insured on Santana's policy with Nova, neither accepted the tender nor denied coverage to KMAPS. KMAPS eventually impleaded Santana.

The underlying personal injury action ultimately settled, with KMAPS contributing $60,000 and Santana contributing $15,000 towards the settlement. KMAPS and its insurer then continued their pursuit of liability coverage from Nova in this DJ action.

On trip #2 to the Appellate Division, the Fourth Department unanimously REVERSED the Erie County Supreme Court's grant of summary judgment to KMAPS and vacated its declaration of coverage in KMAPS' favor. The Fourth Department found that Nova had raised an issue of fact as to whether KMAPS was entitled to a defense and indemnification with respect to injuries sustained by Cobos in the underlying action, a different subcontractor who was not insured by Nova.

The Fourth Department also ruled that the lower court had erroneously determined that Nova was obligated under Insurance Law § 3420(d) to provide KMAPS with a timely disclaimer of coverage. The "arising of out 'your work'" language of the additional insured endorsement of Nova's policy with Santana did not operate as an exclusion to coverage and "requiring payment of a claim upon failure to . . . disclaim [in a timely manner] would create coverage where it [may] never [have] existed". Finally, the court also concluded that because it is the insured's burden to establish coverage in the first instance, the lower court erred in determining that Nova was required to assert lack of coverage as an affirmative defense.

Back to Supreme Court we go. Again.