Monday, October 6, 2008

Additional Insured Coverage Granted for Leased Stairwell Accident

Jenel Mgt. Corp. v. Pacific Ins. Co.
(1st Dept., decided 10/2/2008)

The "Additional Insured-Managers or Lessor of Premises" endorsement affords coverage to real property lessors or managers "only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [the named insured]".

At issue in this case was whether the stairwell area where the underlying accident occurred was covered by the additional insured clause in the policy procured by the underlying plaintiff's employer from Pacific Insurance Company, presumably an "Additional Insured-Managers or Lessors of Premises" endorsement or one of similar ilk.

In AFFIRMING that part of New York Supreme's award for summary judgment to the additional insureds and their insurer, the First Department held:
Coverage exists because the underlying claim arose out of the "maintenance or use" of the leased premises, within the meaning of the additional insured clause, where the accident occurred in the course of an activity necessarily incidental to the operation of the space leased by the employer, and in a part of the premises that was necessarily used for access in and out of the leased space (see ZKZ Assoc. v CNA Ins. Co., 89 NY2d 990 [1997]; New York Convention Ctr. Operating Corp. v Cerullo World Evangelism, 269 AD2d 275, 276 [2000]). We note that this result is consistent with the lease, which required the employer to procure insurance against any liabilities "on or about the demised premises or any appurtenances thereto."
Two additional take-away points:
  1. note that plaintiff's insurer and Pacific were found to be co-primary insurers of the underlying plaintiff's employer; and

  2. the First Department modified to award the plaintiffs their attorneys' fees for prosecuting the third-party claims against the employer in the underlying personal injury action as "an essential component of their defense of the main underlying action". This represents an exception of sorts to the general rule that only defense fees are recoverable from a disclaiming insurer later found to owe coverage.

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