Additional Insured's Liability Found to Have Arisen Out of the Named's Insured's Ongoing Operations

CGL – ADDITIONAL INSURED – LIABILITY ARISING OUT THE NAMED INSURED'S ONGOING OPERATIONS – DUTY TO DEFEND
IBEX Constr., LLC v. Utica Natl. Assur. Co.
(1st Dept., decided 12/4/2008)

There quite a bit of history for this coverage case not apparent from this short decision of the First Department. The First Department had already seen the underlying personal injury action on appeal twice, the second time in September 2008, when it granted reargument and recalled and vacated its June 2008 decision.

Bradley worked for Sage Electrical, which subcontracted with IBEX for work on a Home Depot construction project. Apparently there was some question whether Bradley fell and injured himself by tripping on a plastic-covered floor or by falling from an unsecured ladder he was using in his work. Bradley sued IBEX and Home Depot, which in turn impleaded Sage Electrical for indemnification. IBEX was also named as an additional insured on Sage's CGL policy with Utica National for liability for Sage's "acts or omissions arising out of . . . ongoing operations performed by [Sage]." Based on the dispute over how Bradley had fallen, Utica National apparently declined to afford additional insured coverage to IBEX.

Bradley's motion for partial summary judgment on Labor Law § 240(1) liability in the underlying action was denied, and the action proceeded to trial. Although the jury found that Bradley had fallen from the ladder, it found that the ladder was placed and used so as to give him proper protection in the performance of his work. Bradley unsuccessfully moved to set aside the jury's verdict and then appealed.

In its June 2008 decision, the First Department modified the order appealed from and granted Bradley's post-trial motion to set aside the jury verdict, finding that the jury could not have concluded that the ladder was placed and used so as to give Bradley proper protection in the performance of his work, and that there was no evidence to suggest that Bradley's own actions were the sole proximate cause of his injury. The personal injury action was remanded back to New York Supreme for trial on damages and an apportionment of fault among defendants. In that decision, however, the First Department affirmed that part of the lower court's order which had granted Sage Electrical's motion to dismiss any third-party and cross claims for indemnification against it.

The third-party plaintiffs moved to reargue their appeal, and in its September 2008 decision, the First Department reinstated the indemnification claims against Sage Electrical, holding that "[its] reinstatement of plaintiff's claims against defendants is a fundamental change in those circumstances, and the concomitant reinstatement of defendants' claims and cross claims against Sage for indemnification, which arise out of those claims, is now warranted."

For those keeping score, as a result of these appellate decisions and orders, Bradley's damages are to proceed against IBEX and Home Depot based on their Labor Law § 240(1) liability and those defendants' third-party indemnification claims against Sage Electrical were revived and are still pending. It was in that procedural context that the First Department then considered and decided this coverage matter.

IBEX had previously moved unsuccessfully for summary judgment declaring that Sage Electrical's CGL insurer, Utica National, was obligated to defend and indemnify IBEX as an additional insured in relation to the Bradley action. In MODIFYING the lower court's denial of that motion, and based on its June and September decisions in the underlying action, the First Department now held:

The allegations in the personal injury complaint, and the subsequent trial thereof, make clear that the plaintiff in the underlying action claimed he fell from an improperly secured ladder provided by his employer, defendant's insured and a subcontractor of IBEX. In a post-trial appeal, this Court held that IBEX was liable to the employee, pursuant to Labor Law § 240(1) (see Bradley v IBEX Constr., LLC, 54 AD3d 626, 627 [2008]). Thus, IBEX is an additional insured as defined by the policy, i.e., one "held liable for [the insured's] acts or omissions arising out of . . . ongoing operations performed by [the insured] or [its] subcontractors" (see BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708, 714 [2007]). Defendant's duty to defend IBEX was triggered by the allegations in the underlying complaint, which brought the claims potentially within the scope of coverage (id.).