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Excess Liability Policy Covers Additional Insured Only Where Named Insured's Acts or Omissions Cause Injuries to Claimant

Pursuant to the terms of an excess liability policy, the insurer was only obligated to indemnify an additional insured if the named insured's acts or omissions were a cause of injuries to the third-party claimant. (Advent, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA (2016) 6 Cal.App.5th 443)

Facts

Advent, Inc. (Advent) was the general contractor on a large construction project. Advent entered into a subcontract with Pacific Structures, Inc. (Pacific). Pacific in turn entered into a subcontract with Johnson Western Gunite (Johnson) pursuant to which Johnson was to furnish and install shotcrete for the perimeter walls of the project. The Pacific/Johnson subcontract required that Advent be listed as an additional insured on Johnson's general liability policy.

While construction was underway, a Johnson foreman instructed Johnson employee Jerry Kielty to retrieve some plywood from outside one of the buildings at the project. Kielty went to retrieve the plywood, but then inexplicably entered the building. It is not known why Kielty entered the building, inasmuch as Kielty's employer, Johnson, was not working on the interior of the building. In any event, while Kielty was inside the building, Kielty fell down an unguarded stairway shaft and suffered severe injuries. Due to Kielty's injuries, Kielty had no memory of the accident or why he was inside the building.

Kielty filed a personal injury action against various parties, including Advent. Kielty essentially alleged that Advent had created a dangerous condition which proximately caused Kielty's injury.

At the time of the accident, Advent was the "named insured" on a $1 million commercial general liability policy issued by Landmark American Insurance Company (Landmark) and a $5 million excess liability policy issued by Topa Insurance Company (Topa). In addition, Advent was an "additional insured" on Johnson's $1 million commercial general liability policy and Johnson's $15 million excess liability policy, both of which were issued by National Union Fire Insurance Company of Pittsburgh, PA (National Union).

Advent tendered its defense to various insurance companies, including National Union. National Union eventually agreed to participate in Advent's defense under a reservation of its rights.

Kielty entered into a partial settlement of his claims against Advent and others for $10 million. Pursuant to the settlement, Landmark paid $1 million under its CGL policy; Topa paid $5 million under its excess policy, National Union paid $1 million under its CGL policy; and other insurers paid the balance. The settlement agreement provided that Kielty could pursue additional amounts from Advent if it was determined that Advent was an "additional insured"under National Union's $15 million excess policy.

After the partial settlement, Advent filed a declaratory relief action against National Union seeking a declaration that Advent was entitled to coverage as an additional insured under National Union's $15 million excess policy. Topa intervened in the action, seeking equitable contribution from National Union for the $5 million Topa had contributed on behalf of Advent toward the underlying settlement. Eventually, Advent dismissed its complaint against National Union with prejudice. Subsequently, Topa and National Union filed cross-motions for summary judgment concerning Topa's claim for equitable contribution against National Union. The trial court denied Topa's motion and granted National Union's motion. Topa appealed.

Holding

The California Court of Appeal affirmed. The National Union excess policy covered Advent as an additional insured only to the extent that the National Union CGL policy covered Advent as an additional insured. The National Union CGL policy, in turn, provided that Advent was an additional insured "only with respect to liability for 'bodily injury' … caused, in whole or in part, by: [1.] [Johnson's] acts or omissions; or [2.] The acts or omissions of those acting on [Johnson's] behalf … in the performance of [Johnson's] ongoing operations for [Advent]." Thus, the issue was whether Advent's liability for Kielty's injury was caused in whole or in part by Johnson or by someone acting on behalf of Johnson.

The appellate court concluded that there was no evidence that Kielty's injuries were "caused by" Johnson or someone acting on behalf of Johnson. Johnson itself was not conducting any work in the interior of the building where Kielty fell. Further, there was no evidence that Kielty himself had been at fault. Thus, National Union met its initial burden of demonstrating that neither Johnson's acts or omissions nor Kielty's own acts or omissions were the sole or partial cause of Kielty's injuries. In response, Topa had not provided any evidence showing that Kielty's injuries were caused either by Johnson's acts or omissions or by Kielty's own acts or omissions. Topa's argument that Kielty's injuries "may have" resulted from Kielty's own acts or omissions while he was acting on behalf of Johnson was simply "speculation." Because Topa could not show that Advent's liability in the underlying lawsuit was "caused by" Johnson or by someone acting on behalf of Johnson, Topa could not show that Advent was "actually covered" under National Union's excess policy. Thus, Topa was not entitled to equitable contribution from National Union.

Comment

The additional insured endorsement in this case covered the additional insured only for bodily injury "caused by" the named insured or by someone acting on behalf of the named insured – meaning there had to be some fault on the part of the named insured or someone acting on behalf of the named insured. The result might have been different if the additional insured endorsement had covered the additional insured for bodily injury "arising out of" work the named insured was performing for the additional insured – which does not necessarily require any fault by the named insured or someone acting on its behalf.

 

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