We put lights on the front of trains so we can see them approaching in a tunnel. And we buy insurance for the accidents that occur despite such precautions. General contractors try to manage their project risks by taking precautions to avoid accidents, but they also require subcontractors to name them as “additional insureds” on their general liability or project-specific insurance should an accident happen. Suppose you’ve done that. An accident follows: Your subcontractor injures a person on the project site as a result of your own workers’ failure to warn. You’re covered, right? Better slow down.
In Burlington Insurance Co. v. NYC Transit Authority, New York’s highest court has just held otherwise. In Burlington, the New York City Transit Authority and MTA New York City Transit contracted with Breaking Solutions Inc., to perform tunnel excavation work on a subway project. As required by its contract, Breaking Solutions listed the Transit Authority and the MTA as additional insureds on its policy with Burlington, but
… only with respect to liability for “bodily injury” … caused, in whole or in part, by:
- [The Named Insured’s] acts or omissions; or
- The acts or omissions of those acting on [the Named Insured’s] behalf.
A Breaking Solutions machine touched an electrical cable buried at the worksite, causing an explosion that injured a Transit Authority employee. The employee later sued Breaking Solutions and the City. The Transit Authority was brought into the case and tendered its defense to Burlington. Discovery indicated that the Transit Authority had failed to notify Breaking Solutions of the live wire. Burlington withdrew its defense of the Transit Authority on grounds that the policy only provided coverage for Breaking Solutions’ negligence, while the loss (it said) was solely caused by the Transit Authority’s own negligence—not that of Breaking Solutions.
Reversing a lower appeals court decision, a majority of the New York Court of Appeals held that (1) the phrase “caused, in whole or in part,” requires proximate causation (even though it doesn’t say so), and (2) the phrase “[The Named Insured’s] acts or omissions” really means “the subcontractor’s negligent acts or omissions” (even though it doesn’t say that, either). In other words, if you’re an additional insured, you’re only covered for your subcontractor’s direct negligence, not your own.
Literally read, even though Breaking Solutions’ act of touching the cable sparked the explosion, the majority viewed the Transit Authority’s negligent failure to alert Breaking Solutions to the live cable as the “proximate cause” of the accident. (Black’s Law Dictionary defines proximate cause as “a cause that directly produces an event and without which the event would not have occurred.”) The key to the court’s ruling is its distinction between the legal concepts of “proximate causation” and mere “but for” causation, and its opinion that the phrase “caused, in whole or in part,” must imply proximate causation, because “‘but for’ causation cannot be partial.”
But surely it can. It’s certainly possible to envision a chain of two or more circumstances, each one of which is necessary but insufficient for an accident to occur. In Burlington, for example, the explosion wouldn’t have happened but for the Transit Authority’s failure to warn, or but for Breaking Solutions’ touching the live cable. The logical error is this: Without a “but for” cause, the entire event would not occur, but it may well take more than one “but for” cause to bring about a particular event.
Even if that weren’t so, the rules of plain English applied to the policy’s terms dictate a much simpler analysis. The explosion in Burlington was “caused in part” by Breaking Solutions’ act in touching the cable, as the literal words of the policy required. By instead applying a legalistic syllogism to create an ambiguity that it resolved in favor of the insurer, the court violated long-standing rules of policy interpretation that require it to read the policy as an ordinary insured would do, not to read words into the policy that aren’t there, and to resolve any ambiguities in favor of coverage.
The Court also ignored these rules by reading “acts or omissions” to mean “negligent acts or omissions.” In plain words, the policy provides coverage for liabilities that result from any acts or omissions. These acts or omissions might be negligent, but they might also be reckless—or faultless—and still be covered. If those acts could give rise to liability, the insurer has a duty to defend and indemnify its insureds. In reading the absent word “negligent” into the policy, the Court of Appeals potentially narrowed its coverage considerably. And while this case involves coverage for the Transit Authority as an additional insured, insurers may argue that this analysis narrows coverage for named insureds to “negligent” acts or omissions as well.
The majority’s tunnel vision, unfortunately, is now the law of New York. Luckily, it is specific to the language of the endorsement at issue in Burlington. If you’re an additional insured and you want coverage for your own “but for” negligence on a project, you should make sure the additional insured endorsement preserves coverage for that risk. Consult a coverage lawyer if in doubt—preferably before you agree to additional insurance offered by your subcontractors. Meanwhile, we’ll all have to wait for another case to revisit this wording, and hope that case represents a light at the end of the Burlington tunnel.