As a coverage attorney, I often find myself representing the liability insurers of both general contractors and subcontractors. When representing a carrier for a general contractor, one of the first questions the client usually asks us to explore is whether its named insured may qualify as an “additional insured” on a policy issued to one of its subcontractor under an additional insured endorsement. Correspondingly, when representing a carrier for a subcontractor, one of the first questions the client usually asks is whether the client owes additional insured coverage to the general contractor. The answer to this question of whether the general contractor qualifies as an additional insured on the subcontractor’s policy may more frequently be “no,” in light of a recent decision from the Federal District Court for the Southern District of Florida, Amerisure Insurance Company v. Seneca Specialty Insurance Company, No. 20-20442, 2020 WL 3317035 (S.D. Fla. June 18, 2020).
In Amerisure, when entering a Walmart, a family was struck by large quantities of wet cement that poured through a gap in the ceiling. The family sued Walmart alleging that Walmart was directly negligent for failing to maintain the store in a reasonably safe condition and failing to warn plaintiffs of the dangerous condition. Id. A final judgment was entered against Walmart. Id. Walmart and Amerisure Insurance Company (“Amerisure”) entered into a settlement agreement and assignment of claims wherein Amerisure agreed to pay the judgment entered against Walmart, and Walmart assigned its rights to Amerisure against both the subcontractor on the concrete project and the subcontractor’s insurer, Seneca Specialty Insurance Company (“Seneca”).
Amerisure sued Seneca arguing that Walmart was an additional insured under Seneca’s policy, but Seneca filed a motion to dismiss arguing that it did not have a duty to defend Walmart. Id. at *3. Seneca’s policy provided additional insured coverage to any person or organization shown in the Schedule as required by a written contract, but “only with respect to liability for ‘bodily injury’ … caused, in whole or in part by” the subcontractor’s acts or omissions. Id. at *1.
Critically, the court held that the complaint did not allege vicariously liability against Walmart, yet the additional insured endorsement only provided coverage to Walmart as an additional insured for its vicarious liability for actions or inactions of the concrete subcontractor. Id. at *5. The court then analyzed Garcia v. Federal Insurance Co., 969 So. 2d 288 (Fla. 2007), explaining:
The Supreme Court of Florida found that the phrase “because of” in the additional-insured endorsement was “relevant” and that “there is a more circumscribed meaning to ‘because of’ than merely being a sequential link in the chain of events…. The phrase appears to include persons or organizations held in by way of vicarious liability for derelictions of [the named insured].” Id. at 293 (emphasis added) (quoting Long Island Lighting Co. v. Hartford Accident & Indem. Co., 350 N.Y.S. 2d 967, 972 (N.Y. Gen. Term. 1973)). Thus, the Florida Supreme Court reasoned that “[t]he omission of the words ‘but only’ in [the insurer’s] policy [did] not materially change the limitation of the additional insured provision to instances of vicarious liability.” Id. (emphasis added). The Florida Supreme Court further explained that “the presence of the words ‘because of’ in [the insurer’s] policy require[d] that an additional insured’s liability be ‘caused by’ the acts or omissions of the named insured.” Id. (emphasis added). In short, the Florida Supreme Court held that the insurer’s policy did not cover the additional insured’s “independent acts of negligence” and that “[b]ecause the accident victim’s suit against [the additional insured] sought recovery only for her direct negligence, and did not allege any liability based on acts or omissions of [the named insured], [the additional insured] [was] not entitled to coverage.” Id. at 294.
Id. The court further explained that federal courts applying Florida law to additional insured endorsements similar to the one in Seneca’s policy consistently hold that the endorsements do not provide coverage where the underlying lawsuit fails to allege that the additional insured is vicariously liable for the negligence of the named insured. Id. at *6. See also, King Cole Condo. Ass’n, Inc. v. Mid-Continent Cas. Co., 21 F. Supp. 3d 1296, 1299 (S.D. Fla. 2014) (holding that no coverage existed because the underlying complaint only alleged direct negligence against the additional insured and the additional insured endorsement only provided coverage for injuries caused, in whole or in part, by the named insured); United Rentals, Inc. v. Mid-Continent Cas. Co., 843 F. Supp. 2d 1309, 1312 n.6 (S.D. Fla. 2012) (same); Mid-Continent Cas. Co. v. Constr. Servs. & Consultants, Inc., No. 06-CV-80922, 2008 WL 896221, *3 (S.D. Fla. March 31, 2008) (not reported) (same).
Coverage attorneys for insurers of general contractors usually rely on Mid-Continent Casualty Co. v. Royal Crane, LLC, 169 So. 3d 174, 179-83 (Fla. 4th DCA 2015), when seeking additional insured coverage. The case held that the phrase, “caused, in whole or in part by” the named insured should not be construed narrowly to only provide coverage for vicarious liability of the named insured. Amerisure was no exception. However, the court distinguished Royal Crane, explaining:
Although Royal Crane provides some support for Amerisure’s argument, that case is inapposite here. Not only did Royal Crane openly apply a “relaxed standard,” Id. at 184, but also, it did not address the Florida Supreme Court’s ruling in Garcia, see generally id. – which might be because Royal Crane “ did not involve an additional insured endorsement, but rather only found that there was no ‘insured contract’ within the meaning of the policy” and thus there was no duty to indemnify under the policy’s indemnification provision. See Cmty. Asphalt Corp., 2017 WL 4712199, at *9 (declining to follow Royal Crane). In any event, Royal Crane runs against the Florida Supreme Court’s ruling in Garcia and the weight of authority in this District.
Id. at *8.
What does this all mean? This was a good result for the defense. Additionally, when evaluating additional insured coverage, coverage counsel needs to pay specific attention to the causes of action alleged in the underlying complaint and the provisions of the additional insured endorsements.