New York’s Appellate Division, First Department, handed
insurers a lump of coal this holiday season, unanimously holding that a
contractor’s insurance company (Insurer) owed a property owner and manager (Building
Defendants) primary coverage as additional insureds, even though its named
insured had nothing to do with the allegedly negligent acts giving rise to the
subject injury, and despite the named insured previously prevailing against the
Building Defendants’ claims for common law and contractual indemnification. As
the First Department panel concluded, because the additional insured clause at
issue broadly provided coverage “with respect to operations performed by or on
behalf of the Named Insured,” the inquiry must “focus not upon the precise
cause of the accident…but upon the general nature of the operation in the
course of which the injury was sustained.”
Fireman’s Fund Ins. Co. v State Natl. Ins.
Co. arose out of an underlying trip and fall claim where the plaintiff
was allegedly injured due to an optical illusion created by an exterior step
and a subsequent walkway being painted the exact same color. The Building
Defendants sought coverage from Upgrade Contracting Company, Inc., the
contractor that had waterproofed the exterior step and walkway as part of a
renovation project, but which did not select the paint color used at the
location. Rather, the product to be used was specified in construction
documents, and the paint color was approved by the building’s board of
directors. Upgrade’s commercial general liability insurer initially rejected
the tender based upon the ground that Upgrade was not responsible for selecting
the paint colors.
Upgrade obtained dismissal of the Building Defendants’ third-party
claims asserted in the underlying action for common law and contractual
indemnification, with the court holding that “Upgrade had simply followed the
architect’s plans and specifications to waterproof the entire passageway in one
color and that there had been no proof of negligence on the part of Upgrade.” Thereafter, in the declaratory judgment (DJ) action,
the Insurer attempted to challenge coverage based upon the same argument,
contending that the additional insured provision was not triggered because
plaintiff’s accident did not arise out of Upgrade’s operations. However, the DJ
court rejected this position and found that Upgrade’s mere application of waterproofing
to the step and walkway created a sufficient connection between its work and
the alleged accident, even though there were no claims that the waterproofing
was negligently applied, and even though Upgrade played no role in selecting the color, which was the sole
and specific basis of the alleged negligence leading to the injury.
In affirming the trial court’s order and declaring that the Building Defendants were entitled to additional insured coverage, the First Department reviewed several decisions from New York appellate courts analyzing similarly broad additional insured provisions. In doing so, it took note of the much-discussed court of appeals’ decision in Burlington
, establishing the different analytical frameworks for coverage required by the phrases “caused by” and “arising out of”, and distinguished Upgrade’s work from prior precedent in which no additional insured coverage obligation was found because a lack of negligence rendered a particular contractor’s work area the mere situs of an accident
. Instead, the First Department reasoned that under the broad “arising out of” standard, even though Upgrade had nothing to do with the injury-producing element of the work (i.e.
, the selection of color or failure to adequately warn of the step), the fact that Upgrade had simply performed the waterproofing work at the location of the plaintiff’s alleged accident was sufficient to trigger the additional insured provision.
 Fireman’s Fund Ins. Co. v State Natl. Ins.
Co., ___ AD3d ___, 2019 NY Slip Op 09399, *5 (1st Dep’t December 26, 2019),
quoting Worth Constr. Co., Inc. v Admiral
Ins. Co., 10 NY3d 411, 416 ).
 Id. at *2. Interestingly, the contractual indemnity
claim was dismissed even though the indemnity provision used similarly broad
language, requiring Upgrade to indemnify and hold harmless the Building
Defendants “from . . . all claims, losses, damages or liability arising out of
or in connection with the operations and performance of the Work specified
under this Contract.”
 Fireman’s Fund Ins. Co. v State Nat. Ins.
Co., No. 160195/15, 2018 WL 3413917, at *2 (Sup Ct NY Cty, 2018).