Landlords and tenants, contractors and sub-contractors, even fathers and sons often establish relationships that make one party potentially liable for the acts of the other. One way to manage the risk these relationships create is for one party to add the other to its liability insurance policy as an additional insured. On the other side, insurers try to limit their exposure to additional insureds by defining coverage in a way that applies only to risks the additional insured would not ordinarily insure on its own. The courts don’t always co-operate, as some recent, parsimonious readings of exclusionary language help to illustrate.
Amerisure Ins. Co. v. Orange & Blue Construction, Inc., No. 11-80112-CIV (S.D. Fla Dec. 21, 2012), involved a familiar posture: Epoch Properties Inc. was a general contractor on a construction project, under a contract that made it responsible for the safety of the jobsite. Orange & Blue Construction was a subcontractor, under an agreement in which it assumed the risk of potential injuries for its portion of the overall project. The subcontract required Orange & Blue to purchase liability insurance and to name Epoch as an additional insured.
When an employee of one of Orange & Blue’s sub-sub-sub-contractors, Sandi Construction, was killed in a fall, the estate sued all of the contractors and sub-contractors, with the exception of Orange & Blue. The complaint alleged, among other things, that Epoch had breached its duty to provide a reasonably safe workplace. Epoch tendered the defense to Orange & Blue’s insurer, Amerisure.
The Amerisure policy sought to exclude coverage of Epoch for Epoch’s own business activities. It provided that Epoch “[was] only an additional insured with respect to liability arising out of: … [Orange & Blue’s] ongoing operations performed for [Epoch] . . . .” In a declaratory judgment action, Amerisure argued that Epoch was not entitled to coverage, because Epoch was being sued for its own conduct, not for any liability it assumed under its contract with Orange & Blue.
The Southern District of Florida found that the exclusionary language of Amerisure’s policy did not go far enough. Specifically, it found that the language did not limit coverage to vicarious liability, or to claims for injuries that were caused by the named insured, Orange & Blue. If the employee was injured while working in connection with Orange & Blue’s business, then liability for the injury “arose out of” that business, even if it was caused exclusively by Epoch.
In Manner v. Schiermeier, No. SC 92408 (Mo. banc Jan. 8, 2013), the plaintiff, Nathaniel Manner, was riding his Yamaha motorcycle when he was struck by the defendant. After the defendant’s insurer paid its $100,000 policy limit, Mr. Manner asserted underinsured motorist (UIM) claims under four different policies. Three of the policies were in his own name. The fourth policy, issued by American Standard, covered a Suzuki motorcycle owned by the plaintiff’s father, James Manner. Nathaniel, as a family member, was an additional insured under that policy.
American Standard asserted a defense based on an “owned vehicle” exclusion, which stated: “This coverage does not apply for bodily injury to a person . . . occupying . . . , a motor vehicle that is not insured under this policy if it is owned by you or any resident of your household.” The Yamaha that was involved in the accident was insured under a different policy and, the insurer asserted, was “owned” by the plaintiff.
The plaintiff acknowledged that his uncle had agreed to sell him the motorcycle, that he had taken possession of it, and that he had separately obtained insurance for it before driving it. But he hadn’t finished paying for it, and his uncle still retained title. The Supreme Court of Missouri held that the insurer bore the burden of proving that the policy used the term “owed” (which it did not define) in a sense that included this arrangement, and that the insurer had failed to meet that burden. At best, the court found, the term was ambiguous, and ambiguities must be construed in favor of the insured.
The four policies at issue in Manner did define the term “underinsured motorist”: An “uninsured motorist” is one who is covered by a policy “which provides bodily injury liability limits less than the limits of liability of this Underinsured Motorists coverage.” Each of the four policies under which Nathaniel asserted his claim provided $100,000 in liability coverage—the same amount provided under the defendant’s policy. The insurers argued, therefore, that the UIM provisions did not apply.
The court rejected that argument, on the ground that the policies could be “stacked” to provide, in the aggregate, more than $100,000 in coverage. The decision relied, in part, on an “other insurance” provision, which was part of the UIM endorsements, and which stated: “If there is other similar insurance on a loss covered by this endorsement, we will pay our share according to this policy’s proportion of the total limits of all similar insurance.” The court found that this language created an exception to the anti-stacking provisions that appeared elsewhere in the policies.
Thus, without specifically addressing the question, the court held that the policy issued to James Manner could be “stacked” with the policies owned by his son.