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Burlington Ins. Co. v. NYC Transit Authority

New York Court of Appeals

June 6, 2017

The Burlington Insurance Company, Appellant,
NYC Transit Authority, et al., Respondents.

          Joseph D'Ambrosio, for appellant.

          Charles R. Strugatz, for respondents.

          Turner Construction Company, amicus curiae.

          RIVERA, J.

         We conclude that where an insurance policy is restricted to liability for any bodily injury "caused, in whole or in part" by the "acts or omissions" of the named insured, the coverage applies to injury proximately caused by the named insured. The Appellate Division erroneously interpreted this policy language as extending coverage broadly to any injury causally linked to the named insured, and wrongly concluded that an additional insured may collect for an injury caused solely by its own negligence, even where the named insured bears no legal fault for the underlying harm. We reject this "but for" causation formulation of the policy and, on this appeal, reverse the Appellate Division's denial of summary judgment in favor of the insurance company on the issue of coverage.


         Plaintiff, The Burlington Insurance Company (Burlington), issued an insurance policy to nonparty Breaking Solutions, Inc. (BSI) listing as additional insureds defendants, the New York City Transit Authority (NYCTA) and MTA New York City Transit (MTA). Burlington denied coverage to NYCTA and MTA on the grounds that defendants were not additional insureds within the meaning of the policy because NYCTA was solely responsible for the accident that caused the injury. This appeal requires that we interpret whether the additional insured language of the policy provides coverage where the named insured is not negligent.

         According to the undisputed facts, NYCTA contracted with BSI to provide equipment and personnel and for BSI to perform tunnel excavation work on a New York City subway construction project. To comply with NYCTA's insurance requirements, BSI purchased commercial general liability insurance from Burlington with an endorsement that listed NYCTA, MTA, and New York City (City) as "additional insureds." [1] As specified by NYCTA, BSI agreed to use language in the endorsement adopted from the latest form issued by a trade organization known as the Insurance Services Office (ISO), and which provides, in relevant part, that NYCTA, MTA, and the City are additional insureds:

"... only with respect to liability for 'bodily injury', 'property damage' or 'personal and advertising injury' caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf."

         During the coverage period, an NYCTA employee fell off an elevated platform as he tried to avoid an explosion after a BSI machine touched a live electrical cable buried in concrete at the excavation site. The employee and his spouse brought an action against the City and BSI in federal court, asserting Labor Law claims, negligence, and loss of consortium (Kenny v City of N.Y., 2011 WL 4460598 [ED NY, Sept. 26, 2011]).

         Pursuant to BSI's policy, the City tendered its defense in the federal action to Burlington, which Burlington accepted subject to a reservation of rights based on the City's qualification as an additional insured. Burlington withdrew its reservation, however, after receiving NYCTA's letter to BSI that it would not make payments under the contract unless Burlington agreed to provide coverage for the City's defense and indemnification without reservation.

         Meanwhile, the City impleaded NYCTA and MTA in the employee's action and asserted third party claims for indemnification and contribution, based on a lease between NYCTA and the City as a property owner of certain transit facilities. Under Article 6, Section 6.8 of that lease agreement, NYCTA agreed to indemnify the City for liability "arising out of or in connection with the operation, management[, ] and control by the [NYCTA]" of the leased property.[2]

         NYCTA tendered its defense of these claims to Burlington, also as an additional insured under the BSI policy. Burlington accepted the defense, subject to the same reservation that NYCTA qualify as an additional insured under the policy endorsement. NYCTA did not demand, and Burlington did not submit, a withdrawal of this reservation.

         Discovery in the employee's federal lawsuit revealed that NYCTA failed to identify, mark, or protect the electric cable, and that it also failed to turn off the cable power. Documents further established that the BSI machine operator could not have known about the location of the cable or the fact that it was electrified. For example, in two internal memoranda, NYCTA acknowledged its sole responsibility for the accident. In the first, the NYCTA superintendent explained that "the excavation equipment operators were operating the equipment properly and had no way of knowing that the cable was submerged in the invert." The second memorandum concluded that "this accident was primarily due to an inadequate/ineffective inspection process for identifying job-site hazards involving buried energized cables." Based on these revelations, Burlington disclaimed coverage of NYCTA and MTA, asserting that BSI was not at fault for the injuries and therefore NYCTA and MTA were not additional insureds under the policy.

         The district court dismissed the employee's claims against BSI with prejudice, and the City's third-party claims against NYCTA without prejudice. Burlington thereafter settled the lawsuit for $950, 000 and paid the City's defense costs.

         Burlington commenced the underlying action in state court after disclaiming coverage for NYCTA and MTA. Initially, Burlington sought a declaratory judgment that it did not owe NYCTA and MTA coverage as additional insureds under BSI's policy. After settling the employee's action against the City, Burlington moved to amend its complaint to add a claim for contractual indemnification as the City's subrogee under the lease with NYCTA.

         Supreme Court granted Burlington's motion for summary judgment, concluding that NYCTA and MTA were not additional insureds because the policy limited liability to instances where BSI, as the named insured, was negligent. The court also granted Burlington's motion to amend the complaint, finding that the anti-subrogation rule did not bar Burlington's claim as the City's subrogee. Burlington then moved for partial summary judgment on its contractual indemnification claim against NYCTA, which the court granted and subsequently entered judgment for Burlington for the $950, 000 settlement amount, along with prejudgment interest, fees, and costs.

         The Appellate Division reversed, denying plaintiff's motions for summary judgment and to amend the complaint, and granting defendants' cross motion for summary judgment on the first cause of action to the extent of declaring that defendants were entitled to coverage as additional insureds under the Burlington policy (132 A.D.3d 127');">132 A.D.3d 127 [1st Dept 2015]). The court concluded that the named insured was not negligent, but "the act of triggering the explosion... was a cause of [the employee's] injury" within the meaning of the policy (132 A.D.3d at 134-135). The court also determined that as a consequence, it "necessarily follows that the anti-subrogation rule bars Burlington from recovering, as the City's subrogee" (id. at 138). We granted Burlington leave to appeal (27 N.Y.3d 905');">27 N.Y.3d 905');">27 N.Y.3d 905');">27 N.Y.3d 905 [2016]).


         Burlington argues that under the plain meaning of the endorsement NYCTA and MTA are not additional insureds because the acts or omissions of the named insured, BSI, were not a proximate cause of the injury. Put another way, Burlington maintains that the coverage does not apply where, as here, the additional insured was the sole proximate cause of the injury.

         In response, NYCTA and MTA also rely on the policy language, but claim that by its express terms the endorsement applies to any act or omission by BSI that resulted in injury, regardless of the additional insured's negligence. They further argue that the Appellate Division properly concluded that BSI's operation of its excavation machine provided the requisite causal nexus between injury and act to trigger coverage under the policy.

         Burlington has the better argument. Applying the relevant legal principles to the policy language, we conclude that there is no coverage because, by its terms, the policy endorsement is limited to those injuries proximately caused by BSI.


         "An insurance agreement is subject to principles of contract interpretation" (Universal Am. Corp. v Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 25 N.Y.3d 675, 680 [2015]). Therefore, "[a]s with the construction of contracts generally, 'unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court'" (Vigilant Ins. Co. v Bear Stearns Companies, Inc., 10 N.Y.3d 170, 177 [2008], quoting White v Continental Cas. Co., 9 N.Y.3d 264, 267 [2007] [citations omitted]).

         The policy here states, in relevant part, that an entity is "an additional insured only with respect to liability for 'bodily injury' caused, in whole or in part, by [BSI's] acts or omissions." The defendants argue that the endorsement does not limit liability to cases in which an insured's acts or omissions are negligent or otherwise legally actionable. Essentially, they advocate that "caused, in whole or in part" means "but for" causation. Under their reading of the policy, all that is necessary for an additional insured to be covered is that the insured's conduct be a causal link to the injury. This is an incorrect interpretation of the policy language, which by its terms, describes proximate causation and legal liability based on the insured's negligence or other actionable deed.


         It is well established in our law that "but for" causation, or causation in fact, is "[t]he cause without which the event could not have occurred" (Black's Law Dictionary [10th ed. 2014], but-for cause; Dan B. Dobbs et al., Torts § 186 [2d ed. 2011]; see also Koehler v Schwartz, 48 N.Y.2d 807, 808-809 [1979]; 14 New York Practice Series: New York Law of Torts § 8:3]). The term refers to a link in the chain leading to an outcome, and in the abstract does no more than state the obvious, that "any given event, including an injury, is always the result of many causes" (Dobbs, § 189). However, not all "but for" causes result in liability and "[m]ost causes can be ignored in tort litigation" (id.). In contrast, "proximate cause" refers to a "legal cause" to which the Court has assigned liability (Derdiarian v Felix Contracting Corp., 51 N.Y.2d 308, 314 [1980]; see Hain v Jamison, 28 N.Y.3d 524, 528-529 [2016] ["the determination of proximate cause involves, among other things, policy-laden considerations; that is, the chain of causation must have an endpoint in order 'to place manageable limits upon the liability that flows from negligent conduct'"]) . The dissent suggests that "proximate cause" and "but-for cause" may be equivalent concepts (dissenting op at 14), but the law is clear that the two are not synonymous (see Dobbs, § 189). As the Court has explained, "'because of convenience, of public policy, of a rough sense of justice, the law arbitrarily declines to trace a series of events beyond a certain point'" (Ventricelli v Kinney Sys. Rent A Car, Inc., 45 N.Y.2d 950, 952, amended 46 N.Y.2d 770');">46 N.Y.2d 770 [1978], quoting Palsgraf v Long Is. R. R. Co., 248 NY 339, 352 [1928] [Andrews, J., dissenting]).

         Here, the Burlington policy endorsement states that the injury must be "caused, in whole or in part" by BSI. These words require proximate causation since "but for" causation cannot be partial. An event may not be wholly or partially connected to a result, it either is or it is not connected. Stated differently, although there may be more than one proximate cause, all "but for" causes bear some connection to the outcome even if all do not lead to legal liability. Thus, these words - "in whole or in part" - can only modify "proximate cause" (see Dobbs § 189; Black's Law Dictionary, proximate cause; Hain v Jamison, 28 N.Y.3d at 529). Defendants' interpretation would render this modification superfluous, in contravention of the rule that requires us to interpret the language "in a manner that gives full force and effect to the policy language and does not render a portion of the provision meaningless" (Cragg v Allstate Indem. Corp., 17 N.Y.3d 118, 122 [2011] [internal citations omitted]).

         NYCTA and MTA argue that the language "in whole or in part" was necessary in order to make clear that the parties did not mean "solely caused by." Without the additional language, they contend, the endorsement would provide NYCTA and MTA coverage only if BSI's acts or omissions were solely responsible for the loss. We find this argument is unpersuasive because the phrases "caused, in whole or in part, by" and "solely caused by" are not synonymous, either by their plain meaning or legal effect (see Argentina v Emery World Wide Delivery Corp., 93 N.Y.2d 554, 561 n 2 [1999] [the Court considered "the proximate cause" to mean "a proximate ...

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