Coverage for an additional insured is typically limited to instances where the insured's negligence causes injury. For example, in First Ins. Co. of Hawaii, Inc. v. State of Hawaii, 66 Haw. 413, 665 P.2d 648 (1983), the state was named as an additional insured in a policy issued to a contractor building a highway for the state. The state was covered "with respect to liability arising out of operations performed for the additional insured by the named insured." An endorsement, however, excluded coverage arising out of any act of the additional insured, "other than general supervision of work performed for the additional insured by the named insured."
When a motorist was killed, the heirs sued both the contractor and the state. The verdict in the underlying suit absolved the contractor, but found the state was 15% negligent. First Insurance refused to indemnify the state. The Supreme Court agreed there was no duty to indemnify because the state was only covered for liability arising from the named insured's negligence or from an act of the state arising from its general supervision of the work performed by the named insured. Since a jury found the named insured was not negligent, the state was not covered. First Ins. Co., 66 Haw. at 424, 665 P.2d at 656.
A similar result was reached in a recent case decided by the New York Court of Appeals. Worth Construction Co., Inc. v. Admiral Insurance Co., No. 52 (N.Y. Ct. App. May 1, 2008) (found here). Worth Construction Co. was hired to construct an apartment complex. Worth subcontracted with Pacific Steel for construction of a staircase and hand railings. Pacific provided a commercial general liability policy naming Worth as an additional insured. The additional insured endorsement provided Worth was an insured, but only with respect to liability arising out of Pacific's operations.
Pacific completed the installation of the staircase and left the job site. Concrete then had to be poured before Pacific could return to install the hand railings. Before Pacific returned, plaintiff was injured when he slipped on a fireproofing installed by another subcontractor. Pacific played no role in contracting for or applying the fireproofing.
The plaintiff sued the owner and Worth. Worth sought a defense and indemnification from Pacific's insurer, Farm Family, but the tender was denied. Worth then filed a third-party complaint against Pacific in the underlying case. Worth also sued Farm Family for declaratory relief.
In the underlying case, Worth eventually conceded that Pacific was not negligent and should be dismissed. Farm Family then moved for summary judgment in the declaratory relief action, asserting that Worth now conceded the underlying plaintiff's injury did not arise out of Pacific's work or operations. The motion was granted.
The Court of Appeal affirmed. Pacific's operations involved only the installation of a staircase and handrails. A separate company was responsible for applying the fireproofing material. At the time of the accident, Pacific was not on the job site. By admitting in the underlying case Pacific was not negligent, Worth could no longer argue in the coverage action that there was any connection between plaintiff's injury and the risk for which coverage was intended. Therefore, the result was similar to that in First Ins. Co.
