The United States District Court in the Southern District of New York recently held that Harleysville Insurance Company had a duty to defend the City of New York as an additional insured in an underlying personal injury action, even though the insured was not a named defendant. City of New York v. Harleysville Insurance Company, No. 22-CV-3306 (RA), 2023 WL 4548715 (S.D.N.Y. July 14, 2023). The City entered into a contract with Prestige Pavers of NYC to reconstruct an entrance to a playground in Manhattan. Prestige was the named insured under a commercial general liability policy issued by Harleysville. The relevant language of the policy included an additional insured endorsement, which identified the City as an additional insured but only for “bodily injury,” “property damage,” or “personal and advertising injury” caused, in whole or in part, by your acts or omissions or the acts or omissions of those acting on your behalf: (a) in the performance of your ongoing operations; or (b) in connection with your premises owned by or rented to you. Id. at 2.
In February 2020, a minor child filed an action against the City alleging that a gate at the playground fell on the minor child and caused serious and permanent personal injuries alleging it was the duty of the City to maintain the Playground. The City notified Harleysville of the action and demanded a defense. Harleysville initially denied coverage, stating that the contract did not contain language that required defense and indemnity on behalf of the City for their “sole independent negligence” since the underlying case did not name Prestige as a defendant. The City argued the complaint presented a reasonable possibility of coverage because the complaint alleged that the City “and its agents”, including Prestige, had a duty to maintain the safety of the playground, and the injury stemmed from the alleged negligence of both parties. Harleysville argued that the City failed to establish that the accident was caused by Prestige’s acts or omissions, and so the City does not qualify as an additional insured. Id.
The court held for the City, and that it met its burden of demonstrating that the allegations in the underlying complaint suggested a reasonable possibility of coverage under the Harleysville Policy and thus Harleysville’s duty to defend under the Policy was invoked. The court opined there was a “reasonable possibility” that Prestige, as a contractor, was acting as the City’s agent and there was a “reasonable possibility” that the gate fell due to Prestige’s negligence. Thus, the court held the City is entitled to a defense as an additional insured, at least until the accident is later proven to be outside coverage. Even though the underlying action did not name the insured as a defendant, Harleysville is still compelled to defend the City as an additional insured because the duty to defend is based only on the “reasonably possibility of coverage” and not definitive proof of coverage.
Thanks to Martha Osisek for her assistance with this article. Should you have any questions, please contact Tom Bracken.
