Opinion ID: 214183
Heading Depth: 1
Heading Rank: 9

Heading: Whether AAAMA Qualifies as an Additional Insured Under the Endorsement

Text: The AHA Endorsement names Member Clubs, such as AAAMA, as additional insureds under the AHA Policy but only with respect to liability arising out of [AAA's] operations or premises owned by [AAA]. (emphasis supplied). Thus, whether or not defendants must contribute to the settlement payment made by Federal depends on a threshold determination of whether AAAMA qualifies as an additional insured under the AHA Policy issued to AAA National. This determination requires us to examine the meaning of the phrase arising out of in conjunction with the word operations. A. The Operative Phrase Defined The New York approach to the interpretation of contracts of insurance is to give effect to the intent of the parties as expressed in the clear language of the contract. Mount Vernon Fire Ins. Co. v. Belize NY, Inc., 277 F.3d 232, 236 (2d Cir.2002) (internal quotation marks omitted). In doing so, [w]e must give `unambiguous provisions of an insurance contract... their plain and ordinary meaning.' 10 Ellicott Square Court Corp. v. Mountain Valley Indem. Co., 634 F.3d 112, 119 (2d Cir.2011) (quoting Essex Ins. Co. v. Laruccia Constr., Inc., 71 A.D.3d 818, 898 N.Y.S.2d 558, 559 (2010)). We cannot disregard `the plain meaning of the policy's language ... in order to find an ambiguity where none exists.' Id. (quoting Empire Fire & Marine Ins. Co. v. Eveready Ins. Co., 48 A.D.3d 406, 851 N.Y.S.2d 647, 648 (2008)). [I]t is common practice for the courts of [New York] State to refer to the dictionary to determine the plain and ordinary meaning of words to a contract. Id. (quoting Mazzola v. Cnty. of Suffolk, 143 A.D.2d 734, 533 N.Y.S.2d 297, 297 (1988) (internal citation omitted)). We have also explained that [i]f the court finds that the contract is not ambiguous it should assign the plain and ordinary meaning to each term and interpret the contract without the aid of extrinsic evidence and it may then award summary judgment. Int'l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 83 (2d Cir.2002) (citations and quotation marks omitted). On the other hand, under New York law, contract claims are generally not subject to summary judgment if the resolution of a dispute turns on the meaning of an ambiguous term or phrase. See Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 695 (2d Cir.1998) (Language in an insurance contract will be deemed ambiguous if reasonable minds could differ as to its meaning.); see also State v. Home Indem. Co., 66 N.Y.2d 669, 495 N.Y.S.2d 969, 486 N.E.2d 827, 829 (1985) (per curiam) (If ... the language in the insurance contract is ambiguous and susceptible of two reasonable interpretations, the parties may submit extrinsic evidence as an aid in construction, and the resolution of the ambiguity is for the trier of fact.). However, where language in a contract is ambiguous, summary judgment can be granted if the non-moving party fails to point to any relevant extrinsic evidence supporting that party's interpretation of the language. Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 158 (2d Cir.2000). The question of whether the language of a contract is clear or ambiguous is one of law, and therefore must be decided by the court. Id. at 158. In making this decision, the court should not find the language ambiguous on the basis of the interpretation urged by one party, where that interpretation would strain the contract language beyond its reasonable and ordinary meaning. Metro. Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir.1990) (internal quotation marks and citation omitted). The New York Court of Appeals has held that the phrase arising out of is `ordinarily understood to mean originating from, incident to, or having connection with.' Maroney v. N.Y. Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 472, 805 N.Y.S.2d 533, 839 N.E.2d 886 (2005) (quoting Aetna Cas. & Sur. Co. v. Liberty Mut. Ins. Co., 91 A.D.2d 317, 459 N.Y.S.2d 158, 160 (1983)); Mount Vernon Fire Ins. Co. v. Creative Hous. Ltd., 88 N.Y.2d 347, 645 N.Y.S.2d 433, 668 N.E.2d 404, 406 (1996) (There is no significant difference between the meaning of the phrases `based on' and `arising out of in the coverage or exclusion clauses of an insurance policy. Moreover, we find neither phrase to be ambiguous. (internal citations omitted)). The phrase requires only that there be some causal relationship between the injury and the risk for which coverage is provided. Maroney, 5 N.Y.3d at 472, 805 N.Y.S.2d 533, 839 N.E.2d 886 (emphasis supplied); see also Consol. Edison Co. v. Hartford Ins. Co., 203 A.D.2d 83, 610 N.Y.S.2d 219, 221 (1994) (stating that the phrase arising out of in the context of an additional insured clause in an insurance policy focuses 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); accord Turner Constr. Co. v. Kemper Ins. Co., 198 Fed.Appx. 28, 30 (2d Cir.2006). Further, additional insured provisions, extending coverage for liability arising out of the named insured's work or operations, are applied consistent with `common speech' and the reasonable expectations of a businessperson. Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790, 795 N.E.2d 15, 17 (2003). Because the term operations is not defined in the AHA Policy, operations is given its ordinary meaning, considering the general nature of the operation in the course of which the injury was sustained. Consol. Edison Co., 610 N.Y.S.2d at 221. The ordinary meaning of the word in the context of this case is the doing or performing of work. Webster's Third New International Dictionary 1581 (2002 ed.); see also In re Chateaugay Corp., 891 F.2d 1034, 1039 (2d Cir.1989) (stating, in the context of the coal industry, that the meaning of the word `operations' should cover those methods of ... mining, production, preparation, transportation and other ancillary activities in which the [parties] were engaged). Within the bankruptcy context, we have held that the word operations includes a business' ancillary activities. Chateaugay Corp., 891 F.2d at 1039 (finding transportation and other ancillary activities within the coal production operation). We agree with the District Court insofar as it found that the plain language arising out of ... operations in the AHA Endorsement is unambiguous. It seems to us, however, that the learned District Court misapplied the unambiguous language of the Endorsement here. B. The Operative Phrase in Other Evidentiary Contexts Federal seeks indemnification for its settlement with Cannon on behalf of AAAMA, arguing that the Cannon accident arose out of AAA National's operations, in particular, AAA's activities involving emergency road service. In determining that the action did not arise out of the operations of AAA National, we examine some cases in which the operative phrase has been applied. In Worth Construction Co. v. Admiral Insurance Co., 10 N.Y.3d 411, 859 N.Y.S.2d 101, 888 N.E.2d 1043 (2008), a subcontractor, Pacific, named the general contractor, Worth, as an additional insured on its policy but only with respect to liability arising out of Pacific's operations. Id., 859 N.Y.S.2d 101, 888 N.E.2d at 1044. Pacific constructed a staircase frame, and another subcontractor was hired to apply the fireproofing. A second subcontractor's employee slipped on the fireproofing. Id. After a personal injury claim was filed against Worth, Worth filed a third-party action against Pacific and its insurer, Farm Family Casualty Insurance Company (Farm Family). Id. Pacific sought summary judgment on Worth's third-party claim in the underlying injury suit. Worth thereafter conceded that the underlying personal injury claim did not arise out of Pacific's work or operations and that Pacific was not negligent, and thus the trial court granted summary judgment to Farm Family. Id., 859 N.Y.S.2d 101, 888 N.E.2d at 1045. The Appellate Division disagreed, holding that for coverage purposes, it was sufficient that [the subcontractor's employee's] injury was sustained on the stairs. Id. (internal quotation marks omitted). The New York Court of Appeals disagreed with the Appellate Division. Although recognizing that [g]enerally, the absence of negligence, by itself, is insufficient to establish that an accident did not `arise out of' an insured's operations, the court agreed with Farm Family that Worth's admission that its claims of negligence against Pacific were without factual merit  and that the staircase was merely the situs of the accident  established that the accident did not arise out of Pacific's operations. See id. (stating that after Worth's admission, it could no longer be argued that there was any connection between [plaintiff's] accident and the risk for which coverage was intended). [4] In Bovis Lend Lease LMB, Inc. v. Garito Contracting, Inc., 65 A.D.3d 872, 885 N.Y.S.2d 59 (2009), a subcontractor, Garito, named a general contractor, Bovis, as an additional insured on its policy, but only with respect to liability arising out of Garito's work for Bovis. Bovis, 885 N.Y.S.2d at 60. Garito removed a garbage chute enclosure, leaving a hole in the concrete slab floor, and another subcontractor's employee was injured when he fell through the hole. Id. The injured plaintiff brought suit against Bovis, and Bovis filed a third-party claim against Garito. Id. at 60-61. The jury in the personal injury case found that both Bovis and Garito were negligent but that Garito's negligence was not a substantial factor causing the accident because the named insured did not agree to provide protection at the worksite. Id. at 61. The Appellate Division agreed with Garito's insurer  i.e., that Bovis's liability arose out of its own operations, and not Garito's work. Id. at 61-62. Applying Worth, the Appellate Division reasoned that the jury's finding that Garito's negligence was not a substantial factor ... is as conclusive as the admission by Worth that Pacific's activities were not a proximate cause of the underlying accident. Id. In Greater N.Y. Mutual Insurance Co. v. Mutual Marine Office, Inc., 3 A.D.3d 44, 769 N.Y.S.2d 234 (2003), a contract between a parking garage owner, Seward, and operator, Ulltra, provided that Ulltra was responsible for all repairs except for structural ones. Greater N.Y., 769 N.Y.S.2d at 235. Ulltra's policy with Mutual Marine Office (MMO) named Seward as an additional insured, providing coverage for damage to cars in the garage in connection with the insured's [Ulltra's] `garage operations.' Id. at 236. Coverage under the MMO policy was therefore limited to claims arising out of Ulltra's parking garage operations. Id. After the garage roof collapsed and Seward paid numerous property damage claims, its insurer, Greater New York Mutual Insurance Company, sought additional coverage from Ulltra's MMO policy. The Appellate Division determined that the parties had not intended for the additional insurance to cover Seward's liability since the contract established that Seward alone would be responsible for structural repairs. Id. at 239. The court reasoned that [t]he collapse of the parking garage roof clearly did not arise out of Ulltra's parking garage operations but, rather ... out of structural defect in the building housing the parking garage, as to which, under the lease, Seward had the duty of repair. Id. at 237-38. Under the provisions of the MMO policy, the court determined that it is clear that the additional insured endorsement was never intended to extend to Seward's liability arising out of a roof defect in a building it owns and which, under its lease with Ulltra, it is obligated to maintain. Id. at 238. Thus, the additional insured endorsement was never triggered. The court also noted that additional insurance is often used to ensure that the party closest to the operations is the one held responsible when there is a loss. Id. at 238. C. The Operative Phrase in the Case at Bar Contending that AAA was engaged in operations at the time of the accident, Federal argues that AAA's activities were far more than `ancillary' or `incidental' to AAAMA's emergency road service, especially given that emergency roadside service was AAA's core operation. We disagree. AAA National is a not-for-profit affiliation of independently operated automobile clubs. At the time of the accident, AAA National's activities included maintaining the federation of clubs and accredit[ing] member clubs; promot[ing] use of the MDTs; issu[ing] towing, service, and lockout manuals to the member clubs; disseminat[ing] quality standards, including a thirty-minute response time goal; and maintain[ing] the toll-free telephone number that directed service calls to the member club operating in the area of the call's origin. Its activities were therefore much different from the operations of AAAMA, which provided actual roadside emergency services, including towing. At the time of Cannon's accident, AAAMA owned and operated over 100 trucks and also contracted with towing contractors, including E & D. AAAMA also financed the truck Taber was driving, required E & D to use the MDT, trained E & D to use the MDT, and equipped the truck with the MDT. In addition, the minimum causal relationship between the injury and the risk for which coverage is provided is lacking here. See Maroney, 5 N.Y.3d at 472, 805 N.Y.S.2d 533, 839 N.E.2d 886. AAA National's accreditation process and other activities did not contribute to Cannon's injuries. And although AAA National promulgated a suggested 30-minute response time for responding to roadside-assistance calls from members, Taber testified that he was not speeding while en route to the call in Parlin, New Jersey, and that he had more than adequate time to get to his next service call. Moreover, the accident occurred only six minutes after Taber received the service call and started to drive. We therefore conclude that AAA-MA's liability to Cannon is not causally connected to AAA National's 30-minute response time standard in this case. We also note that while AAA National recommended the MDT after evaluating its technology, it never mandated its use. And although Taber testified that while he was initially distracted by the MDT, he subsequently turned to check the flat-bed, and then became distracted by a woman in a passing car, having stared at her for 10-15 seconds before immediately thereafter slamming into Cannon's vehicle. Furthermore, we reject the District Court's conclusion that AAA's operations include a level of emergency roadside oversight and coordination that is, at the very least `connected to' the Cannon accident and AAAMA's liability, i.e., AAA National's role in operating the 1-800-AAA-HELP line. Am. Home Assurance Co., 664 F.Supp.2d at 407. The court found that the connection was supported by the following evidence: Most importantly, an AAA member can call 1-800-AAA-HELP anywhere in the country and receive emergency roadside assistance twenty-four hours a day, seven days a week. All of the service calls are processed by AAA's reciprocal clearing bureau, which allocates charges among the clubs. In most cases, the member does not know which AAA Member Club will respond to his or her call, or that there are even different Member Clubs. Each responding tow truck and driver displays the same AAA insignia, aims to arrive within the thirty-minute window set by AAA, and reports estimated times of arrival and actual times of arrival to AAA, all to comply with AAA's automotive quality standards.... At the time of the accident, Taber was responding to an AAA member call. The record shows that the member called the AAA nationwide 1-800 number and was then directed to the Member Club, which dispatched E & D. Taber hit Cannon's car on his way to help an AAA member who had called the AAA number. Id. at 407-08. We find, however, that reliance upon such evidence is akin to the general contractor's claim in Worth that its liability arose out of Pacific's operations simply because Pacific had built the stair frame that was the site of the injury, Worth Constr. Co., 859 N.Y.S.2d 101, 888 N.E.2d at 1045-46, or to the parking garage owner's claim in Greater New York that the damage to cars caused by the garage roof's collapse arose out of the operator's operations simply because the cars were parked in the garage at the time of the collapse, Greater N.Y. Mut. Ins. Co., 769 N.Y.S.2d at 236-37. We conclude that AAAMA's liability to Cannon did not arise out of AAA National's operations. Here, AAA National served only as a centralized helpline, limiting its role to directing calls to the proper Member Club in which an AAA member's call originated. Similarly, the organizational structure of AAA National and its member organizations precludes us from concluding that AAA National's operations include emergency road service. The record establishes that the AAA organization has divided its activities and operations into sets of distinct functions  AAA National directs policies, accredits member clubs, and maintains a centralized telephone number; and the Member Clubs issue memberships to the public and engage in physical roadside assistance. AAA National does not employ towing companies or maintain towing trucks. In this way, while roadside assistance may be the AAA family's core operation, actual roadside service is provided by the Member Clubs. AAA National's participation is limited to accreditation, policy making, and oversight. Its operations pertain only to those functions.