Opinion ID: 780514
Heading Depth: 3
Heading Rank: 1

Heading: Coverage as an Additional Insured under the Scottsdale Policy

Text: 67 An endorsement, or rider, to T & R's policy with Scottsdale listed Freddie Mac and Sibley as additional insureds. The text of the endorsement states: 68 WHO IS AN INSURED (Section II) [of the policy] is amended to include as an insured the person or organization shown in the Schedule [listing Freddie Mac and Sibley as well as other organizations], but only with respect to liability arising out of `your work' for that insured by or for you. 69 Scottsdale argues that the qualification of the endorsement that limits coverage for additional insureds to liability arising out of `your work' places Freddie Mac outside the scope of coverage. Essentially, Scottsdale argues that the district court should have conducted a fact-intensive inquiry, and that such an inquiry would have revealed that T & R could not have been held liable for the injuries to the residents who made the underlying claims against Freddie Mac. Because T & R could not have been held liable, Scottsdale says, the additional insured provision was not triggered. 70 We find that this argument is unavailing, and that the district court properly concluded that Freddie Mac was covered as an additional insured under the endorsement to the Scottsdale policy. 71 New Jersey courts have given a broad and liberal interpretation to common insurance policy language pertaining to coverage for additional insured parties for injuries arising out of work performed by the main policyholder. In County of Hudson v. Selective Ins. Co., 332 N.J.Super. 107, 752 A.2d 849 (2000), the New Jersey Superior Court, Appellate Division analyzed language equivalent to that contained in the Scottsdale policy, and held that the additional insured was covered under the circumstances. In that case, a general contractor held a commercial general liability insurance policy on which Hudson County, which had hired the general contractor, was an additional insured. The language in an endorsement to that policy stated: WHO IS AN INSURED (SECTION II) is amended to include as an insured the person or organization shown in the Schedule [Hudson County, its agents, representatives & employees] but only with respect to liability arising out of `your work' for that insured by or for you. Id. at 851. 72 The Appellate Division reversed a lower court's grant of summary judgment for the insurance company and remanded with directions to enter summary judgment for Hudson County. Id. at 854. The court explained that though there were multiple reasonable interpretations of the policy language, New Jersey courts apply principles of liberal construction in examining insurance policy language: 73 [A]lthough insurance policies are contractual in nature, they are not ordinary agreements; they are contracts of adhesion and, as such, are subject to special rules of interpretation.... Consequently, we are directed to take a broad and liberal view so that the policy is construed in favor of the insured .... 74 ... [P]urchasers of insurance are entitled to the broad measure of protection necessary to fulfill their reasonable expectations.... And their policies should be construed liberally in their favor to the end that coverage is afforded to the full extent that any fair interpretation will allow .... 75 Id. at 852 (emphasis added) (citations and internal quotation marks omitted). 76 In light of this framework, the court concluded that the language of the endorsement extended to cover an injury to an employee of a subcontractor who visited the site where the general contractor's work was taking place. The court held that the subcontractor's employee's presence at the worksite, and the ensuing accident, was sufficiently connected to [the general contractor's] `work' for the County to constitute a `substantial nexus' between the contract and the contractor's `work' requiring [the insurer] to cover the loss. Id. 10 See also, e.g., Franklin Mut. Ins. Co. v. Security Indem. Ins. Co., 275 N.J.Super. 335, 646 A.2d 443, 446 (1994) (upholding grant of summary judgment for insurer of office building owner for defense and indemnity costs where office building owner was additional insured under insurance policy of restaurant in office building; and holding that a slip and fall accident on the steps of the restaurant was an event for which there was a substantial nexus between the occurrence and the use of the leased premises); Harrah's Atlantic City, Inc. v. Harleysville Ins. Co., 288 N.J.Super. 152, 671 A.2d 1122, 1125 (1996) (reversing trial court's judgment and holding that where store's insurance policy listed landlord, Harrah's Casino, as additional insured, landlord came within the policy's coverage where injured parties were hit by automobile driven by Harrah's parking valet, since the injured individuals had parked in Harrah's garage primarily to shop at [the store], and [w]hen they completed their shopping, they went directly toward the garage to retrieve the car and were injured in that process. Thus, Harrah's liability arose out of the risk generated by [the store's] business on the premises.). 77 Here, where the resident's underlying complaints alleged problems with the fire and smoke alarm systems, the work performed by T & R was squarely at issue in the complaints, and so Freddie Mac fell within the coverage of the Scottsdale policy. 78 Scottsdale argues that New Jersey case law mandates a fact-sensitive approach... to determine whether there is coverage. Scottsdale Br. at 26. In this case, Scottsdale asserts, The underwriting is on the basis of liability for the work of T & R, not on FHLMC's [ (Freddie Mac's) ] exposure for claims when a fire occurs on its premises. Surely not every fire at FHLMC would fall within the T & R policy.  Id. at 33 (emphasis in original). 79 New Jersey case law suggests, however, that claims against Freddie Mac for any fire at the apartment complex that alleged problems with the fire and smoke alarm systems or emergency lighting or exit signs would indeed trigger the policy; such claims would arise out of T & R's work. Indeed, in County of Hudson, the New Jersey Superior Court, Appellate Division, interpreted the equivalent policy language to cover a situation where the general contractor's relationship to the event was far more attenuated. The connection here between T & R's work on the fire and smoke alarm systems and the claims related to the February 1996 fire at the apartment building is without question closer than the nexus found to trigger coverage in County of Hudson. 80