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Personal Injury Claim by Contractor's Employee Excluded from Coverage under Property Owner's CGL Policy

On December 4, 2018, the Second Circuit issued a decision in American Empire Surplus Ins. Lines v. Colony Ins. Co., Case No. 17‐3799, holding that a city agency’s CGL policy did not cover a claim for injuries sustained by employees of a contractor hired by the agency. American Empire arose from a personal injury lawsuit filed against the New York City Housing Authority (NYCHA) by employees of a contractor (Technico) hired to remodel certain buildings owned by NYCHA. Technico’s insurance carrier (American Empire) defended NYCHA in the lawsuit and then filed a lawsuit seeking contribution from NYCHA’s liability carrier (Colony). NYCHA’s policy covered “bodily injury” caused by an “occurrence” arising from “Operations performed for [NYCHA] by the ‘contractor'.” (The defined term “contractor” meant Technico). However, an exclusion provided that there was no coverage for “bodily injury” sustained by “any contractor . . . or any of their ‘employees.’” American Empire argued that the undefined term “any contractor” used in the exclusion did not include Technico, the specific “contractor” identified in the policy. The Second Circuit rejected this argument, explaining:

As the district court concluded, the exclusion provides, in straightforward and unambiguous wording, that the policy does not provide coverage for bodily injury sustained by employees of “any contractor.” “Any contractor” must be read to have its plain meaning. The plain meaning of “any contractor” includes Technico, because Technico is defined in the policy as a “contractor” (in quotes). Technico does not lose its status as a contractor simply because it is also the defined “contractor” (in quotes). The presence of the word “any” before contractor supports the breadth of the exclusion. Because these lawsuits were filed by employees of a contractor, Technico, they are excluded under the plain terms of the policy.

Further, American Empire’s argument‐‐that “any contractor” does not include the defined “‘contractor’”‐‐is refuted by another contract provision. The “Other Insurance” clause provides: “[W]e will not seek contribution from any other insurance available to you [NYCHA] unless the other insurance is provided by a contractor other than the designated ‘contractor’. . .”. The explicit exclusion of the designated “‘contractor’” (Technico) in this provision reinforces the conclusion that the phrase “any contractor” (in the exclusion) includes the designated “‘contractor’”. If the parties wanted to exclude Technico from the policy exclusion, they would have done so explicitly, as they did elsewhere in the contract.

(Record citations omitted).

This decision illustrates that, although exclusions are construed narrowly in favor of coverage, the plain meaning of the policy governs where it is unambiguous.

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