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In the 1980s, the Police sang about synchronicity: “Effectwithout a cause…Sub-atomic laws, scientific pause….”

Psychologist Carl Jung offered a better explanation of theconcept, stating that synchronicity describes events that aremeaningful coincidences if they occur without a causalrelationship.

In determining coverage for insurance disputesover the wording “arising out of,” however, synchronicity won'tdo. As the following recent court decisions demonstrate, there mustbe a causal relationship between the loss and the risk from whichit arises.

Trip and fall

For example, in Chappaqua Cent. School Dist. v. PhiladelphiaIndem. Ins. Co., [148 A.D.3d 980 (2017)], a New York courtruled on a case involving personal injury and leased premises.

Patricia Brunsting was employed by Chappaqua Children'sWorkshop, Inc., which operated an after-school program in thecafeteria of the Robert E. Bell Middle School that it leased fromthe owner, the Chappaqua Central School District. She was injuredwhen she tripped and fell while descending an exterior staircasefrom the school to the parking lot. The Workshop had a liabilitypolicy with Philadelphia Indemnity.

Philadelphia claimed there was no coverage for the schooldistrict, which was an additional insured on the Workshop's policy,because Brunsting was not injured on the leased property and thestairway was not necessarily incidental to the use of the leasedpremises.

The school district claimed that the wording on the policycovering “liability arising out of the ownership, maintenance oruse of that part of the premises leased or rented to you” includedthe broad, comprehensive term “arising out of.”

The court stated that the term “arising out of” requires only acausal relationship between the injury and the risk for whichinsurance coverage is provided in determining coverage for anadditional insured. Because the Workshop rented only the cafeteria,the court ruled that there was no causal relationship between theinjury and the leased premises, so no coverage applied.

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When determining coverage for claims, courts look at thecausal relationship between the risk and the loss. (Photo:Shutterstock)

Business exclusion

Likewise, the court found no coverage applied in VermontMutual Ins. Co. v. Samson (D. Conn. March 20, 2017),but this time because there was a causal relationship between theinjury and a policy exclusion.

Vermont issued a homeowners policy to Paul and Debra Samson withan exclusion for bodily injury arising out of or in connection witha business. The policy carried an endorsement that also excludedliability coverage for business activities of the insureds. Theinsureds stated in the insurance application that they did notconduct business on the premises or keep animals on thepremises.

Matthew Herbert alleged that when he went to pick up his childat the Samsons' daycare, their dog bit him and caused seriousinjuries. He sought coverage for his injuries, for which a courtawarded him $125,000, from Vermont Mutual.

The parties did not agree on whether the injury arose out of orin connection with the daycare business.

The court stated that Connecticut interprets the “arising outof” language broadly, and “the nexus between an accident, loss orinjury is found to exist when it 'was connected with,' 'had itsorigins in,' 'grew out of,' 'flowed from,' or 'was incident to' theexcluded use or activity.” Direct proximate causal connection isnot required, but there must be some causal relation or connection.In this instance, the court found that the injury was incident to abusiness activity in that Herbert was invited into the home to pickup his child from the business, and the policy excludedcoverage.

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Under New York law, if a loss involves a named insured'semployee who is injured while working for the employer, there iscoverage. (Photo: Shutterstock)

Workplace injury

In Arch Specialty Ins. Co. v. Farm Family Cas. Ins. Co.(S.D. N.Y. March 3, 2017), the court found that coverage did existdue to the causal relationship between an injury and the injuryoccurring at the workplace.

Mastercraft had a contract with Mega, a general contractor,making Mastercraft the masonry subcontractor at the constructionsite, stating that Mastercraft assumed entire responsibility andliability for any and all damages for injury or damage arising outof or occurring in connection with the execution of all the masonrywork as per the scope of work attached to the contract.

Mastercraft was required to obtain and carry commercial generalliability (CGL) coverage naming Mega and the other indemnitees asadditional insureds. Mastercraft obtained the policy from FarmFamily.

Joseph Giampa, an employee of Mastercraft Masonry, was injuredon the job site and sued his employer for negligence and violationsof New York labor law and Industrial Code rules. Farm Family arguedthat Giampa had not officially started working at the time of theinjury but was walking to the site before his scheduled start time,so he was not injured as a result of his actual employment.

The court, however, said that it is clear that employees mustenter and leave the site in connection with their shifts. The courtpointed out that New York courts have held that “arising out of” isordinarily understood to mean incident to, having connection with,or originating from — there must be some causal relationshipbetween the injury and the risk. The court found that under NewYork law, if a loss involves a named insured's employee who isinjured while performing the named insured's work, the connectionis sufficient to trigger an additional insured arising out ofoperations endorsement, regardless of fault.

The court found that the parties were additional insureds on thepolicy and that Farm Family was obligated to defend and indemnifythem with respect to Giampa's underlying suit.

The “arising out of” language can cause some headaches ininsurance coverage disputes. Whether a loss is covered hinges onmore than a chance, synchronistic coincidence, but it must show acausal relationship between the risk and the loss.

Susan Massmann, CPCU, is managing editor of electronicpublications for the reference division of ALM, the parent companyof PropertyCasualty360.com. Email her at [email protected].