In this New York case, a man shot and killed a potentialassailant inside the man's home. The two had become involved in adispute relating to their business relationship. The man who wasshot weighed about 360 pounds and was much larger than the home'soccupant. He previously had attacked the occupant, injuring hisleg.

On the morning of the shooting, the large man and a companionappeared outside the home, hurling objects at it. They left, butthe large man returned with two companions. The occupant,anticipating a confrontation, locked his door and retrieved a .25caliber handgun from his bedroom.

The group burst into the home, and the large man began demandingmoney while pounding his fists on the kitchen table. The alarmedoccupant drew his pistol and demanded that the intruders leave. Thelarge man apparently laughed at the small size of the pistol, atwhich point the occupant withdrew to his bedroom and emerged with aloaded 12-gauge shotgun. He stood in his living room and againordered the intruders to leave. The large man started to leave,then turned to face the occupant. He told his companions to takeanything of value, and that he would meet them outside afterattending to some business. The large man advanced toward theoccupant, who warned him that he would shoot if he came any closer.When the large man was about a step away from the barrel of thegun, the occupant fired into the large man's abdomen. He died laterthat day.

The shooter was indicted for intentional murder and depravedindifference to murder. A jury acquitted him of both murder countsand of the lesser offenses of manslaughter in the first and seconddegrees.

The administrator of the deceased's estate commenced a wrongfuldeath action against the shooter. He alleged the large man's deathwas caused by the shooter's negligence. Specifically, the complaintalleged that the shooter's behavior “consisted of negligentlyplaying with a loaded shotgun; negligently pointing that shotgun atthe abdomen of the decedent; negligently discharging that shotguninto the decedent's abdomen; and engaging in unruly behavior…” In aseparate cause of action, the complaint alleged that the shooterintentionally shot the large man, causing his death. At hisexamination before trial, the shooter testified, “I knew the (shotfrom the) shotgun would injure (the deceased) because I had to stophim, but I did not anticipate it killing him.”

The shooter sought coverage under his homeowners policy. Theinsurer disclaimed coverage, explaining that the incident was notan “occurrence” within the meaning of the policy and that theinjury the shooter inflicted fell within the policy's exclusion for“expected or intended” injury.

After depositions, the insurer moved for summary judgment, andthe shooter sought a declaration that the insurer was required todefend and indemnify him in the underlying tort action.

The trial court denied the carrier's motion and declared that ithad a duty to defend the shooter in the wrongful death action. Thecourt found that the insurer failed to prove that the incident wasnot an occurrence covered by the policy or that the shooter'sactions were subject to the “expected or intended” exclusion. Thecourt also held that the insurer had a duty to defend because thenegligence allegations potentially could be proved at trial.

A New York appellate division court reversed the decision,concluding that since the shooter intentionally shot the decedent,his actions could not be considered an accident or “occurrence” andthus were not covered by the shooter's homeowners policy. The courtalso said the shooting fell within the policy exclusion for bodilyinjury “expected or intended” by the insured.

The shooter appealed that decision to the New York Court ofAppeals. It said that it is well established that an insurancecompany's duty to defend is broader than its duty to indemnify.Citing other decisions, the court said the duty to defend is“exceedingly broad” and an insurer will be called upon to provide adefense whenever the allegations of the complaint “suggest … areasonable possibility of coverage” (Continental Cas. Co. v.Rapid-American Corp., 80 NY2d 640, 648 [1993]). “If, liberallyconstrued, the claim is within the embrace of the policy, theinsurer must come forward to defend its insured no matter howgroundless, false or baseless the suit may be.” (Ruder & FinnInc. v. Sea-board Sur. Co., 52 NY2d 663, 670 [1981]).

The appeals court said the duty remains “even though factsoutside the four corners of (the) pleadings indicate that the claimmay be meritless or not covered” (Fitzpatrick v. Am. Honda MotorCo., Inc., 78 NY2d 61, 63 [1991]). “For this reason,” the courtsaid, “when a policy represents that it will provide the insuredwith a defense, we have said that it actually constitutes'litigation insurance' in addition to liability coverage.” Thus,the appeals court said, an insurer may be required to defend eventhough it may not be required to pay, once the litigation has runits course.

Citing another case, the court added that to deny a claim on thebasis of an exclusion, an insurer also must “demonstrate that theallegations of the complaint cast that pleading solely and entirelywithin the pol-icy exclusions, and, further, that the allegations,in toto, are subject to no other interpretation.”

The appeals court said an examination of the wrongful deathcomplaint led to the conclusion that the shooter's claim fordefense was covered by the policy. Among other things, the courtnoted, the complaint against the shooter alleged that henegligently caused the decedent's death. If such allegations couldbe proved, the court said, they would fall within the scope of thepolicy as a covered occurrence.

The policy defined an “occurrence” as an “accident,” a term thecourt previously defined as pertaining to “not only … anunintentional or unexpected event which, if it occurs, willforeseeably bring on death, but equally to an intentional orexpected event which unintentionally or unexpectedly has thatresult.”

Thus, the appeals court said, if the shooter accidentally ornegligently caused the decedent's death, such an event may beconsidered an “occurrence” within the meaning of the policy andcoverage would apply. The court acknowledged that the fact-finderin the underlying action may ultimately reject the notion that theshooter negligently caused the decedent's death, given the evidenceof the shooter's intentional behavior, but that was immaterial tothe issue raised here: the insurer's duty to defend an insuredalleged to have caused injury through negligence.

Since an allegation of negligence implies an unintentional orunexpected event, the court said the insurer necessarily failed todemonstrate that the allegations against the insured could fallonly within the “expected or intended” exclusion.

The appeals court ruled that the carrier was required to defendthe insured in the underlying wrongful death action. In light ofthis disposition, the appeals court said, it was unnecessary toaddress the remaining argument: Whether acts of self-defense areintentional acts, precluded from coverage under a homeownerspolicy. Any duty to indemnify, it said, would be for the trialcourt to determine.

Automobile Insurance Co. of Hartford v. Cook, No. 78 (N.Y.06/08/ 2006) 2006 NY Slip Op 04456, 2006. NY. 0005884(www.versuslaw.com).

Insured cannot rely on certificate as proof ofadditional-insured status

An electric co-op and a contractor entered into a writtencontract calling for the contractor to remove ash and sludge fromone of the co-op's holding ponds. The contract specificallyrequired the contractor to provide evidence to the co-op that thecontractor had procured liability insurance to cover the removalprocedure.

According to the co-op, the contractor agreed to have the co-opnamed as an additional insured on the contractor's liabilityinsurance policy, but the contract itself didn't contain thatrequirement. The co-op said that on two previous occasions theco-op had requested such status and that the contractor hadprovided evidence of it. The co-op said the contractor hadforwarded the co-op's written requests for additional-insuredstatus to the contractor's insurance broker, who then sent theco-op certificates of insurance that listed the co-op as anadditional insured on the contractor's liability policies.

Later that year, a subcontractor working for the contractor onthe holding-pond project was killed. The executor of thesubcontractor's estate filed a wrongful-death action against theco-op. The co-op asked the contractor's broker for a certificate ofinsurance showing the co-op as an additional insured on thecontractor's current liability policy. The contractor latertestified that the broker issued the requested certificate, onwhich the co-op was shown as an additional insured, without theauthorization of the contractor or its insurer.

The co-op demanded that the contractor and its carrier defendand indemnify it in the wrongful-death action. Initially, theinsurance company said it would, based on the certificate. Later,however, it refused to do so, maintaining that the co-op never hadbeen made an additional insured.

The co-op and its own insurers settled the wrongful-deathaction, then sued the contractor, its insurer and its broker formisrepresentation and breach of contract. The contractor moved fora summary judgment on the claims, which a trial court granted.

In their appeal, the co-op and its insurers said they presentedsubstantial evidenceshowing that the contractor in the past hadfalsely represented to the co-op that it had been named as anadditional insured on the contractor's policies. The plaintiffssaid those misrepresentations induced the co-op to enter into theholding-pond contract. They said the misrepresentations werecontained in the certificates of insurance the contractor's brokerhad on two occasions sent to the co-op, which showed it to be anadditional insured on the contractor's policies.

The contractor argued that, even assuming it could be heldliable for the misrepresentations of its insurance broker, theplaintiffs had not demonstrated that the co-op reasonably relied onthose misrepresentations in awarding the contractor theholding-pond contract. (Reasonable reliance is an essential elementof a claim for misrepresentation.) The contractor pointed out thatboth of the certificates the plaintiffs cited bore the followingstatement:

“This certificate is issued as a matter of information only andconfers no rights upon the certificate holder. This certificatedoes not amend, extend or alter the coverage afforded by thepolicies below.”

One of the certificates entered into the record did not includethe reverse side. The other did, however, and it included thefollowing statement:

“IMPORTANT: If the certificate holder is an ADDITIONAL INSURED,the policy(ies) must be endorsed. A statement on this certificatedoes not confer rights to the certificate holder in lieu of suchendorsement(s). … DISCLAIMER: The Certificate of Insurance on thereverse side of this form does not constitute a contract betweenthe issuing insurer(s), authorized representative or producer, andthe certificate holder, nor does it affirmatively or negativelyamend, extend or alter the coverage afforded by the policies listedthereon.”

The contractor noted that in a similar case, a federal districtcourt said the plaintiff could not reasonably rely on an insurancecertificate for proof that it had additional-insured status underthe defendant's liability policy.

The contractor cited other cases stating that “a claim formisrepresentation cannot stand when the party asserting the claimis legally charged with knowledge of the true facts,” that “aninsured has a duty to read the insurance policy and is charged withknowledge of its provisions” and that “under Texas law, aninsurance agent generally has no duty to explain policy terms to aninsured.”

In another cited case, a court concluded that a client claimingto be an additional insured under another entity's policy “shouldbe held to the same obligation as a named insured to review apolicy of insurance on which it seeks to rely, and its reliancesolely on the agent's certificate of insurance is notreasonable.”

The contractor also cited material in a construction law journalstating the following: “”Where an entity requires another toprocure insurance naming it an additional insured, that partyshould not rely on a mere certificate of insurance, but shouldinsist on a copy of the policy. A certificate of insurance is notpart of the policy-if it states that there is coverage but thepolicy does not, the policy controls.”

In the case at hand, the appeals court found the above-citedauthority to be “persuasive.” The co-op and its insurers counteredthat, unlike in the cited cases, there was evidence that the co-opcould not have reviewed the contractor's insurance policy, had itattempted to do so. They pointed to the broker's depositiontestimony that it would not have given the co-op a copy of thecontractor's policy because “it's none of (the co-op's)business.”

However, the plaintiffs didn't argue that the co-op actuallytried to obtain a copy of the policy. Nor did the plaintiffs pointto any testimony indicating that the contractor's insurer or thecontractor would have refused the co-op access to the policy, handthe co-op requested it.

Consequently, the appeals court held that the co-op and itsinsurers had not presented substantial evidence indicating that itwas reasonable for the co-op to rely on the certificates ofinsurance indicating that it was an additional insured. It said thetrial court did not err in entering a summary judgment for thecontractor on the misrepresentation claim.

In regard to the breach-of-contract claim, the plaintiffscontended that the co-op offered to “do business” with thecontractor if it would maintain insurance naming the co-op as anadditional insured. They said the contractor accepted the offer byasking its agency to obtain insurance naming the co-op as anadditional insured.

The written contract governing the holding-pond project,however, did not mention such a condition. It only enumerated thecoverages and limits the contractor was to maintain and requiredthe contactor to provide a certificate of insurance showing theywere in place. The contract did not mention that the contractor wasto have the co-op named an additional insured on the policies.

The plaintiffs did not dispute this. Nor did they say they weretrying to al-ter the terms of the written holding-pond contractwith evidence of a prior or contemporaneous oral agreement, or thatthe parties did not intend the written contract to be fullyintegrated (i.e., to be the entirety of the agreement). Rather, theplaintiffs argued that the contractor's oral agreement to maintaininsurance naming the co-op as an additional insured while “doingbusiness” with the co-op was part of a contract separate from thewritten holding-pond contract.

The plaintiffs argued that a written contract'sintegration/merger clause “does not bar or invalidate a previous orcontemporaneous contract if the agreement is not inconsistent withthe integrated contract and is made for separateconsideration.”

The appeals court, however, cited a previous case in which itsaid, “When a written instrument shows that it contains theobligation of both parties to it, that alone is evidence of theterms of the contract. It is only when the instrument shows that itdoes not contain all the terms of the contract as to both partiesto it that evidence may be offered to show further stipulation thanthose expressed ….”

The court noted that the written contract contained a provisiondealing with the contractor's obligation to obtain insurance, butit didn't require the contractor to name the co-op as an additionalinsured. Since the contract “dealt expressly with the subjectmatter of the alleged collateral oral agreement,” the appeals courtheld that “the alleged collateral oral agreement was one theparties would naturally have included in the writtenagreement.”

“We hold as a matter of law that no agreement existed requiring(the contractor) to maintain insurance on which (the co-op) wasnamed as an additional insured during work on the holding-pondcontract,” the appeals court said. It said the trial court did noterr in entering a summary judgment for the contractor on thebreach-of-contract claim.

The plaintiffs argued that the contractor voluntarily assumed aduty to maintain insurance naming the co-op as an additionalinsured. The appeals court, however, reiterated that the fin-alexpression of the parties' intent with respect to the contractor'sinsurance responsibilities for the holding-pond project wascontained in the written contract. Once the contractor entered intothe contract, it abandoned any duty it might have voluntarilyassumed up to that point. There was no evidence, said the court,that the contractor voluntarily assumed such a duty after thecontract was signed. The trial court's findings were upheld.

Alabama Electric Cooperative Inc. v. Bailey's ConstructionCo., Inc., No. 1050433 (Ala. 07/28/2006) 2006.AL. 0000363(www.versuslaw.com).

Don Renau is a retired agent and practicing attorney inLouisville, Ky. As an attorney, he consults on a variety of issues,including business formation and estate planning, for agencies andbusinesses in Kentucky. He can be reached at [email protected] orby fax at (502) 805-0702.