While working at the site, a U.S. Drywall employee, Thiago Almeida, allegedly slipped on ice, fell down a staircase, and was injured.

Mr. Almeida sued Bacon, alleging that Bacon's negligence had caused his injuries.

Thereafter, Bacon sought to recover indemnity and defense costs from Arbella. Bacon alleged that, because the Arbella policy named Bacon as an additional insured, Bacon was entitled to indemnification. Arbella, however, took the position that, based on the additional insured endorsement, Bacon was an additional insured only with respect to liability for bodily injury caused by the insured subcontractor's acts or omissions.

Bacon asked a court to declare that Arbella was contractually obligated to indemnify and defend Bacon as an additional insured with respect to Mr. Almeida's action.

The trial court granted summary judgment in favor of Arbella, and the dispute reached the Rhode Island Supreme Court.

The Arbella Policy

The Arbella policy's additional insured endorsement provided:

Who is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement, executed prior to an “occurrence”, that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability for “bodily injury”; “property damage” or “personal and advertising injury” caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf;

in the performance of your ongoing operations for the additional insured.

The Arbella policy provided that the terms “you” and “your,” as used throughout the policy, exclusively referred to the named insured, U.S. Drywall. The additional insured endorsement listed Bacon as an additional insured and not as the named insured.

The Rhode Island Supreme Court's Decision

The court affirmed, holding that that the additional insured endorsement provision in the Arbella policy contained “limiting, fault-based language” that restricted Bacon's entitlement to coverage to those situations where liability was attributable, at least in part, to the negligence of U.S. Drywall, the named insured.

The court reasoned that the endorsement contained a “significant limitation” on the availability of coverage in that it provided that an entity was an additional insured “only with respect to liability for 'bodily injury' . . . caused, in whole or in part, by: (1) [U.S. Drywall's] acts or omissions; or (2) The acts or omissions of those acting on [U.S. Drywall's] behalf[.]” Therefore, the court reasoned, Bacon was entitled to coverage as an additional insured only where liability was caused by U.S. Drywall's acts or omissions.

Because there were no allegations in Mr. Almeida's complaint that U.S. Drywall's acts or omissions had caused Almeida's injury, Arbella had no duty to defend Bacon in Mr. Almeida's action, the court concluded.

The case is Bacon Construction Co. v. Arbella Protection Ins. Co., No. 2017-350 (R.I. June 4, 2019). Attorneys involved include: For Plaintiff: Peter H. Carroll, Esq. For Defendant: Lisa M. DeMari, Esq.