The Texas Court of Appeals affirmed summary judgment in favor of an insurer based on the inapplicability of an additional insured endorsement. The case is Cont'l Cas. Co. v. Am. Safety Cas. Ins. Co., 365 S.W.3d 165 (Tex. Ct. App. 2012).
Williams Underground was a subcontractor for Traffic Systems Construction, Inc. on a road construction project. A Williams employee was injured by a third-party vehicle while working. He sued Williams, Traffic, and the vehicle driver for negligence. Traffic was insured by Continental Casualty Company, and Williams had a policy through American Safety Casualty Company.
Traffic requested coverage under the additional insured endorsement attached to the American Safety policy, but American Safety refused on the grounds that the underlying suit was either not covered or excluded by the American Safety policy. Continental defended Traffic in the underlying suit and ultimately settled with the injured employee for $250,000.
Continental subsequently sued American Safety for equitable contribution for its defense of Traffic and settlement in the underlying case. American Safety claimed they owed neither indemnity nor defense to Continental because coverage for additional insureds only applied to claims arising from the sole negligence of the named insured, Williams. American Safety sought summary judgment, and Continental filed for partial summary judgment. The lower court granted American Safety's motion after finding Williams, Traffic, the third-party driver, and the injured employee were all jointly responsible for the employee's injuries. Continental appealed.
The appellate court began with an examination of the additional insured endorsement on the American Safety policy issued to Williams. It specifically provided that neither the duty to defend nor the duty to indemnify would trigger for Traffic unless the underlying claim was based on "the actions or inactions of Williams." The endorsement also contained an explicit statement that American Safety was not obligated to "defend any insured, other than Williams, except when the sole allegation against that insured is vicarious liability for the sole negligence of Williams" (emphasis added). Therefore, said the court, American Safety was only obligated to defend Traffic if the underlying suit alleged vicarious liability against Traffic for the sole negligence of Williams.
Continental argued the underlying suit alleged Traffic was vicariously liable for the actions of its subcontractor, Williams. The court pointed out, however, that the injured employee had not alleged vicarious liability against Traffic. The underlying complaint alleged negligence against Traffic for failure to take reasonable precautions to provide a reasonably safe work environment. No question had been posed concerning whether or how much control Traffic had over the work performed by Williams. The lower court had found that both Traffic and Williams shared joint liability with the third-party driver and the injured employee for negligence related to the accident. Since the injured employee had not alleged vicarious liability against Traffic, and Traffic was found jointly, not solely, negligent in the underlying case, the additional insured endorsement was not triggered and American Safety owed neither indemnity nor defense to Traffic.
Summary judgment in favor of American Safety was affirmed.
Editor's Note: Some endorsements will contain broad language that provides coverage to additional insureds only for liability caused in whole or in part by the named insured for the underlying policy. Other endorsements, like the one at issue in this case, provide coverage only in specific situations. The additional insured endorsement on the policy for American Safety in this case had a narrow, specific scope: Coverage would only be provided to additional insureds if the additional insured, Traffic, was sued for vicarious liability for Williams's sole negligence. Since the lower court had ruled the injuries in the underlying case were caused partly by Williams's own negligence and partly by the negligence of other parties, Williams could not be solely negligent, and therefore coverage under the additional insured endorsement did not apply.
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