Insurance Policy Covering Injury Caused by Insured Requires Proximate Causation

On June 6, 2017, the Court of Appeals issued a decision in Burlington Insurance Co. v. NYC Transit Authority, 2017 NY Slip Op. 04384, holding that "where an insurance policy is restricted to liability for any bodily injury 'caused, in whole or in part' by the 'acts or omissions' of the named insured, the coverage applies to injury proximately caused by the named insured."

At issue in Burlington Insurance Co. was the interpretation of a commercial general liability policy issued to a contractor, which named the New York City Transit Authority, the MTA and the City of New York as additional insureds, but "only with respect to liability for 'bodily injury,' 'property damage' or 'personal and advertising injury' caused, in whole or in part, by" the named insured. The insurance company refused coverage to NYCTA and the MTA for claims arising from an accident for which the named insured was not legally liable. The Court of Appeals, in a decision written by Judge Rivera, reversed the First Department's holding that coverage was triggered, explaining:

[T]he Burlington policy endorsement states that the injury must be "caused, in whole or in part" by BSI. These words require proximate causation since "but for" causation cannot be partial. An event may not be wholly or partially connected to a result, it either is or it is not connected. Stated differently, although there may be more than one proximate cause, all "but for" causes bear some connection to the outcome even if all do not lead to legal liability. Thus, these words — "in whole or in part" — can only modify proximate cause. Defendants' interpretation would render this modification superfluous, in contravention of the rule that requires us to interpret the language in a manner that gives full force and effect to the policy language and does not render a portion of the provision meaningless . . . .

The endorsement's reference to "liability" caused by BSI's acts or omissions further confirms that coverage for additional insureds is limited to situations where the insured is the proximate cause of the injury. Liability exists precisely where there is fault. . . . That the policy extends coverage to an additional insured "only with respect to liability" establishes that the "caused, in whole or in part, by" language limits coverage for damages resulting from [the named insured's] negligence or some other actionable "act or omission."

(Citations omitted).

Judge Fahey dissented in a decision joined by Judge Stein. The dissenters found no basis for interpreting "caused, in whole or in part" as limited by the legal concept of proximate cause, since "[i]nsurance contracts are to be viewed through the eyes of the average consumer and deciphered not through 'legalese,' but by means of plain and common speech."