The Ancient “But For” Test Controls Coverage Dispute

Barry Zalma | Zalma on Insurance

Additional Insured Endorsement Insures Lessor for Slip and Fall in Parking Lot Serving Property Leased

When the use of the property as a gas station / convenience store depended on customers’ ability to ingress and egress through the attached parking lot – even though the lessees’ lease did not extend to the parking lot where the plaintiff fell but for the use of the parking lot the gas station/convenience store could not operate. In Republic Franklin Insurance Company, a/s/o Paul H. Lamb, t/a Lamb’s Auto Service Coatesville Shell v. Brethren Mutual Insurance Company, No. 20-1431, United States Court Of Appeals For The Third Circuit (October 6, 2020) was asked to determine whether coverage applied for the additional insured even though the lessees policy did not include the parking lot.


When a customer slipped-and-fell in a gas station parking lot in Honey Brook, Pennsylvania an insurance coverage dispute was submitted to the Third Circuit. The owner insured the properties through Republic Franklin Insurance Company. Lamb leased the gas station – but not the parking lot – to Dharmesh and Popat Bhalala, who co-owned Shree Ram Enterprises, LLC, which operated the gas station and associated convenience store. Shree Ram insured the gas station / convenience store through a policy with Brethren Mutual Insurance Company. That policy included an endorsement naming Lamb as an additional insured, subject to a critical limitation: Lamb was covered only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to Shree Ram.

After both insurers (protecting their insureds and agreeing to resolve the coverage dispute later) agreed to pay for the slip-and-fall injuries, Republic Franklin sued Brethren Mutual for reimbursement of its $175,000 payment to the injured customer on Lamb’s behalf. Republic Franklin claimed that Brethren Mutual owed that sum due to Lamb’s status as an additional insured on Shree Ram’s policy and Republic Franklin’s motion was granted.


The sole issue concerned the scope of coverage provided by the additional insured endorsement. In relevant part, that document provides coverage for liability arising out of the use of the leased premises, which Shree Ram operated as a gas station / convenience store. Under Pennsylvania law the phrase “arising out of” means causally connected with, not proximately caused by, and but for causation, i.e., a cause and result relationship, is enough to satisfy this provision. With that understanding, the question becomes whether the use of the leased premises was a “but for” cause of the customer’s slip-and-fall.

The customer slipped and fell in the parking lot after exiting the store. And while not every incidental factor that arguably contributes to an accident is a “but for” cause in the legal sense the customer’s patronage of the store and her egress to the parking lot share more than an incidental causal nexus.

Because the customer would not have slipped in the parking lot but for her patronage of the gas station and store, her injuries arose out of the use of the leased premises. Therefore, the Third Circuit concluded that the incident falls within the coverage provided by the additional insured endorsement, and the District Court’s judgment in favor of Republic Franklin was affirmed.


A lease of a gas station and convenience store without a parking lot is useless to the lessee. The fact that the parking lot existed and that the lessor did not demand the operator of the gas station to pay rent for it, understanding that it was used for the customers of the convenience store, and since the injury would not have occurred but for the existence of and use of the convenience store. Republic Franklin should be honored for protecting the insured and then, after the insureds were protected, seeking reimbursement and resolution of the coverage dispute.

Connecticut Supreme Court Finds Duty to Defend When Case Law is Uncertain

Eric B. Hermanson and Austin D. Moody | White and Williams

The Connecticut Supreme Court recently addressed whether an insurer has a duty to defend when faced with legal uncertainty as to whether coverage is owed: for example, when there is no Connecticut case law on point, and courts outside of the state have reached conflicting decisions.

The Court suggested that an insurer, in these circumstances, should defend the insured, and should seek a declaratory judgment from a court as to whether coverage is owed.

The issue in Nash St., LLC v. Main St. Am. Assurance Co.,[1] arose out of a home collapse in Milford, Connecticut. The owner of the home (Nash) hired a contractor (New Beginnings) to renovate the home. New Beginnings, in turn, retained a subcontractor to lift the house and to do concrete work on the foundation. While the subcontractor was lifting the house, the house shifted off the supporting cribbing and collapsed.

Nash sued New Beginnings, which tendered to its insurer (Main Street), which denied coverage. Main Street based its coverage denial on two exclusions in its policy. The first exclusion barred coverage for property damage to “[t]hat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the ‘property damage’ arises out of those operations . . . .”. The second exclusion barred coverage for property damage to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”[2]

Following Main Street’s refusal to defend, Nash obtained a default judgment against New Beginnings. When the judgment went unsatisfied, Nash brought a lawsuit against Main Street directly. The trial court – agreeing with Main Street’s position – found the exclusions barred any duty to defend. But, on appeal, the Connecticut Supreme Court reversed, and found a duty to defend had been owed.

In so ruling, the Court made clear that it was not opining on whether the exclusions actually precluded coverage. Indeed, the Court stated that it was not required “to determine conclusively what those exclusions mean.” Instead, the Court noted that New Beginnings’ tender gave rise to uncertainty as to coverage under Connecticut law; and it said this legal uncertainty was sufficient to trigger Main Street’s duty to defend.

Discussing the issue further, the Court noted that uncertainties as to coverage can be either factual or legal. A factual uncertainty exists when it is unclear from the face of a complaint whether the allegations fall within coverage. A legal uncertainty commonly occurs when policy language is ambiguous in application to the specific factual scenario at issue. But, extending this principle, the Court found legal uncertainty also exists in a second scenario: when there is a split of authority in other jurisdictions as to the meaning of a particular policy provision, and there is no relevant appellate authority within Connecticut.

This case presented a legal uncertainty of this type:

  • In some states, such as Massachusetts, courts broadly construe the phrase “that particular part,” finding – in the case of a general contractor – that it refers to an entire structure the insured is working on, and bars coverage for damage to any part of that structure.
  • In other states, courts construe the exclusion more narrowly. In these states, a court might find, for example, that the phrase “that particular part” only referred only to the foundation the subcontractor was hired to repair, and did not refer to (or bar coverage for damage to) the other parts of the home that was being lifted.

Faced with this split of authority – and absent any Connecticut appellate authority on point – the court found a legal uncertainty as to the applicability of these exclusions, and concluded that Main Street was required to defend New Beginnings.

In the future, the Court suggested, insurers faced with a legal uncertainty of this type should consider offering defense under reservation of rights, and pursuing a declaratory judgment action to try to resolve the proper construction of the disputed policy language.

[1] No. 20389, 2020 Conn. LEXIS 197 (Sep. 1, 2020).

[2] Under the standard CGL Policy, these are exclusions j (5) and (6). However, under this policy, they were exclusions k (5) and (6).

Snapchat This! That Little Green Card is Pretty Important Says One Court

Matthew DeVries | Best Practices Construction Law

We live in a world of e-mails, IMs, texts, Snapchats, TikToks, Instagrams and the occasional fax.  Although information is transmitted instantaneously in today’s environment, proof of receipt of that information (often called “Notice”) remains subject to some very strict rules imposed by contract, case law or statute.

Notice of Claims.  In a transportation case involving a personal injury, Department of Transportation v. Jones, the Court of Appeals of Georgia explained the importance of strict compliance with certain notice provisions.  The plaintiff was injured in a single-car accident on State Route 42 and he sued the Georgia Department of Transportation (“GDOT”). The plaintiff claimed that GDOT’s improper maintenance of the roadway led to an accumulation of water, which caused his truck to hydroplane into a tree, severely injuring him.  GDOT filed a motion to dismiss, arguing that the plaintiff failed to strictly comply with the notice provisions of the Georgia Tort Claims Act (“GTCA”).  The trial court denied that motion and the Court of Appeals reversed.

The Green Card.  The GTCA requires that notice of the claim be sent to “the Risk Management Division of the Department of Administrative Services.”  At the hearing, the plaintiff presented the following evidence: (a) the notice letter; (b) the green return receipt card sent to the Commissioner of GDOT; (c) a response letter from the Risk Management Division acknowledging receipt of the notice letter; and (d) a U.S. Postal Service tracking document showing that “something was sent by certified mail to the Department of Administrative Services.

The Holding. Despite this evidence, the Court held that the plaintiff failed to strictly comply with the statute because there was no proof by the plaintiff that the letter was sent by certified mail to the Risk Management Division.  The green card submitted showed proof of delivery to the Commissioner of GDOT.  The attorney for GDOT admitted in court that the notice letter received by the Commissioner of GDOT was then sent internally by the Commissioner’s office to the Risk Management Division, which then sent the acknowledgement letter.  Nevertheless, the plaintiff did not comply with the statute requiring that he sent notice of the claim to the Risk Management Division.

So What? While this may seem like a hyper-technical application of the rule, that’s precisely what “strict construction” means according to one court in George.  Whether you are contractor, developer, specialty subcontractor, or professional service provider in the construction industry, the real lesson learned is to read the express terms of any applicable contract or statute when a dispute arises, and follow both “the letter and the spirit” of the law.

Insurance Policies and Indemnity Provisions Are Not the Same

Garret Murai | California Construction Law Blog

Just because you own a pair of Air Jordans doesn’t make you Michael Jordan. In the next case, Carter v. Pulte Home Corporation, Case No. A154757 (July 23, 2020), the 1st District Court of Appeal denied an insurance carrier’s equitable subrogation claim explaining that an insurer’s obligations under its insurance policy are not the same as an idemnitee’s obligations under an indemnity provision. Or, as aptly put by the Court of Appeal, while a “subrogated insurer is said to ‘stand in the shoes’ of its insured, because it has no greater rights than the insured. Here . . . [the insurer] is seeking to stand in a different, more advantageous set of shoes.” 

Carter v. Pulte Home Corporation

Pulte Home Corporation was sued for construction defects by 38 homeowners in two housing developments. Various subcontractors had worked on the projects, but under their subcontracts, each subcontractor agreed to indemnify Pulte from and against “all liability, claims, judgments, suits, or demands for damages to persons or property arising out of, resulting from, or relating to Contractor’s performance of work under the Agreement (‘Claims’) unless such Claims have been specifically determined by the trier of fact to be the sole negligence of Pulte . . . ”

Pulte tendered the claim to its subcontractors and Travelers Property Casualty Company of America, the insured for four of the subcontractors, accepted the tender under its policies. Insurance carriers for seven subcontractors, however, refused to accept Pulte’s defense claiming that their policies did not require that they indemnify Pulte.

Thereafter, Travelers filed a complaint in intervention against the seven subcontractors and their insurers for declaratory relief, equitable subrogation, equitable indemnity and contractual subrogation. Travelers later dismissed each of its causes of action except its claim for equitable subrogation.

The homeowners’ claim against Pulte ultimately settled with Travelers having paid $320,491.82 for Pulte’s defense. Travelers later recovered $164,400 from other subcontractors, but as to the balance of $156,091.82, the seven subcontractors and their insurers refused to reimburse Travelers, and the case went to trial.

At trial, Travelers took the position that the seven subcontractors and their insurers were “jointly and severally liable” for the $156,091.82 balance in defense costs. In other words, each of the seven subcontractors and their insurers were responsible for the entirety of the $156,091 balance in defense costs irrespective of their actual proportionate responsibility of allegedly defective work.

In line with the position Travelers took at trial, Travelers filed a motion in limine to exclude all evidence or argument suggesting that damages should be allocated or apportioned among the seven subcontractors in proportion to their allegedly defective work. This motion was granted by the trial court. In addition, Travelers filed, and the trial court granted, a motion in limine excluding all evidence or argument regarding whether the work of the seven subcontractors was defective or caused damage.

During the trial, the evidence showed that there was considerable variation in the number of homes each of the seven subcontractors worked on. Two of the seven subcontractors worked on each of 38 homes, another worked on 30 of the 38 homes, two worked on 23 of the 38 homes, and the remaining two worked on only six or eight of the 38 homes.

Following the presentation of evidence including closing argument, the court found that Travelers had failed to prove its equitable subrogation claim, by failing to carry its burden on three of the eight elements necessary to prove equitable subrogation.

Travelers appealed.

The Appeal

On appeal, Travelers argued that the trial court essentially “led it astray” by granting its two motions in limine seeking to exclude evidence or argument that damages should be allocated or apportioned in proportion to the seven subcontractor’s allegedly defective work and to exclude evidence or argument regarding whether the work of the seven subcontractors was defective or caused damage.

Relying on the trial court record, the Court of Appeals found Traveler’s argument on appeal to be “untenable,” finding that while Travelers chose to frame its case as an “all or nothing” joint and several liability claim, nothing precluded the seven subcontractors to challenge the premise of Traveler’s assertion as framed, and nothing precluded the trial court from rendering a decision on the subcontractor’s challenge to this assertion.

As to the three elements that the trial court found that Travelers had failed to carry its burden of proof on, the Court of Appeal explained that the eight essential elements of an insurer’s cause of action for equitable subrogation are:

  1. The insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer;
  2. The claimed loss was one for which the insurer was not primarily liable;
  3. The insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable;
  4. The insurer has paid the claim of its insured to protect its own interest and not as a volunteer;
  5. The insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer;
  6. The insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends;
  7. Justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and
  8. The insurer’s damages are in a liquidated sum, generally the amount paid to the insured.

In this instance, explained the Court of Appeal, the trial court found that Travelers had failed to satisfy its burden on three of the eight elements necessary to prove equitable subrogation, namely, that: (1) the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; (2) Justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and (3) The insurer’s damages are in a liquidated sum, generally the amount paid to the insured.

The Subcontractors Were Not “Primarily Liable” for the Defense Costs Travelers Paid to Pulte

As to whether Travelers had met its burden of showing that it had compensated the insured (Pulte) in whole or in part for the same loss for which defendant (the seven subcontractors) were “primarily liable,” The Court of Appeal held that while Travelers (on behalf of its insured subcontractors) may have reimbursed Pulte for its defense costs, it does not follow the the seven subcontractors were “primarily liable” for the defense costs Travelers reimbursed to Pulte, since the  subcontractors worked on different houses and each of the subcontractors were only obligated contractually to defend Pulte with respect to claims involving their respective “performance of work.”

Importantly, the Court of Appeal drew a distinction between an insurer’s obligation to defend an insured even if claims only potentially involve the scope of work of its insured, which is based on policy considerations, as opposed to a subcontractor’s obligation to defend a general contractor under an indemnity provision, which is based on contract. And, here, under the indemnity provision contained in the subcontractors’ subcontracts with Pulte, the subcontractors only agreed to defend Pulte for claims arising from their respective “performance of work.”

The Subcontractors Were Not in an Equitable Position That Was Inferior to That of Travelers

This distinction, between “policy” considerations when it comes to an insurer’s obligation to defend an insured, and a subcontractor indemitor’s obligation to defend a general contractor indemnitee under a “contractual” indemnity provision, also, held the Court, supported the trial court’s finding that Travelers had failed to show that justice required that the loss (Travelers’ payment of Pulte’s defense costs) be entirely shifted from Travelers to the seven subcontractors because their equitable positions were inferior to that of Travelers.

While noting that “there is no facile formula for determining superiority of equities,” the Court of Appeal noted that cases examining the issue had found that an insurer in a “superior position” generally involved a situation where the insurer’s insured contractually agreed to indemnify another, and that the party in the “inferior position” usually involved a party who both contractually agreed to defend the insurer’s insured and who was also performing in whole or in part the work agreed to be performed by the insurer’s insured. In other words, the typical case where a general contractor subcontracts its scope of work in whole or in part to a subcontractor. In such a situation, the general contractor’s insurer would be in the “superior position,” and the subcontractor would be in the “inferior position” because, while the general contractor agreed to indemnify the project owner, the work alleged to be defective was performed by the subcontractor:

Significantly, Travelers is seeking to shift to respondents costs for defending Pulte against claims unrelated to the scope of respondents’ work—claims for which respondents did not promise to indemnify and defend Pulte. Respondents’ failure to comply with their contractual obligations to indemnify and defend Pulte for claims arising from their own work could not make them liable for losses due to the work of other independent subcontractors. Equitable subrogation allows a loss to be shifted from one who was legally liable to another who is more responsible for the same loss. Here, Travelers is trying to shift the loss jointly and severally to respondents who were each liable for only a portion of the total loss.

Finally, as to the trial court’s finding that Travelers had failed to carry its burden that Travelers’ damages were in liquidated sum, the Court of Appeal held that its holding on the two elements of equitable subrogation made it unnecessary to consider this third element.


So, there you have it. An insurer’s obligations under an insurance policy is different than an indemnitee’s obligations under an indemnity provision. While one is based on policy consideration the other is based on contract. And while both can be broad, they’re not the same.

Federal Court Holds That Other Insurance Analysis Is Unnecessary If Policies Cover Different Risks

Craig Rokuson | Traub Lieberman

In Greater Mutual Insurance Company v. Continental Casualty Company, 2020 WL 5370419 (S.D.N.Y. September 8, 2020), the United States District Court for the Southern District of New York had occasion to consider the “other insurance” provisions of a commercial general liability policy, issued by Greater Mutual Insurance Company (“GNY”), and a directors and officers (“D&O”) policy, issued by Continental, to the same insured. The GNY policy covered, inter alia, property damage caused by an occurrence, as well as “personal advertising injury,” defined to include “[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” The Continental D&O policy covered claims for wrongful acts, including “wrongful entry or eviction, or other invasion of the right to private occupancy. . . .” Unlike the GNY policy, however, the Continental policy expressly excluded coverage for damage to tangible property.

In the underlying action, the plaintiffs alleged that the insured engaged in construction work to fix a leak from a terrace on the seventeenth floor. In doing so, the insured accessed the plaintiffs’ roof terrace. The plaintiffs alleged that the construction workers installed and stored construction materials on the roof terrace, making the plaintiffs unable to access the terrace. Plaintiffs also alleged that their deck furniture may have suffered damage, and that the workers had a “direct line of sight” into their unit, resulting in the plaintiffs having to leave their unit frequently. Causes of action were for property damage, constructive eviction, partial constructive eviction, and invasion of privacy.

GNY accepted a primary defense coverage obligation, based on the allegation that there may have been property damage. Continental asserted an excess position, based on its “other insurance” clause, which specified that the D&O policy is excess “[i]f any Loss resulting from any Claim is insured under any other policies.” “Loss” was defined as “Defense Costs … on account of a covered Claim,” and “Claim” was defined in relation to a “wrongful act,” i.e., an act by the insured in an insured capacity.

The court held that the Continental D&O policy was excess only where both policies cover the same risk, because the “Claim” insured by the other insurer must also be insured under the Continental policy for the “other insurance” to come into play. If both policies cover different risks, they would be co-primary. The court found that the property damage claim was unequivocally covered by the GNY policy and not covered by the Continental D&O policy. However, with respect to the constructive eviction, partial constructive eviction, and invasion of privacy causes of action, the court determined that the papers were not sufficient to decide as a matter of law whether both policies covered such risks. Although the Continental policy covered such claims, GNY argued that its wrongful eviction coverage was limited to liability for intentional dispossession, which was not alleged. The court could not determine as a matter of law whether the allegations were covered under GNY’s policy. As such, the court denied summary judgment for both parties.

The case illustrates the need to carefully read and analyze the “other insurance” provisions of policies when two or more policies are implicated for the same claim or suit. As the court noted, the Continental policy could have more broadly asserted an excess position by defining loss to include all claims, not just covered claims. By using the term “covered claims,” Continental was unable to obtain a declaration of excess coverage on a summary judgment standard.