Scottsdale Ins. Co. v. Harsco Corp.
2022 WL 17087036 (Ind. Ct. App. 2022)
Harsco Corporation (“Harsco”) contracted with PPL Montour Company (“PPL”) to build and maintain an elevator at a PPL worksite in Pennsylvania. Harsco subcontracted with Metro Elevator Company (“Metro”) to lease and install the elevator. Consistent with the subcontract, Metro’s commercial general liability (“CGL”) and umbrella insurance policies with Scottsdale Insurance Company (“Scottsdale”) included an additional insured endorsement that extended coverage to Harsco under certain circumstances.
While performing the contracted work, Harsco employee, Christopher Rainey, fell two stories from scaffolding that was installed by Harsco. Rainey filed a personal injury suit against PPL and Metro in Pennsylvania. Although Pennsylvania’s workers compensation laws prevented Rainey from suing his employer, Harsco became involved when it received a demand for indemnification from PPL. While Rainey’s personal injury action was pending in Pennsylvania, Harsco filed an insurance coverage action against Metro’s insurer, Scottsdale, and others in Indiana.
After Rainey’s personal injury claim settled, the Pennsylvania court allocated the fault responsibility of the defendants and found that Metro was zero percent at fault for Rainey’s injuries and that Harsco was 100% at fault. Later, in Harsco’s coverage action, the Indiana trial court entered summary judgment for Harsco, holding that Harsco was an additional insured under Metro’s CGL and umbrella policies and was thus entitled to indemnification for its contribution to the settlement of Rainey’s personal injury claim. The Indiana trial court ultimately awarded Harsco a total of $5,204,039.27, which included $3,000,000 in indemnity, $70,975.93 in defense costs, and $2,133,063.34 in prejudgment interest. Scottsdale appealed.
The Court of Appeals first discussed whether Harsco was entitled to indemnification as an additional insured under Scottsdale’s CGL policy. The additional insured endorsement extended coverage to Harsco for bodily injury “caused, in whole or in part,” by the acts or omissions of Metro or those acting on its behalf. Harsco argued this language did not require that Metro proximately caused Rainey’s injury but only that his injury would not have happened “but for” Metro’s acts or omissions. Unpersuaded, the Court of Appeals stated: “[a] significant majority of other courts addressing this exact same question have rejected Harsco’s argument, and so do we.” The Court of Appeals found that “the great weight of authority” supported Scottsdale’s argument that “caused, in whole or in part,” implies “proximately caused, in whole or in part,” (emphasis in opinion). Thus, Harsco was entitled to indemnification as an additional insured only if Metro’s acts or omissions were a proximate cause, at least in part, of Rainey’s injuries.
Because Metro was found zero percent at fault, Harsco was not entitled to indemnification under the additional insured endorsement in Scottsdale’s CGL policy. But that was not the end of the case. Harsco argued that its coverage was not limited to the terms of the additional insured endorsement but extended to an exclusionary exception in the CGL policy’s primary coverage form. Although the CGL policy generally excluded coverage for contractually assumed liability, it made an exception for liability assumed under an “insured contract,” meaning, in relevant part, an indemnity agreement under which “you assume” the tort liability of another party for injury to a third party caused, in whole or in part, by “you or those acting on your behalf.” Harsco argued that the words “you” and “your” included additional insureds, such as Harsco, and that Harsco was acting on Metro’s behalf when it erected the scaffolding from which the Harsco employee fell. The Court of Appeals rejected both arguments.
The Court of Appeals noted that the CGL policy stated that the words “you” and “your” referred to the named insured—Metro. Although that alone defeated Harsco’s argument, the Court of Appeals went on to explain that accepting Harsco’s argument would render much of the CGL policy’s language “nonsensical.” If “you” and “your” referred not only to named insureds but also additional insureds, the Court of Appeals stated, “any use of the word ‘insured’ in the policy would be meaningless.”
The Court of Appeals then addressed Harsco’s argument that it was acting on Metro’s behalf when it erected the scaffolding because its preparation of the site made it possible for Metro to install the elevator. As the Court noted, however, Harsco provided “no authority for the proposition that a general contractor acts on behalf of a subcontractor that it hires whenever it does something that allows the subcontractor to complete its work[.]” After stating its research revealed no such authority, the Court of Appeals found that the phrase “those acting on your [Metro’s] behalf” referred to “any second-tier subcontractors Metro might have hired in order to fulfill its contractual obligation to Harsco.” Because Harsco did not erect the scaffolding on behalf of Metro, it was not entitled to indemnification under Metro’s CGL policy with Scottsdale. By extension, Harsco was also not entitled to indemnification under Metro’s umbrella policy, which applied only to insureds entitled to coverage under the CGL policy. Thus, the Court of Appeals reversed the trial court’s ruling that Scottsdale had to indemnify Harsco.
Lastly, the Court of Appeals discussed whether Scottsdale had a duty to defend Harsco. The Court of Appeals agreed with the trial court that Scottsdale was responsible for Harsco’s defense until the Pennsylvania trial court found Metro zero percent at fault for Rainey’s injuries. Consequently, the Court of Appeals remanded the case with instructions to enter judgment in favor of Harsco for defense costs of $70,975.03.