Court Holds Contractor is not Entitled to Coverage Under Additional Endorsement Where Requisite Connection to Primary Insured’s Operations was Lacking

Markel International Insurance Company, Ltd. v. Centex Homes, LLC, 2006 U.S. Dist. LEXIS 4780 (D.N.J. 2006)


This lawsuit arises from a coverage dispute between a residential home builder, Centex Homes, LLC, and Markel International Insurance Company, Ltd, the insurer providing a commercial general liability policy to a subcontractor, Alpha Contractors. Alpha was engaged to perform work for Centex. In connection with the subcontractor’s work, an endorsement was issued naming Centex as an Additional Insured on Alpha’s commercial liability policy with Markel. In granting summary judgment for Markel, the Court held that, despite it’s status as an additional insured, Markel did not owe coverage to Centex for the claims being asserted, as the requisite connection between Centex’s liability and the operations of Alpha was not present. Having found that Centex was not entitled to coverage under the additional insured endorsement, the Court held that Markel was also entitled to summary judgment on Centex’s bad faith claim.

The Litigation

Centex was a residential home builder involved in building a housing development in Marlborough Township, New Jersey. Centex hired Alpha to build masonry posts for a fence at the site. Alpha, in turn, hired subcontractor Piotr Bielawsky to perform the work at the site.

Markel issued a commercial general liability policy to Alpha. The policy included an additional insured endorsement, naming Centex as an additional insured under the policy. However, the additional insured endorsement identified Centex as an insured under the policy, but “only with respect to liability arising out of [Alpha’s] operations or premises owned by or rented to [Alpha].

At the completion of his work day at the site, Mr. Bielawsky was involved in a motor vehicle accident as he was leaving the site to go home. Apparently, as he pulled onto the roadway that is adjacent to the work site, he pulled into the path of an oncoming car, resulting in the accident. The passenger of the other automobile was seriously injured, and brought suit against Mr. Bielawsky. However, upon obtaining a copy of the police accident report, it was learned that trees and brush along the roadway next to the construction site obscured the views of both drivers. Accordingly, Mr. Bielawsky’s attorney joined Centex to that litigation by way of a Third Party Complaint.
Centex tendered the defense of that case to Markel, pursuant to the additional insured endorsement. Markel denied coverage for that claim, and proceeded forward with filing a Declaratory Judgment action seeking a declaration that it did not owe Centex a defense or indemnification. Centex answered, and filed its own counterclaim for Declaratory Judgment. Centex also asserted a bad faith claim against Markel.

The Decision

In the coverage litigation, Centex contended that “but for” Alpha’s operations (thru Mr. Bielawsky) at the construction site, the accident would not have occurred. Therefore, it contends, that it should be provided a defense and indemnification under the Markel policy. By contrast, it was Markel’s position that it had not duty to defend or indemnify Centex, as Centex’s liability arose from its own negligence in failing to maintain the trees and brush at the construction site. Since trimming the trees and brush was not part of Alpha’s operations, Centex’s liability did not arise from Alpha’s operations.

The District Court acknowledged that there are no cases directly on point in New Jersey. However, after analyzing holdings in other jurisdictions, the Court held, as a matter of law, that “the requisite connection between Centex’s failure to maintain its trees and bushes and Mr. Bielawsky’s operations is not present for Centex to be covered under the additional insured provision.” In doing so, the Court denied Centex’s Motion for Summary Judgment, and granted Markel’s Motion for Summary Judgment as to coverage.

The District Court then addressed Centex’s bad faith claim against Markel. The Court held that, [t]o establish a bad faith claim, the entity seeking coverage must be able to establish, as a matter of law, a right to summary judgment on the substantive claim.” Since Centex failed to show that it was entitled to coverage under the additional insured endorsement, the Court held that, as a matter of law, Centex had also failed to establish a bad faith claim.

For additional information, or a copy of this Opinion, please contact Law Wright at Wright & O’Donnell, P.C., , 610-940-4092.