thanks to Jonathan W.
who helped author this article.
Since the advent of the modern Insurance Services Office, Inc. (ISO),1 standard additional insured (AI) endorsement in the early 2000s, many insurance companies have advocated for an exceedingly narrow application, arguing that coverage is available only for the AI's vicarious liability for the named insured's acts or omissions.
Courts typically reject this argument in favor of a plain reading that AI coverage is available so long as the named insured played a causative role in the harm, at least in part. A recent decision from the Eleventh Circuit Court of Appeals aligning with the narrower view—flawed though it is—serves as a reminder that the campaign for restrictive coverage continues and that a tailored insurance recovery strategy is critical in these minority jurisdictions.
Since the 1980s, ISO's standard form AI endorsement covered injuries "arising out of" the named insured's actions. This language had been interpreted broadly in courts across the country, resulting in coverage for claims even where the AI was solely liable. In response to significant lobbying pressure from the insurance industry, in 2004, ISO modified its standard AI endorsement to include the following provision.
Who is Insured is amended to include as an additional insured any person or organization when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy, but only with respect to "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by:
Your acts or omissions in the performance of your ongoing operations for the additional insured;
The acts or omissions of those acting on your behalf in the performance of your ongoing operations for the additional insured; or
"Your work" performed for the additional insured and included in the "products-completed" operations hazard. [Emphasis added.]
In amending its standard AI endorsement, ISO explained that it discovered from monitoring various court decisions that "courts in many disputes between insurers and insureds have construed broadly the phrase 'arising out of,' and further that '[s]ome courts have ruled that … the [prior] additional insured endorsements … respond to injury or damage arising from the additional insured's sole negligence."2 Thus, ISO's intent in amending its form language was to narrow the scope of AI coverage by requiring at least some partial causal responsibility (though not necessarily liability) on the part of the named insured. Some insurers, however, have aggressively advocated a more restrictive position that AI coverage is available only where the AI is vicariously liable for the acts or omissions of the Named Insured.
Though there may not be a sufficient precedent to establish a majority/minority approach, courts more consistently reject this view, recognizing that vicarious liability is a very specific legal liability framework (with decades of developed case law) that concentrates only on the liability of one party (here, the AI) that exists solely by virtue of its relationship to another (here, the named insured) and, thus, is essentially co-extensive with that party's (the named insured's) own liability. The "caused, in whole or in part" language reflects no such limited scope; if ISO had intended to use the more restricted vicarious liability standard, it need only have used the words "vicarious liability." Rather, the intent was to provide complete AI status (subject to all other terms and conditions) so long as the AI's liability was caused, at least in part, by the named insured's acts or omissions.
Several jurisdictions, including the US District Courts in Florida, have trended toward the insurer's position, effectively limiting AI coverage under the standard 2004 ISO form to claims where the AI is specifically alleged to be vicariously liable for the named insured's negligence. This result was recently upheld by an appellate decision in the Eleventh Circuit Court of Appeals. In this author's opinion, as discussed below, the outcome is contrary to the plain meaning and intent of the standard form AI endorsement, supported by poorly reasoned and flawed precedent, while also at odds with decisions from other jurisdictions. Nonetheless, policyholders and coverage practitioners would be well advised to appreciate the importance of downstream entities being formally implicated in any claim dispute to ensure the best opportunity for accessing the intended AI coverage.
The Facts and Holding of KNS Group, LLC
In Cincinnati Specialty Underwriters Ins. Co. v. KNS Group, LLC, 561 F. Supp. 3d 1298, 1313 (S.D. Fla. 2021), aff'd, 21-13628, 2022 WL 5238711 (11th Cir. Oct. 6, 2022), PPE Casino Resorts Maryland, LLC ("Owner"), hired GM&P ("GC") to construct the Maryland Live! Casino and Hotel ("Project"). The GC subcontracted with KNS Group, LLC, to perform exterior glazing and glass façade work. The subcontract between the GC and KNS required KNS to obtain AI coverage in favor of the GC. KNS obtained a policy through Cincinnati Specialty Underwriters Insurance Company, which included ISO's standard form AI coverage, covering the GC as an AI only with respect to "property damage … caused, in whole or in part, by" KNS's acts or omissions.
The Owner sued the GC in Maryland state court after problems arose with the glazing and façade work performed by KNS. As is customary, the Owner's complaint against the GC alleged, among other things, negligence directly against the GC—the party with whom the Owner shared a direct contractual relationship. The Owner's complaint did not allege the GC was vicariously liable for the work performed by KNS, the named insured under the Cincinnati policy.
The GC, in turn, filed a third-party complaint against KNS, alleging breach of contract, indemnification, and negligence. The GC also sought AI coverage under KNS's policy with Cincinnati for the claims lodged against it by the Owner. Cincinnati declined to provide a defense to the GC, relying on the AI endorsement's "caused, in whole or in part" language, which it alleged provided coverage to the GC only if the GC was alleged to be vicariously liable for the acts or omissions of KNS. Because the Owner's complaint did not allege the GC was vicariously liable for KNS, Cincinnati maintained that it owed no duty to defend the GC.
Ultimately, Cincinnati filed a declaratory judgment action in the Southern District of Florida, seeking a declaration that it owed no defense nor indemnity obligations to the GC. The district court granted summary judgment in Cincinnati's favor, agreeing that because the GC was not alleged to be vicariously liable for KNS's acts or omissions, the policy's AI coverage was not triggered. The district court relied heavily on the Florida Supreme Court's prior decision in Garcia v. Federal Ins. Co., 969 So. 2d 288 (Fla. 2007). The GC appealed to the Eleventh Circuit Court of Appeals, which affirmed.
The Shaky Foundation of the Garcia Decision
The Garcia decision provides much of the foundation and analytical framework used by the federal district and circuit courts in KNS Group, LLC. However, Garcia involved vastly different contextual and factual issues, and its application to ISO's standard form AI endorsement is questionable.
In Garcia, a caregiver was employed by a homeowner insured under a homeowners' policy with Federal Insurance Company. The caregiver borrowed a vehicle owned by the homeowner's family member. While operating the vehicle, the caregiver struck a pedestrian, causing injuries. The pedestrian sued the homeowner (the named insured), her family member (the owner of the car), and the caregiver. In its complaint, the pedestrian alleged claims of direct negligence against each party. It did not allege the caregiver was vicariously liable for the homeowner.
The caregiver sought coverage under the Federal policy. Federal denied coverage, relying on the policy's definition of "covered person," which was defined as follows.
A covered person means:
 You or a family member;
 any other person or organization with respect to liability because of acts or omissions of you or a family member; or
 any combination of the above
Ultimately, the Florida Supreme Court was tasked with answering a certified question from the Eleventh Circuit Court of Appeals, asking whether the Federal policy's coverage for an additional insured "with respect to liability because of acts or omissions" of the named insured limited coverage to instances in which the additional insured is vicariously liable for acts of the named insured. The Garcia court answered in the affirmative.
In reaching its decision, the court referenced the dictionary definitions of "with respect to" and "because of," which were defined, in turn, as "concerning" and "by reason of." The court found that the phrases clearly indicated "that an additional insured is only entitled to coverage concerning liability that is caused by or occurs by reason of acts or omissions of the named insured. An additional insured's liability thus must be caused by the acts or omissions—that is, the negligence—of the named insured." Noticeably lacking from the court's opinion was any discussion on how the court combined the terms "concerning" and "by reason of" to find a collective meaning of "caused by," a term of art with inherently important legal implications, and seemingly equated "acts or omissions" with negligence, a standard carrying heavy legal significance.
Having decided that the Federal policy covered additional insureds for liability caused by the acts or omissions of the named insured, the Garcia court proceeded to analyze whether coverage was limited to claims of vicarious liability. The court recognized a prior Florida Supreme Court case discussing similar AI issues, where the court reasoned that if the insurer had intended to limit AI coverage for claims of vicarious liability, it should have done so by using clear language to that effect in the policy. As an example of what the court believed to be a clear vicarious liability limitation, the court referenced a Federal District Court decision from Pennsylvania, Consolidation Coal Co., Inc. v. Liberty Mut. Ins. Co., 406 F. Supp. 1292 (W.D. Pa. 1976), where the language "but only with respect to acts or omissions of the named insured" was construed as limiting AI coverage to claims of vicarious liability for the named insured.
With what it believed to be the exemplary verbiage for a clear vicarious liability limitation in mind, the Garcia court proceeded to analyze the "but only" language, which was included in Consolidation Coal policy but absent from the subject Federal policy. The court decided that the "but only" language was not material; rather, it was the meaning of "because of" that indicated a clear intent to limit AI coverage to claims of vicarious liability. Still, the court provided no meaningful analysis as to how it equated the phrase "because of" with "caused by" or how "caused by" was construed to place an express limitation of AI coverage to claims of vicarious liability.
The Garcia court briefly discussed other cases interpreting the phrase "arising out of" in the AI context, concluding that such language was significantly broader than the "because of" language. According to the Garcia court, the "arising out of" language required only "some level of causation greater than coincidence," whereas the meaning of "because of" meant liability "caused by" the acts or omissions of the named insured. Absent from the Garcia court's analysis was any discussion regarding what causation standard would be applicable for AI coverage to be triggered under the "arising out of" language or whether the phrase "caused by" required any further analysis of legal causation principles, such as actual or proximate causation. Without shining any light on these key issues and without addressing the implications of interpreting "because of" to mean "caused by," the Garcia court decided that the phrase "caused by" restricted AI coverage to claims of the AI's vicarious liability for the acts or omissions of the named insured.
Although the opinion left much to be desired in terms of analytical support, the Garcia court set the standard in Florida that AI coverage "with respect to liability because of acts or omissions" of the named insured was limited to claims of vicarious liability. In setting this standard, the court failed to articulate or recognize that its holding regarding a standard homeowners policy may apply too broadly to encompass questions arising under commercial general liability (CGL) policies. Perhaps most significantly, the AI coverage in Garcia was provided by default under a homeowners policy's standard "covered persons" definition; there was no specific grant of coverage for AIs. The policyholder in Garcia did not undertake to obtain AI coverage for any specific party, nor did it procure coverage to satisfy any contractual requirement, as would be the case in the typical CGL context. This makes the context and intent of the Garcia policy markedly different from the commercial context, where sophisticated parties specifically negotiate the terms of requisite AI coverage and AI coverage is procured to transfer risk from one party to another.
Notably, while the Garcia court's analysis did not frame the issue this way, its holding was that the caregiver was not a "covered person" under the applicable policy definition. Notwithstanding, the Garcia court broadly framed its inquiry as relating to whether AI coverage was available to the caregiver given the allegations of the underlying complaint as if the caregiver was otherwise intended and/or qualified as an AI under the policy. Thus, perhaps unintentionally, the court's holding paved the way for a sweeping "black letter law" impact on issues concerning the interpretation of AI coverage at large, including those arising in the CGL context where AI coverage was specifically purchased to cover intended AIs.
Garcia Applied to KNS Group, LLC
The Eleventh Circuit in KNS Group, LLC, applied "Garcia's logic" to determine whether the allegations of the Owner's complaint against the GC "ma[d]e clear that Cincinnati does not owe [GC] a duty to defend … because [GC] is being sued for its own negligence, not vicariously for any negligent acts or omissions on the part of KNS." There, the GC argued that the language of the applicable policy, "caused, in whole or in part," distinguished it from the "because of" language in Garcia. It argued that should the court find "caused, in whole or in part" similarly requires allegations of vicarious liability, it "would render the term 'in part by' mere surplusage."
The Eleventh Circuit disagreed, finding "[t]here is a clear difference between 'caused' and 'caused in part by': the latter term means that even if the complaint alleged KNS was only 1 percent responsible for causing the faulty workmanship, then Cincinnati would have a duty to defend [GC]." With this reasoning, the Eleventh Circuit held that because the Owner had not alleged any liability on the part of KNS, Cincinnati owed no duty to defend GC as an AI under the KNS policy.
The Eleventh Circuit's opinion is noteworthy for several reasons. First, the opinion does not address the heart of the district court's decision giving rise to the appeal (i.e., that the "caused, in whole or in part" language requires allegations of vicarious liability). Rather, the court of appeals found that if KNS was alleged to be "only 1 percent responsible," then Cincinnati would have a duty to defend the GC. By inserting principles of comparative fault, the decision indicates that allegations of vicarious liability would not be necessary to trigger AI coverage so long as the named insured is alleged to be at least partially at fault for causing the same damages for which the AI is also alleged to have caused.
Further, the Eleventh Circuit appears to say that allegations of vicarious liability are not required under the "caused, in whole or in part" language because vicarious liability is an "all or nothing proposition." One cannot be alleged to be partially vicariously liable. Instead, vicarious liability is derivative liability without fault, imposed solely based on the legal relationship between the parties.3 Thus, the reasoning of the Eleventh Circuit seems to support a plausible basis for AI coverage without allegations of vicarious liability; however, the court's intent remains unclear given its specific reference to and reliance on the Garcia decision. In all, the Eleventh Circuit's KNS Group, LLC, decision raises more questions than it seems to answer.
Decisions from Other Jurisdictions
Other jurisdictions examining whether ISO's "caused, in whole or in part" language requires allegations of vicarious liability have held that it does not. For example, in First Mercury Ins. Co. v. Shawmut Woodworking & Supply, Inc., 3:12CV1096 JBA, 2014 WL 5519831, at *1 (D. Conn. Oct. 31, 2014), the insurer argued that the purpose of the subject AI endorsement "was to provide coverage for vicarious liability only." The US District Court in Connecticut rejected this argument, explaining that "First Mercury's policy lacks language to connote the limitation it now urges" and noting that if "the parties had intended coverage to be limited to vicarious liability, language clearly embodying that intention was available." Because First Mercury's policy language "failed to limit coverage to vicarious liability," the court rejected the insurer's argument and held that the AI endorsement was not limited to claims of the AI's vicarious liability for the acts or omissions of the named insured.
Similarly, the Eastern District Court in Tennessee reached the same conclusion in American Guarantee & Liab. Ins. Co. v. Norfolk S. Ry. Co., 278 F. Supp. 3d 1025, 1042 (E.D. Tenn. 2017). There, the insurer argued the AI endorsement's "caused, in whole or in part" language restricted coverage to vicarious liability. The court rejected this argument, stating "the phrase 'caused, in whole or in part' denotes shared fault.… The AI Endorsement's use of the words 'caused … in part' can only suggest that coverage extends beyond mere vicarious liability arising out of the named insured's acts or omissions. Instead, the language covers the additional insured for its own negligence so long as the named insured was also a contributing cause of the injury or damage giving rise to liability."
Thus, the court squarely held that the standard ISO language extends beyond vicarious liability.
The same issues and arguments were analyzed by the First Circuit Court of Appeals in Scottsdale Ins. Co. v. United Rentals (N. Am.), Inc., 977 F.3d 69, 72–73 (1st Cir. 2020). There, the Federal Appellate Court in Massachusetts determined that the phrase "in whole or in part" cannot be limited to vicarious liability "because, as a form of imputed liability, vicarious liability cannot be caused 'in part.'" Thus, consistent with the decisions of the district courts in Connecticut and Tennessee, the First Circuit also expressly found that the "caused, in whole or part" language cannot be construed to restrict AI coverage for claims of vicarious liability for the named insured's acts or omissions.
Finally, other courts have examined ISO's intent in regard to the causation standard contemplated by the "caused, in whole or in part" verbiage. In Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313, 326–27, 79 N.E.3d 477, 485 (2017), the insurer argued that "caused, in whole or in part" implicitly required the named insured to be at least partially negligent and a proximate cause of the injury giving rise to the AI's liability. The parties seeking AI coverage argued that an actual or "but for" causation standard should apply. The court examined the history of ISO's form language and its 2004 modification, recognizing that "[a]t the heart of the amendment … was 'the preclusion of coverage for an additional insured's sole negligence.'" Thus, the court concluded "caused, in whole or in part, by" required the named insured's act to be at least a partial proximate cause of the loss and that actual, or "but for," causation was an insufficient "causal nexus."
In reaching this conclusion, the court reasoned that "[t]hese 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.… Thus, these words—'in whole or in part'—can only modify 'proximate cause.'" In finding that the ISO AI form required proximate cause on the part of the named insured, the court also reminded the parties that they are free to negotiate a different allocation of risk should they wish to do so.
The takeaway from the Eleventh Circuit's decision in KNS Group, LLC, is that AI endorsements containing ISO's "caused, in whole or in part" language may be construed under Florida law to be limited to claims sounding in the AI's vicarious liability for the acts or omissions of the named insured. In the opinion of this author, the KNS Group, LLC, decision is backboned by the thinly reasoned Garcia decision, where broader than intended implications were borne out of a factually and contextually distinguishable homeowners insurance case. The KNS Group, LLC, decision is squarely at odds with well-reasoned opinions from other jurisdictions that have more appropriately held that the "caused, in whole or in part" verbiage necessarily extends beyond vicarious liability.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
1 ISO is an association of thousands of property and casualty insurers that develops standard policy forms in collaboration with state insurance regulators. Virtually all commercial general liability (CGL) insurance written in the United States is written on ISO forms. See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 772 (1993).
3 Interestingly, and from a practical standpoint, comparative fault is an affirmative defense. The allocation of fault between joint tortfeasors is a jury question. Pleadings do not allege allocations for respective percentages of fault.