Third Circuit Finds Additional Insured Coverage Based on Peculiar Risk Doctrine

In its recent decision Lafayette College v. Selective Insurance Company, 2001 U.S. App. LEXIS 22721 (3d Cir. Nov. 10, 2011), the United States Court of Appeals for the Third Circuit, applying Pennsylvania law, addressed under what circumstances additional insured coverage may be triggered.

The underlying suit in Lafayette arose out of a construction site injury at Lafayette College in Easton, Pennsylvania.  Lafayette had hired Telesis Construction, Inc. as the  general contractor to renovate a portion of the campus.  Telesis was insured under a general liability policy issued by U.S. Fire.  Telesis, in turn, subcontracted out a portion of the work to Alan Kunsman Roofing & Siding, Inc.  During the course of the renovation work, an employee of Kunsman fell from a scaffold and sustained severe injuries.  That employee later sued Lafayette and Telesis, among others. 

The primary coverage dispute in Lafayette was whether the college qualified for additional insured coverage under Telesis’ policy.  That policy’s additional insured endorsement stated that an entity such as Lafayette “is only an additional insured with respect to liability caused by your negligent acts or omissions at or from your ongoing operations performed for the additional insured at the job indicated by written contract or written agreement.”  In other words, the additional insured coverage was limited to vicarious liability imposed on Lafayette as a result of Telesis’ work. 

U.S. Fire argued that it did not have a coverage obligation to Lafayette because the underlying suit alleged that Lafayette was jointly and severally liable rather than vicariously liable for plaintiff’s injuries.  The court noted that while true, such was not fatal to Lafayette’s claim for coverage, as it is not the legal theories advanced, but rather the underlying facts that are dispositive of coverage issues.  With this in mind, the court addressed Lafayette’s contention that the underlying suit asserted liability based on the “peculiar risk doctrine,” which imposes liability on employers of independent contractors when: (1) a risk is foreseeable to the employer at the time of contract and (2) the risk is different “from the usual and ordinary risk associated with the general type of work done.”  The court explained that if the underlying complaint could be read to assert such a claim against Lafayette, such would be tantamount to an assertion of vicarious liability for the purpose of the additional insured endorsement in the U.S. Fire policy.

Looking to the underlying complaint, the court found sufficient allegations to substantiate Lafayette’s claim, notwithstanding the fact that plaintiff did not expressly assert a theory of legal liability based on the peculiar risk doctrine.  Among other things, the complaint alleged that defendants, including Lafayette, “knew or should have known that falls are one of the leading causes of fatalities and injuries at construction sites” and that defendants exposed plaintiff “to peculiar and unreasonable danger by refusing to permit workers to use the elevator and/or stairs inside the college to gain access to the roof and requiring workers … to climb more than 40 feet in the air on a vertically mounted scaffolding ladder without any adequate protection.”  These allegations, explained the court, established the foreseeability of the plaintiff’s injuries and that the risk involved was, in fact, different than ordinary risks associated with construction work.  As such, the court concluded that the two elements of a peculiar risk claim were satisfied by the underlying complaint, and U.S. Fire had a duty to defend Lafayette.