New Jersey Law

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New Jersey Appellate Division Rules Additional Insured Endorsement Controls Coverage Determination Not the Language of the Lease

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On April 29, 2020, the Appellate Division of the New Jersey Superior Court issued an unpublished decision in Gateway Park, LLC v. Travelers Insurance Co. in which it addressed whether the insurer for a tenant was obligated to provide coverage to the landlord under the additional insured endorsement contained in the tenant’s insurance policy. In the case the injured plaintiff, Stacy Garris, was an employee of the tenant, ExamWorks, Inc. Garris was injured from a fall in the parking lot after exiting her car, on her way to work. She settled with the landlord/property owner, Gateway, and their snow and ice remediation contractor. Gateway Park instituted a declaratory judgment action asserting that ExamWorks’ lease required ExamWorks to obtain liability insurance naming Gateway as an additional insured. The Trial Court initially granted summary judgment to the Gateway; however, on a Motion for Reconsideration held for the defendant, Travelers, based in large part on the terms of the lease. After confirming that the general law regarding the construction of insurance policies as being required to be construed liberally in favor of the insured and that any ambiguities would be resolved in favor of the insured, the Appellate Court concluded that the additional insured endorsement in the ExamWorks policy was plainly written and unambiguous. The Appellate Court analyzed the provisions of the additional insured endorsement of the insurance policy which stated that the additional insured “is an insured” with respect to liability for bodily injury caused by an occurrence that takes place after the tenant signs and executes the contract or agreement. The endorsement also contained a condition that the bodily injury needed to “arise out of” the use of the premises by Exam Works. The Appellate Court explained that the term “arising out of” is not capable of precise definition but is to be interpreted broadly to mean “originating from the use of or growing out of the use of the leased premises.” The Court then stated that there must be a “substantial nexus between the occurrence and the use of the leased premises in order for coverage to attach.” The Appellate Court confirmed that this use of the parking lot for access to the Exam Works office “fell within the landscape of risk” and is therefore directly tied to ExamWorks’ leased space within the building. With such a substantial nexus, the Appellate Court reversed and reaffirmed the initial decision of the trial court granting summary judgment to the landlord, Gateway. Although the terms of the lease may have supported the position presented by Travelers, the Court stated that the only reason by which it should consider the terms of the lease is if there was an ambiguity in the additional insured endorsement, which would permit the court to consider “extrinsic evidence” to interpret the intent and purposes of the policy and the reasonable expectations of the insured.

This case not only confirms that the language of the policy itself is most essential in determining coverage, but also warns landlords and tenants to be careful to not only review the terms of their lease as to coverage for the landlord, but to confirm that the additional insured endorsement sufficiently represents the intentions of the parties with respect to liability for invitees or employees of the tenants.

If you have any questions regarding this decision or any aspect of insurance law please contact Steven A. Kunzman, Esq.

DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum PC (http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services.

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