In Wilson Central School District et al. v. Utica Mutual Insurance Company, et al., 2014 WL 7151827 (Dec. 17, 2014), the New York Supreme Court’s Appellate Division, Second Department, applying New York law, reversed a trial court’s order and held that Utica had no duty to defend and indemnify Wilson Central School District (the District) as an additional insured in three underlying personal injury actions where the subject policy was issued to School Bus Service, Inc. (SBS), the bus service was not referred to in underlying complaints, and coverage under the additional insured endorsement was limited to vicarious liability for acts of the insured.

The Appellate Division began its analysis by noting that under New York law an insurer must defend whenever allegations in a complaint suggest a reasonable possibility of coverage, but also observed "[t]he duty to defend is not triggered, however, when, ‘as a matter of law ... there is no possible factual or legal basis upon which the insurer might eventually be held to be obligated to indemnify the claimant under any provision of the insurance policy’ (Bruckner Realty, LLC v. County Oil Co., Inc., 40 AD3d at 900; see City of New York v. Evanston Ins. Co., 39 AD3d 153, 157–158)."  Wilson Central School District et al v. Utica Mutual Insurance Company et al. at *1.

The Appellate Division found that the language of the additional insured endorsement in the SBS policy unambiguously limited coverage to the District’s vicarious liability for the acts of SBS and stated that that the District was an additional insured only "[t]o the extent that such additional insured [i.e. the District] is held liable for your [i.e. SBS’s] acts or omissions arising out of and in the course of ongoing operations performed by you or your subcontractors for such additional insured; or ... [w]ith respect to property owned or used by, or rented or leased to, you."  Id. at *2.  Applying this language, the Appellate Division observed that the underlying complaints sought to hold the District liable for its "own independent" alleged acts and omissions.  Moreover, there were no allegations that the District was vicariously liable for any acts by SBS.  Thus, the court held that the insurer did not have a duty to defend and indemnify the District because it did not qualify as an additional insured under the unambiguous language of the policy.

This decision is an example of a court applying the plain and unambiguous language of an insurance policy to limit the scope of coverage.