The syllabus outlines a legal case involving Norman International, Inc. v. Admiral Insurance Company, concerning an exclusionary clause in a commercial general liability insurance policy issued by Admiral to Richfield Window Coverings, LLC. The clause excludes coverage for liabilities related to operations in certain New York counties, including Nassau County. Richfield, which sells window covering products and provides maintenance for cutting machines at retailers like Home Depot, faced a lawsuit from Colleen Lorito, an employee injured while using one of these machines. Admiral denied coverage based on the exclusion clause, leading Richfield to seek a declaratory judgment to compel Admiral to defend and indemnify it in the lawsuit.
The Law Division ruled in favor of Admiral, but the Appellate Division reversed this decision, finding no causal relationship between Richfield's activities and the claims. The Court ultimately held that the broad language of the exclusionary clause applies to any claims connected to Richfield’s operations in the excluded counties, confirming that Admiral had no duty to defend or indemnify Richfield. The Court emphasized that coverage determination typically involves comparing the allegations in the complaint with the policy, but in cases where coverage depends on unresolved factual issues, the duty to defend may hinge on actual facts rather than just the allegations. Here, the critical determination was whether Lorito's claims fell under the policy's coverage, which involved issues of potential manufacturing or design defects and Richfield’s negligence in relation to her injuries.
The Appellate Division did not address the applicability of a policy exclusion related to an incident involving Richfield Window Coverings, LLC. Instead, it established that a complaint must be analyzed alongside the insurance policy to ascertain the duty to defend. Courts are advised to clarify when issues necessitate consideration of facts beyond the complaint. Insurance policies are interpreted based on contract principles, and clear terms are enforced as written. If a policy exclusion uses unambiguous language indicating that coverage is unrelated to any causal link, it will be applied without inferring causation.
In Flomerfelt v. Cardiello, the Court interpreted broad phrases like "incident to" and "in connection with," indicating that injury could be connected in any manner, however remote. In the case at hand, Lorito was injured in Nassau County, which falls within the exclusionary clause. The pivotal question is whether Richfield’s actions at the store trigger the exclusion, specifically if they are "connected with" or "related to" Richfield’s activities. The terms "in any way connected with" and "related to" do not necessitate causation.
Lorito's injury occurred while using a machine provided by Richfield, and Richfield’s regular maintenance and training activities at the store establish a sufficient link to invoke the exclusion. Consequently, the Court concluded that the claim filed by Richfield is not covered under the policy, and Admiral Insurance Company has no duty to defend. The decision was reversed and remanded to the trial court.
Richfield supplies retailers, including Home Depot, with cutting machines for blinds and provides maintenance and training for their use. Admiral Insurance Company issued a general liability policy to Richfield that includes an exclusionary clause barring coverage for liabilities arising from operations in specific New York counties, including Nassau County. An employee at a Home Depot in Nassau County was injured while operating one of Richfield's machines and subsequently filed a lawsuit against Richfield. Admiral invoked the exclusionary clause, denying any obligation to defend or indemnify Richfield in this matter.
Richfield initiated a declaratory judgment action, arguing that the terms "operations" and "activities" in the exclusion were ambiguous and should favor the insured. The Law Division rejected this, concluding that any allegations of bodily injury connected to Richfield’s operations in the excluded county triggered the exclusion. The Appellate Division initially reversed this decision, asserting no causal connection existed between Richfield's operations and the employee's injuries.
However, the analysis by the Appellate Division was deemed too narrow, as the exclusionary clause's broad language indicates that any claim "in any way connected with" Richfield’s operations in the excluded counties is not covered, regardless of a direct causal relationship. The court reaffirmed that Admiral has no duty to defend Richfield against claims it is not obligated to indemnify. Consequently, the Appellate Division's judgment was reversed, and the Law Division's ruling was affirmed. Richfield’s operations, including shipping, training, and maintaining the cutting machines, are directly linked to the injuries sustained, confirming the applicability of the exclusion. Harjit Singh, president of Richfield, testified that there is no contractual relationship with Richfield’s buyers.
The relationship between Richfield and its buyers, such as Home Depot, is defined by a "supplier buying agreement." Richfield ships window covering products to these buyers, who then assume ownership upon receipt and payment, regardless of subsequent retail sales. During his deposition, Singh clarified that Richfield does not directly conduct business in New York but sells products to larger companies like Home Depot, Walmart, and Bed Bath & Beyond, which then decide the distribution to their stores. Richfield's supplier agreement implicitly includes blind cutting machines necessary for fitting blinds, which are delivered to stores by Richfield and installed by Home Depot. Richfield's sales representatives regularly train Home Depot staff on product use and handle customer service issues, including repairs of cutting machines. Singh noted that in 2017, 60% of Richfield's sales came from Home Depot, with 95% of products sold requiring the cutting machine, making its availability essential for Richfield's business. However, he argued that Home Depot's operation of the machine does not constitute Richfield's responsibility. On August 12, 2017, a Home Depot employee, Colleen Lorito, was injured operating the cutting machine, which allegedly lacked a safety guard. Subsequently, she and her husband filed a lawsuit against Richfield for various claims, while Admiral denied coverage under its policy due to exclusions regarding independent contractors and specific New York counties.
The appeal focuses on the Designated New York Counties Exclusion within an insurance policy, which states that coverage does not apply to any "bodily injury, property damage," or "personal and advertising injury" related to operations or locations in specified counties, including Nassau County, where the incident occurred. Lorito was injured while working at a Home Depot in Nassau County, leading Richfield to seek a declaratory judgment against Admiral to compel defense and indemnification. Admiral counterclaimed, asserting no obligation to defend or indemnify due to the exclusion. After an arbitrator ruled in favor of Admiral, Richfield sought a trial de novo and both parties moved for summary judgment. The Law Division granted Admiral's motion, confirming the exclusion applied due to Lorito's work-related injury in one of the designated counties. Richfield appealed, and the Appellate Division reversed the decision, stating that Richfield's activities lacked a causal connection to the claims made, specifically noting that the allegations did not relate to the maintenance or training activities associated with the equipment involved. Admiral's subsequent petition for certification contests the Appellate Division's reliance on the complaint's allegations, arguing that relevant factual issues pertaining to the exclusion should not be determined in the underlying action.
Admiral contends that the Appellate Division's decision fundamentally altered the standards for insurers' duty to defend, as established in Burd v. Sussex Mutual Insurance Co. Admiral argues that the court improperly focused on the complaint's limited description instead of the comprehensive facts revealed during discovery, notably that the underlying event occurred in Nassau County, triggering an exclusion. Admiral maintains there is no duty to defend without a corresponding duty to indemnify and claims the decision creates a conflict of interest regarding the duty to defend.
Admiral critiques the Appellate Division for misinterpreting the Designated New York Counties Exclusion, emphasizing the significance of the disjunctive "or" in the exclusion’s terms, which allows for satisfaction if any term applies. Furthermore, Admiral asserts that the exclusionary clause does not necessitate a causal link between Lorito’s injury and Richfield’s actions.
In contrast, Richfield argues that the Appellate Division applied established insurance policy interpretation principles correctly and considered all relevant facts. Richfield posits that Burd is inapplicable as the coverage determination can be resolved through the underlying action, where a Nassau County jury will ascertain how Lorito was injured, which will inform the duty to indemnify. Richfield insists that the Appellate Division did not impose a new duty to defend absent a duty to indemnify, as the court concentrated on the applicability of the exclusion rather than the indemnity issue. Richfield also counters Admiral’s claim by stating that the appellate court did not restrict its analysis to the allegations in the complaint.
The document further explains that summary judgment is reviewed de novo, with a standard that allows such judgment if there are no genuine material fact issues. The central question is whether Admiral has a duty to defend Richfield against the claims from the Loritos. The court may need to assess the duty to defend prior to resolving coverage definitively. Generally, the duty to defend is determined by comparing the complaint to the policy to see if sustaining the allegations would obligate the insurer to pay, with any uncertainties favoring the insured. However, when coverage depends on factual issues not addressed by the trial, merely comparing the complaint to the exclusion may be insufficient, highlighting the need to consider actual facts.
Chief Justice Weintraub, in Burd, illustrated a scenario where an insurance policy covers one vehicle (a Ford) but not another (a Chevrolet), leading to the insurer's lack of obligation to defend against a complaint regarding an incident involving the Chevrolet, despite allegations concerning the Ford. The Court recognized conflicts of interest that could arise when trial outcomes leave coverage questions unresolved, potentially requiring the insured to pay later or risking prejudice from the insurer's defense strategy. In Burd, the coverage hinged on whether intentional harm was present, which could trigger an exclusion in the policy.
In the current case involving Lorito, the critical issue is whether claims against Admiral are covered by its policy, with underlying issues related to manufacturing defects and negligence, none of which necessitate addressing the policy exclusion. The Appellate Division failed to reference Burd, instead suggesting a general standard for evaluating the duty to defend, which involves comparing the complaint to the policy. The appellate court acknowledged the trial court's reliance on discovery facts about Richfield's involvement, which were not included in the complaint.
The analysis will consider these additional facts to determine Admiral's duty to defend, focusing on the policy's exclusionary clause. Insurance policies are interpreted based on contract principles, enforcing clear terms as written, with exclusionary clauses presumed valid if they are specific and not against public policy. Courts typically construe such clauses narrowly but will favor interpretations that support coverage when terms are ambiguous. The insurer carries the burden to establish that an exclusion applies, and if a causal link is necessary, courts will assess its nature. If exclusionary language does not explicitly require a causal connection, the court will determine the extent of the policy's intention regarding such a link.
The exclusionary clause in the insurance policy at issue includes terms such as "arising out of," "related to," "caused by," "contributed to by," and "in any way connected with." Previous case law has interpreted these phrases broadly, establishing that a causal link is necessary but does not require the excluded act to be the proximate cause of the injury. The court emphasized that the language "in connection with" should be interpreted expansively, meaning that even a remote or tangential connection suffices for applicability. Courts have further noted that terms like "related to" are broader than "arising out of," and an arbitration provision covering claims 'relating to' a contract encompasses more than one limited to claims arising out of it.
In this case, the Appellate Division's analysis mistakenly focused on causal relationships instead of the necessary connection between the injuries and the actions of the insured, Richfield. Since Lorito's injuries occurred in Nassau County—a county listed in the exclusion—determining whether Richfield's activities at the store triggered the exclusion is crucial. The exclusion operates disjunctively, meaning that any one of the phrases can activate it. The court found that Richfield’s provision of the blind cutting machine to Home Depot establishes a sufficient link to Lorito’s injuries, as she would not have been injured had Richfield not supplied the machine. Thus, the exclusion applies based on the broad interpretation of the connected phrases in the policy.
Richfield's involvement with the machine at Home Depot extended beyond merely supplying it; Richfield employees regularly visited the store to change blades and perform maintenance. Furthermore, Richfield provided a manual and trained Home Depot employees in its operation. This direct engagement in the machine's use and operation establishes a connection between Richfield and the injuries sustained by Lorito. Additionally, Richfield's activities related to selling window blinds and maintaining the machine trigger the Designated New York Counties Exclusion clause in the policy. Consequently, the claim filed by Richfield is not covered under the policy, and Admiral is not obligated to defend against it. The judgment of the Appellate Division is reversed, and the case is remanded to the trial court for further proceedings. Chief Justice Rabner and Justices Patterson, Solomon, and Pierre-Louis concur with Judge Fuentes's opinion.
