A federal appeals court has clarified when insurers must cover construction site injuries, spotlighting key risks for insurers and builders after a Manhattan scaffold collapse.
On August 13, 2025, the United States Court of Appeals for the Second Circuit delivered its decision in Liberty Insurance Corporation v. Hudson Excess Insurance Company, a case that underscores how coverage disputes can play out in major construction projects.
The case began after a worker for Skittles Services Corp. was injured when a scaffold collapsed during demolition work at 45 John Street in Manhattan. The worker, who lacked protective gear, sued the property owner, 45 John NY LLC, and the general contractor, Avacon Management LLC, in state court. Skittles was insured by Hudson Excess Insurance Company, while the building owner was covered by Liberty Insurance Corporation.
Liberty brought the dispute to federal court, seeking a ruling that Hudson was required to defend and indemnify 45 John as an additional insured under Skittles’ commercial general liability policy. The Hudson policy’s additional insured endorsement extended coverage to parties Skittles agreed in writing to add, but only for liability caused by Skittles’ acts or omissions, or those of its employees, during ongoing operations.
After a bench trial, the district court found that Skittles’ actions were a proximate cause of the worker’s injuries and declared that Hudson owed a duty to indemnify 45 John. The court also awarded Liberty attorney’s fees under New York Insurance Law § 1213(d), which allows such fees against unauthorized foreign insurers under certain conditions.
Hudson appealed, arguing that the district court’s finding was premature and that a later state court decision, which invalidated the indemnity provision in Skittles’ contract, should change the outcome. The Second Circuit disagreed, affirming that Hudson must indemnify 45 John. The appellate court found the federal court was within its authority to determine proximate cause based on the stipulated facts and evidence, and that the subsequent state court decision did not require a different result.
However, the Second Circuit reversed the award of attorney’s fees to Liberty. The appellate court found that Hudson qualified for a statutory safe harbor under New York Insurance Law § 1213(e), as its CGL policy was authorized under New York law and procured by a licensed excess line broker. The court examined the statutory language, including the placement of a comma in Section 1113(a)(13), and concluded the legislature did not intend to limit authorized CGL policies only to professional negligence.
In short, the Second Circuit’s ruling means insurers and builders alike should pay close attention to how additional insured clauses are written and enforced, especially in the context of construction projects. The case underscores the importance of clear insurance policy language and careful coordination between insurers and builders on major construction projects.
