Paragano sought coverage under the K&D policy and the insurer, Harleysville, objected. The trial court directed the insurer to provide a defense and indemnification to Paragano as an additional insured under the terms of the K&D policy. Harleysville appealed.

The appeals court said that the coverage afforded to Paragano is determined by reference to the policy itself. By its very terms, the policy issued to K&D Builders does not cover Paragano for its own acts of negligence. The policy provided that Paragano was covered "only with respect to liability … caused in whole or in part by your (K&D) acts or omissions". The appeals court saw no ambiguity in these words. Paragano was provided coverage only for liability that was caused in whole or in part by the acts of omissions of K&D. Paragano had coverage for a claim asserted against it for vicarious liability; there was no coverage for Paragano's own negligent acts. And since Paragano was found to be negligent by OSHA and cited for improper construction of the scaffold, it had no coverage as an additional insured under the K&D policy. The order of the trial court was reversed.

Editor's Note: Coverage for additional insureds is going to be a matter of dispute for quite a while. Whether the additional insured has coverage under the terms of the named insured's policy for its own acts of negligence or simply has vicarious liability coverage will depend on the policy language and the views of the particular court hearing the case. The Insurance Services Office (ISO) has attempted to clarify the issue with its additional insured language, namely, "such person or organization is an additional insured only with respect to liability … caused in whole or in part by your acts or omissions …."

This language makes the point that the additional insured has coverage but the liability has to arise out of the acts or omissions of the named insured, whether this be in whole or in part. The negligent acts or the omissions of the additional insured alone are to be covered under its own general liability policy.