Insurance – Liability for Motorcycle Accidents – ‘Arising Out of’ Subcontractor’s Work

Plaintiff APAC-Atlantic’s liability for motorcycle accidents “arose out of” its subcontractor’s signage work.

We vacated the district court’s judgment and remanded with instructions to enter judgment in Plaintiff’s favor by ordering indemnification under the insurance policy.

This appeal was about an insurance company’s duty to indemnify. Plaintiff APAC-Atlantic, Inc., was repaving a North Carolina highway with the assistance of subcontractor Emery Sealco, Inc., when two motorcycles crashed on the highway. APAC paid a settlement to the victims of the accidents. It then sued Defendant Owners Insurance Company for indemnification under a policy that required Owners to indemnify APAC for liability “arising out of” Emery’s work on the highway project. On cross-motions for summary judgment, the district court held that APAC’s liability to the accident victims did not “arise out of” Emery’s work for APAC and granted summary judgment to Owners. We disagreed. APAC’s liability to the victims is causally connected to Emery’s work, and under North Carolina law, that means APAC’s liability “arises out of” Emery’s work.

Plaintiff, a highway contractor in North Carolina sought indemnification from its insurer, Owners Insurance Company, after two motorcyclists were injured while traveling through a repaving project area and APAC settled their claims. APAC had subcontracted Emery Sealco, Inc. to place uneven pavement warning signs throughout the project, and the insurance policy required Owners to indemnify APAC for liability “arising out of” Emery’s work. The district court granted summary judgment to Owners, reasoning that APAC’s liability did not “arise out of” Emery’s work because the crashes occurred at the start of the work zone, where Emery had not placed advance-warning signs, and fault rested with APAC.

We disagreed, emphasizing that under North Carolina law, “arising out of” is broadly construed to include liability that has any causal connection or is incident to the subcontractor’s work, regardless of whether the subcontractor was negligent. We found that APAC’s liability was indeed connected to Emery’s placement of signs, since the presence or absence of those signs contributed to the accidents, satisfying the “arising out of” standard. We criticized the district court’s reliance on a fault-based analysis from an Ohio case, noting that North Carolina law allows coverage even for the contractor’s independent negligence as long as there is some causal nexus with the subcontractor’s work. Accordingly, we vacated the district court’s summary judgment ruling and remanded with instructions to enter judgment in APAC’s favor, holding that APAC is entitled to indemnification from Owners for the settlement payments. The opinion illustrates the broad interpretation of “arising out of” in North Carolina insurance law and reinforces that indemnification can apply even when a contractor’s own negligence contributes to the underlying liability, so long as there is a connection to the subcontractor’s work.

Vacated and remanded.

APAC-Atlantic Inc. v. Owners Insurance Co. (Lawyers Weekly No. 001-053-26, 8 pp.) (Pamela Harris, J.) Appealed from the U.S. District Court for the Western District of North Carolina, at Asheville (Max O. Cogburn, Jr., J.) ARGUED: Kelly Margolis Dagger, ELLIS & WINTERS, LLP, Raleigh, North Carolina, for Appellant. Jeffrey S. Bolster, BOLSTER ROGERS, PC, Charlotte, North Carolina, for Appellee. ON BRIEF: J. Michael Malone, HENDREN REDWINE & MALONE PLLC, Raleigh, North Carolina, for Appellant. Melissa Monroe, BOLSTER ROGERS, PC, Charlotte, North Carolina, for Appellee. U.S. Court of Appeals for the Fourth Circuit Unpublished