Recognizing Third-Party Insured Status and Co-Excess Coverage in Risk Retention Group Policies: County of Ulster v. Alliance of Nonprofits

Introduction

The Second Circuit’s summary order in County of Ulster v. Alliance of Nonprofits for Insurance Risk Retention Group, No. 24-1598 (2d Cir. Apr. 7, 2025), addresses two interconnected questions under a risk retention group (“RRG”) insurance policy: (1) whether a county—acting as principal—is an “insured” by virtue of an endorsement covering volunteers, and (2) how that coverage interacts with a separate municipal policy. The underlying accident occurred in January 2018, when Barbara Hyde, driving under the County’s Senior Transportation Program, collided head-on with a County bus, killing herself and injuring passenger Joyce Northacker. Northacker sued the County and Jewish Family Services of Ulster County (“JFS”) in state court. The County then filed for a declaratory judgment in federal court, seeking coverage under the RRG policy issued by the Alliance of Nonprofits (“ANI”). The district court granted summary judgment to the County. ANI appealed, challenging (a) the County’s status as an insured, and (b) the priority of the RRG policy vis-à-vis the County’s separate NYMIR policy.

Summary of the Judgment

The Second Circuit affirmed in part and vacated in part. It held:

• Insured Status: Barbara Hyde qualified as an “insured” volunteer under an endorsement to the ANI policy. Because the policy’s general insuring agreement extends coverage to anyone “liable for the conduct of an insured,” the County itself is an insured to the extent of its liability for Hyde’s actions.
• Priority of Coverage: The ANI policy’s “other insurance” clause makes it primary only for liability “assumed under an ‘insured contract.’” The court reasoned that the County’s status as an insured under the policy does not depend on an insured-contract endorsement, so the ANI policy and the County’s NYMIR policy are co-excess rather than one primary and one excess.
• Remand: The cause was remanded for further proceedings consistent with these rulings.

Analysis

Precedents Cited

• Byrne v. Rutledge (623 F.3d 46): Standard of review for summary judgment—no genuine dispute of material fact required.
• EMF General Contracting Corp. v. Bisbee (6 A.D.3d 45): Test for contract abandonment by conduct—requires mutual, positive, unequivocal actions inconsistent with the contract.
• Aliperti v. Laurel Links, Ltd. (27 A.D.3d 675): Contract treated as abandoned only if one party’s actions are inconsistent with intent to be bound and the other party acquiesces.
• Goldman v. White Plains Center for Nursing Care (896 N.Y.2d 173): Clear, unambiguous contract language must be enforced on its face.
• Sport Rock Intl., Inc. v. American Casualty Co. (65 A.D.3d 12): Determination of priority among overlapping policies by comparing “other insurance” clauses.

Legal Reasoning

The court dissected three key issues:

1. Volunteer Status of Hyde: The “Agreement for Professional Services” between the County and JFS tasked JFS with recruiting, training, insuring and managing volunteer drivers. The policy endorsement covered “anyone volunteering services to [JFS] while using a covered auto . . . to transport [JFS] clients.” Read in context, the drivers—including Hyde—were JFS volunteers even if they also volunteered for the County. ANI’s attempt to invoke contract-abandonment by pointing to overlapping duties failed: neither mutual, unequivocal conduct nor party acquiescence terminated the Agreement.
2. Extension of Insured Status to the County: The policy’s “Who Is An Insured” section included: (a) JFS itself, (b) anyone using a JFS auto with permission, and (c) “anyone liable for the conduct of an insured described above.” Because Hyde was an insured volunteer, the County—liable for her torts—became an insured under subsection (c).
3. Policy Priority and Co-Excess Coverage: The ANI policy’s “other insurance” clause designates it primary “for any liability assumed under an ‘insured contract.’” The court emphasized that the County’s insured status arose under the policy itself, not under an insured-contract assumption of liability. Under New York law, when coverage arises on identical terms from two different policies and neither is primary by operation of its “other insurance” clause, they share liability on a co-excess basis.

Impact

This decision clarifies two significant points for practitioners and insurers:

• Third-party principals can obtain insured status under an RRG policy through endorsements that cover volunteers, and coverage extends to any party liable for the volunteers’ conduct.
• In cases of overlapping automobile liability coverage, insurers must analyze whether coverage arises under an insured-contract provision or under the policy’s general insuring agreement. Only the former yields primary coverage; otherwise, policies operate co-excessively.

Municipalities, nonprofits and their insurers will need to review endorsement language and “other insurance” clauses to assess coverage layers accurately, particularly in volunteer-driven programs.

Complex Concepts Simplified

• Risk Retention Group (RRG): A liability insurance company owned by its members, typically nonprofits or municipalities, that pool risk.
• Endorsement: A written amendment to an insurance policy that adds, modifies or excludes coverage.
• Insured Contract: A contractual assumption of another party’s tort liability, which can trigger primary coverage under some policies.
• Other Insurance Clause: A policy provision that allocates responsibility when more than one policy covers the same risk—dictating which insurer pays first or whether they share loss.
• Primary vs. Excess vs. Co-Excess: Primary insurers pay first, excess insurers pay only after primary limits are exhausted, and co-excess insurers share payment when neither policy is primary.

Conclusion

The Second Circuit’s ruling in County of Ulster v. Alliance of Nonprofits establishes that a policy endorsement covering volunteers can extend insured status to a third-party principal and that coverage arising independent of an “insured contract” is co-excess with other policies. This interpretation ensures that municipalities and nonprofits operating volunteer-based programs cannot evade coverage disputes by recasting who is the insured or by relying on insured-contract language. Insurers and risk managers must now scrutinize policy endorsements and “other insurance” clauses to determine coverage layers in any volunteer-involved liability scenario.