Nested-List Interpretation of Additional-Insured Grants and Ambiguity in Employers’ Liability Exclusions Under Separation-of-Insureds Clauses

Reidy Contracting Group, LLC v. Mt. Hawley Insurance Company, U.S. Court of Appeals for the Second Circuit (Feb. 12, 2026)

1. Introduction

This appeal arises from a construction-site accident in which a ceiling collapse injured three employees of a subcontractor, Vanquish Contracting Corporation (“Vanquish”). The general contractor, Reidy Contracting Group, LLC (“Reidy”), was sued by the injured workers and sought defense and indemnity as an additional insured under Vanquish’s excess liability policy issued by Mt. Hawley Insurance Company (“Mt. Hawley”), which followed form to the underlying commercial general liability policy issued by Endurance American Specialty Insurance Company (“Endurance”).

Two coverage questions dominated the dispute:

  • Additional-insured status and scope: whether the Endurance additional-insured grant (incorporated by the Mt. Hawley follow-form language) covered Reidy for liability “arising out of” Vanquish’s work, or only for liability connected to Reidy’s “general supervision” of that work.
  • Employers Liability Exclusion: whether an exclusion for injury to an “employee of any insured” “in the course of employment by the insured” barred coverage to Reidy when the injured workers were employed by Vanquish.

The district court granted summary judgment to Reidy and its insurer, Merchants Mutual Insurance Company (“Merchants”). The Second Circuit affirmed—on the merits—holding (i) Reidy was an additional insured for the loss, and (ii) the Employers Liability Exclusion was ambiguous when read with the Separation of Insureds Clause and thus construed against Mt. Hawley under contra proferentem.

2. Summary of the Opinion

The Second Circuit affirmed summary judgment for Reidy and Merchants. It held:

  • Coverage grant: The phrase “in connection with [the additional insured’s] general supervision” modified only the immediately preceding “acts or omissions” phrase, not the entire preceding series (“premises, work, or acts or omissions”). Accordingly, the policy covered Reidy for liability arising out of Vanquish’s work even without proof that the claims arose from Reidy’s general supervision.
  • Employers Liability Exclusion: The exclusion was ambiguous in context—particularly in light of the Separation of Insureds Clause—and Mt. Hawley offered no extrinsic evidence to resolve the ambiguity. The ambiguity was therefore resolved in favor of the insured seeking coverage (Reidy), so the exclusion did not bar coverage.

The panel declined to reach, because it did not need to, the district court’s alternative holding that Mt. Hawley’s “not an additional insured” argument was precluded by New York Insurance Law § 3420(d)(2), citing the appellate principle that it may affirm “on any basis supported by the record” (Allco Fin. Ltd. v. Klee).

Judge Menashi dissented, arguing the exclusion’s text was unambiguous and that the majority improperly “created” ambiguity to invoke contra proferentem.

3. Analysis

3.1. Precedents Cited

A. Core New York insurance-interpretation framework

  • Lend Lease (US) Constr. LMB Inc. v. Zurich Am. Ins. Co. and Seaboard Sur. Co. v. Gillette Co. anchor the burden structure: the insured must show coverage; the insurer must show an exclusion applies and is “subject to no other reasonable interpretation.” The court deploys that “no other reasonable interpretation” standard as the decisive lever against Mt. Hawley on the exclusion.
  • Consol. Edison Co. of N.Y. v. Allstate Ins. Co. is cited for the basic move: begin with the policy’s language. Related interpretive principles are drawn from Cetta v. Robinson (ordinary speech; intended risk), Show Car Speed Shop, Inc. v. U.S. Fid. & Guar. Co. and Throgs Neck Bagels, Inc. v. GA Ins. Co. of N.Y. (plain and ordinary meaning, construed in light of risk and purpose), and Kass v. Kass (do not isolate words from context; substance over form; quoting William C. Atwater & Co., Inc. v. Pan. R.R. Co.).
  • Ambiguity and its consequences follow Second Circuit doctrine: Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co. (ambiguity standard; trade usage; extrinsic evidence; then contra proferentem), building on Morgan Stanley Grp. Inc. v. New England Ins. Co. and Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co..
  • Summary judgment and ambiguity principles come from N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., which allows summary judgment despite ambiguity if extrinsic evidence is one-sided or nonexistent—here, the latter—citing Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc. and Topps Co. v. Cadbury Stani S.A.I.C..

B. Additional insureds and construction-industry risk transfer

  • Kerrigan v. RM Assocs., Inc. is used to situate “named insured” versus “additional insured.”
  • The opinion reads the additional-insured grant in light of construction risk allocation recognized in Burlington Ins. Co. v. NYC Transit Auth. (additional insured coverage reflects allocation of subcontractor risks; includes exposure to claims of contributory negligence and vicarious liability). The panel also cites New York Appellate Division support: Citizens Ins. Co. of Am. v. Am. Ins. Co., Hanover Ins. Co. v. Phila. Indem. Ins. Co., and 3650 White Plains Corp. v. Mama G. Afr. Kitchen Inc..
  • To confirm “reasonable expectations,” the court follows BP Air Conditioning Corp. v. One Beacon Ins. Grp., looking to the subcontract/purchase order language requiring coverage “arising out of” Vanquish’s operations—evidence of the risk the parties intended to shift.
  • The court rejects interpretations that “virtually nullify” the coverage purpose, citing the Appellate Division decision Lend Lease (U.S.) Constr. LMB Inc. v. Zurich Am. Ins. Co. (and noting the Court of Appeals later affirmed on other grounds), plus Cnty. of Monroe v. Travelers Ins. Cos. and City of New York v. Phila. Indem. Ins. Co..

C. Syntactic canons used to interpret the coverage grant

  • The court applies the rule of the last antecedent as stated in Barnhart v. Thomas.
  • It contrasts that with the series-qualifier canon as framed in Facebook, Inc. v. Duguid (quoting Scalia & Garner).
  • It notes that in this Circuit, punctuation can push toward the series-qualifier approach, citing Am. Int'l Grp., Inc. v. Bank of Am. Corp..

D. Reading coverage and exclusions in parallel

  • In support of harmonizing the policy’s structure, the panel cites Handelsman v. Sea Ins. Co. and Utica Fire Ins. Co. of Oneida Cnty. v. Gozdziak—cases used to justify interpreting provisions so that coverage grants and limitations/exclusions map coherently rather than collide.

E. Employers’ liability exclusions, “any insured,” and separation of insureds

  • Mt. Hawley’s reading that “any insured” includes named and additional insureds is supported by Bayport Constr. Corp. v. BHS Ins. Agency and Howard & Norman Baker, Ltd. v. Am. Safety Cas. Ins. Co..
  • For the proposition that, with a Separation of Insureds clause, “the insured” can be read as the insured seeking coverage, the court relies on Emps.' Liab. Assurance Corp. v. Travelers Ins. Co., as well as Second Circuit and New York authorities: In Endurance Am. Specialty Ins. Co. v. Century Sur. Co., Emps. Ins. Co. of Wasau v. Harleysville Preferred Ins. Co., Fulmont Mut. Ins. Co. ex rel. Hutchinson v. N.Y. Cent. Mut. Fire Ins. Co., Greaves v. Pub. Serv. Mut. Ins. Co., and Lane v. Sec. Mut. Ins. Co..
  • The court distinguishes cases cautioning that a separation clause cannot override “any insured” language, citing In Endurance Am. Specialty Ins. Co. v. Century Sur. Co., Howard & Norman Baker, Ltd. v. Am. Safety Cas. Ins. Co., and Richner Dev., LLC v. Burlington Ins. Co., but ultimately finds the particular wording here creates a cross-reference problem (“any insured” versus “the insured”) that the separation clause makes salient rather than nullifying.
  • The opinion’s “insurer knew how to draft this clearly” point is bolstered by comparison to other provisions and to decisions like Essex Ins. Co. v. Grande Stone Quarry, LLC, and contrasted with Maroney v. N.Y. Cent. Mut. Fire Ins. Co..
  • For “whole contract” interpretation reinforcing ambiguity analysis, the panel cites Riverside S. Plan. Corp. v. CRP/Extell Riverside, L.P..
  • The court also references Hastings Dev., LLC v. Evanston Ins. Co. (summary order) to acknowledge Mt. Hawley’s reading can be reasonable in isolation when a policy broadly defines “employee,” underscoring that “context” is doing the decisive work.

F. Dissent’s authorities (and the interpretive fault line)

Judge Menashi’s dissent frames the dispute as one of plain text versus “manufactured” ambiguity. It emphasizes New York’s admonition against straining to find ambiguity, citing Maurice Goldman & Sons, Inc. v. Hanover Ins. Co., and repeats the plain-meaning rule with Vigilant Ins. Co. v. Bear Stearns Cos. (quoting White v. Cont'l Cas. Co.). It adds rhetorical support from Wilson v. State Farm Mut. Auto. Ins. Co. (Iowa), and textualist framing from Lomax v. Ortiz-Marquez.

The dissent further asserts that interpretive tools cannot be used to create ambiguity, citing 10 Ellicott Square Ct. Corp. v. Mountain Valley Indem. Co. (quoting Empire Fire & Marine Ins. Co. v. Eveready Ins. Co.), and general maxims from In re Boggs-Rice Co. and Russell Motor Car Co. v. United States. It stresses intent-is-in-the-writing contract principles via Metro. Life Ins. Co. v. RJR Nabisco, Inc., Greenfield v. Philles Recs., Inc. (quoting Slamow v. Del Col), and warns against “new contracts” under Rosenthal v. Am. Bonding Co.. It also invokes Nautilus Ins. Co. v. Barfield Realty Corp. as quoted in In Endurance Am. Specialty Ins. Co. v. Century Sur. Co. to argue “any insured” must remain meaningful.

3.2. Legal Reasoning

A. The additional-insured grant: nested lists, punctuation, and “policy architecture”

The court’s interpretive innovation is its careful handling of a nested disjunctive list in the additional-insured grant:

Reidy is an insured “only with respect to liability arising out of [Vanquish’s] premises, [Vanquish’s] work for [Reidy], or acts or omissions of the additional insured, in connection with their general supervision of [Vanquish’s] work.”

Mt. Hawley’s position relied heavily on the comma before “in connection with,” arguing that the tail modifier should sweep across the entire series (“premises, work, or acts/omissions”). The panel rejected that, using two steps:

  • Last antecedent identifies what the modifier most naturally attaches to (the closest phrase).
  • Series-qualifier (prompted by the comma) extends the modifier across the immediate internal series (“acts or omissions”), but the court refuses to “apply it twice” to leap outward to the larger series.

Crucially, the court does not treat these canons as mechanical rules; it validates the chosen attachment against the policy’s overall structure—particularly how the Limitations Clause mirrors the three coverage categories (premises; work; acts/omissions-other-than-supervision). That structural “parallelism” is the court’s strongest response to punctuation-based arguments: it reads the policy as an integrated design rather than as a single comma-driven sentence.

The court then grounds interpretation in construction-industry function: additional-insured coverage is commonly purchased to transfer the subcontractor’s operational risk to the subcontractor’s insurance, including risks of vicarious exposure, and not merely claims limited to “general supervision.” Reading the policy to require “general supervision” for all coverage would, in the panel’s view, largely defeat the purchased risk-transfer arrangement (drawing on Burlington Ins. Co. v. NYC Transit Auth., BP Air Conditioning Corp. v. One Beacon Ins. Grp., and Cnty. of Monroe v. Travelers Ins. Cos.).

B. The Employers Liability Exclusion: ambiguity created by “any insured” + “the insured” + separation of insureds

The Employers Liability Exclusion’s critical wording is:

No coverage for injury to “an ‘employee’ of any insured” arising out of and in the course of “employment by the insured.”

Mt. Hawley argued “the insured” refers back to “any insured” (so the exclusion bars coverage to Reidy because the injured workers were employees of Vanquish, an insured). The majority accepts that this reading is reasonable in isolation.

But the majority finds another plausible reading once the Separation of Insureds Clause is applied (“separately to each insured against whom claim is made or suit is brought”): “the insured” can be read as the particular insured seeking coverage (here, Reidy). Because the workers were not Reidy’s employees, the exclusion would not apply on that reading.

The court insists it is not using the separation clause to override “any insured.” Instead, it treats the clause as exposing a drafting tension in the exclusion’s two-part structure: it uses “any insured” for the employee’s status but “the insured” for the employment relationship, leaving unclear whether the exclusion was meant to apply:

  • whenever the injured worker is employed by any insured (Mt. Hawley’s reading), or
  • only when the insured seeking coverage is the worker’s employer (Reidy’s reading).

The panel reinforces ambiguity by pointing to drafting choices elsewhere in the policy (e.g., using “that insured” in the Automobile Liability Exclusion; using “that ‘employee’” in the family-member clause) as evidence that Mt. Hawley “knew how” to draft a clearer cross-reference if it intended Mt. Hawley’s sweeping interpretation.

Once the panel labels the exclusion ambiguous, it follows the standard playbook:

  • look for extrinsic evidence of intent (Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co.);
  • place the burden on the insurer to prove its interpretation (Morgan Stanley Grp. Inc. v. New England Ins. Co.);
  • because Mt. Hawley offered none, construe against the drafter (contra proferentem), resolving ambiguity in favor of coverage.

This reasoning is the doctrinal hinge of the decision: the outcome is ultimately controlled less by the semantic plausibility of Mt. Hawley’s reading than by the insurer’s failure to (a) draft clearly and/or (b) produce extrinsic evidence to lock in its intended breadth.

C. The dissent’s competing methodology

Judge Menashi’s dissent would treat the exclusion as plain English: “the insured” naturally refers to the previously referenced “any insured.” The dissent criticizes the majority for using context (separation of insureds; “customs, practices, usages and terminology”) not to resolve but to create ambiguity, which it considers inconsistent with Maurice Goldman & Sons, Inc. v. Hanover Ins. Co. and the rule that courts should not strain to find ambiguity.

The dissent’s core contention is that the majority’s approach effectively rewrites the exclusion into a different one—an “employee of the insured” exclusion—despite the policy’s use of “any insured.” That disagreement highlights an enduring tension in insurance interpretation: how aggressively courts should harmonize text with “separation of insureds” when exclusions use mixed referents (“any insured” in one clause; “the insured” in another).

3.3. Impact

A. Drafting and litigation consequences for insurers

  • Employers’ liability exclusions must be internally consistent. If an insurer intends to bar additional-insured coverage whenever the injured worker is employed by any insured, this opinion signals that mixing “any insured” (employee status) with “the insured” (employment relationship) invites an ambiguity finding—especially when a Separation of Insureds clause is present.
  • Extrinsic evidence may matter—but the insurer must bring it. The panel did not merely label the exclusion ambiguous; it emphasized that Mt. Hawley offered no extrinsic evidence. Insurers litigating ambiguous exclusions in New York should expect that a pure textual argument may be insufficient once ambiguity is found; underwriting files, drafting history, broker communications, or industry forms may become outcome-determinative.

B. Additional-insured grants: punctuation is not destiny

  • The decision provides a structured method for interpreting additional-insured grants containing multiple “or” clauses and trailing modifiers: the court’s “nested list” analysis limits the sweep of a tail modifier even where a comma might otherwise suggest broader reach under the series-qualifier canon.
  • The court’s use of the policy’s “architecture” (Coverage Grant aligned with the Limitations Clause) encourages litigants to argue coherence across provisions rather than relying solely on isolated grammar.

C. Practical shift in risk allocation on construction projects

In construction-accident cases involving subcontractor employees suing the general contractor, excess carriers often attempt to avoid additional-insured exposure through employers’ liability exclusions. This opinion makes that strategy harder where the exclusion’s cross-references are not drafted with precision and where separation-of-insureds language exists—thereby potentially increasing the likelihood of defense and indemnity obligations for general contractors as additional insureds under subcontractor towers.

D. Procedural note: § 3420(d)(2) remains unresolved here

Although the district court held Mt. Hawley was precluded under N.Y. Ins. Law § 3420(d)(2) from raising additional-insured-status arguments late, the Second Circuit assumed without deciding that preclusion did not apply. The precedential contribution of this case is therefore primarily interpretive (coverage grant and exclusion), not a definitive statement about § 3420(d)(2) waiver/preclusion in this posture.

4. Complex Concepts Simplified

  • Additional insured: a party (here, Reidy) that did not buy the policy but is covered because a contract required it and the policy’s endorsement/grant extends coverage to it.
  • Follow-form excess policy: an excess policy (Mt. Hawley) that generally adopts the terms and conditions of an underlying policy (Endurance), unless the excess policy says otherwise.
  • Separation of Insureds clause: a provision instructing that coverage is applied as though each insured is covered separately—often important when determining whether exclusions apply to one insured based on another insured’s conduct or relationships.
  • Employers Liability Exclusion: an exclusion meant to keep workplace injury risk (normally handled by workers’ compensation/employers’ liability coverage) from being shifted into a general liability policy.
  • Contra proferentem: if policy language is ambiguous and extrinsic evidence does not resolve it, courts construe the ambiguity against the drafter—typically the insurer—and in favor of coverage for the insured.
  • Last antecedent vs. series-qualifier: grammar-based canons used to decide what a trailing modifier applies to; this case is notable for using both in a “nested list” setting and refusing to let a single comma expand the modifier across multiple layers of a sentence.

5. Conclusion

Reidy Contracting Group, LLC v. Mt. Hawley Insurance Company adds two practical interpretive guideposts to New York insurance coverage disputes in the construction context. First, where an additional-insured grant contains nested disjunctive lists and a trailing “in connection with” modifier, courts may limit that modifier to the immediately preceding internal series—especially when the policy’s limitations and overall structure confirm that reading and when broader reading would undermine the purchased risk transfer. Second, an employers’ liability exclusion that combines “employee of any insured” with “employment by the insured,” when paired with a Separation of Insureds clause, may be deemed ambiguous; absent insurer-provided extrinsic evidence, the ambiguity will be resolved against the insurer under contra proferentem.

The dissent underscores that future cases will likely turn on how courts characterize the textual clarity of “any insured/the insured” formulations. But the majority’s holding gives insureds and additional insureds a powerful argument: if an insurer intends to eliminate additional-insured protection for injuries to a named insured’s employees, it must draft with unmistakable precision—or risk losing the exclusion at the ambiguity stage.