In a recent Seventh Circuit decision, Atlanta Gas Light Company v. Navigators Insurance Company, the court addressed a theme that policyholders are often confronted with by insurers[1] – insurers disputing additional insured coverage where the named insured is not named in the underlying action. The court aptly rejected this position since it was undisputed that the bodily injuries alleged in the underlying lawsuits were due to a gas explosion that was “caused, in whole or in part, by” the named insured’s acts or omissions.
I. Background
The additional insureds, Atlanta Gas Light Company and Southern Company Gas (collectively, “AGL”), retained the named insured, United States Infrastructure Corporation (“USIC”), to locate and mark gas lines that AGL owned in Georgia. USIC failed to mark a certain gas line, which was later struck by a boring company, leading to an explosion that injured three people.
During a pre-suit mediation, the plaintiffs settled with USIC, which exhausted its primary commercial general liability policy’s limits. The plaintiffs were unable to reach an agreement with AGL and subsequently filed suits against AGL. AGL tendered the suit to USIC’s excess insurer, Navigators Insurance Company (“Navigators”), who denied coverage, averring that AGL was not an “additional insured” because the underlying suits were premised solely on the conduct of AGL, not USIC. AGL initiated coverage litigation.
II. No Duty Owned by Navigators Prior to Mediation
The court first addressed AGL’s claims insofar as they were premised on Navigators’ failure to defend AGL at mediation. Specifically, AGL contended that Indiana law imposed upon Navigators a duty of care when it was on notice that the primary policy limits would be exhausted. The court rejected this position because (a) the authority AGL relied on was inapposite since it addressed a duty between primary and excess insurers, and (b) the Indiana Supreme Court has unequivocally held that “the liability of the insurer under an excess insurance clause arises only after the limits of the primary policy are exhausted.”[2]
III. Navigators Breached the Contracts Because AGL was an Additional Insured
Next, the court addressed the breach of contract claim, which rested on Navigators’ position that AGL was not an “additional insured” under the excess policy. The excess policy included as an “insured” any person or entity insured under the primary policy which, in turn, included a CG 20 10 endorsement naming as an additional insured those persons or organizations required by contract but “only with respect to liability . . . caused, in whole or in part, by . . . [y]our acts or omissions . . ..” Because USIC’s acts or omissions caused, in whole or in part, the explosion resulting in the plaintiffs’ injuries, the court found AGL was an insured under the plain language of the policies.
Nevertheless, Navigators asserted two arguments: (1) because the settlement agreement between the plaintiffs and USIC released USIC of any liability, USIC’s acts and omissions could not have been the cause of harm for which AGL was sued; and (2) because USIC was not named in the underlying lawsuits, USIC’s acts or omissions could not be the proximate cause of the harm that was the subject of those lawsuits. The court disagreed.
First, the court explained that the settlement agreement between plaintiffs and USIC merely released USIC for any claims of liability; it did not determine whether the plaintiffs’ injuries were proximately caused by USIC. Second, the court explained that it was immaterial that USIC was not named in the lawsuit since, in the context of the duty to defend, the “insurer must look to the allegations in the complaint coupled with the facts known to the insurer after reasonable investigation.”[3] Rather, the phrase “caused, in whole or in part, by” recognizes there can be multiple proximate causes, and it was undisputed that USIC’s failure to mark the gas line was, at least, a partial cause of the explosion.
IV. No Bad Faith by Navigators
Lastly, the court addressed and rejected AGL’s three separate bases for asserting Navigators had breached the duty of good faith and fair dealing:
| Argument | Holding |
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1. Navigators intentionally violated the policy’s “Separation of Insureds” clause by assigning a single claim and adjuster to both AGL’s and USIC’s claims under the policy. |
The “Separation of Insureds” clause did not state Navigators would assign separate claim numbers or adjusters to claims, and AGL failed to cite to any authority to support this proposition. |
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2. Navigators’ failure to do anything at any time constituted bad faith. |
The genuine dispute doctrine applied, as the record indicated that Navigators genuinely believed AGL was not an additional insured under its policy. |
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3. Navigators acted in bad faith by working with USIC’s counsel to prepare a letter that it would send to AGL to deny coverage. |
The record was devoid of facts from which a reasonable fact finder could find that Navigators acted with “a state of mind reflecting dishonest purpose, moral obliquity, furtive design, or ill will[,]” and AGL failed to provide authority that coordinating denial letters in the manner in which they were constituted bad faith under Indiana law.[4] |
Also, because AGL premised its breach of fiduciary claim on the contention that Navigators acted in bad faith, the court rejected this claim too.
V. Conclusion
Atlanta Gas Light Company provides a good discussion on issues that additional insureds are often confronted with, including when excess coverage is at issue. Although the court’s decision was based on Indiana law, the finding of additional insured coverage is consistent with what the majority of insureds’ understanding of what it means for a loss to be “caused, in whole or in part, by” the acts or omissions of the named insured.
[1] 164 F.4th 1038 (7th Cir. Jan. 26, 2026).
[2] Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049, 1062 (Ind. 2001) (quoting Ryder Truck Lines, Inc. v. Carolina Cas. Ins. Co., 285 N.E.2d 440, 452 (Ind. 1979)).
[3] Smith v. Progressive Se. Ins. Co., 150 N.E.2d 192, 202 (Ind. Ct. App. 2020) (quoting Am. State Ins. Co., 379 N.E.2d at 518).
[4] Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d 968, 977 (Ind. 2005) (quoting Colley v. Ind. Farmers Mut. Ins. Grp., 691 N.E.2d 1259, 1261 (Ind. Ct. App. 1998)).