In latest edition of The Wright Toolbox:
Who is an Additional Insured – Are You Covered?
A recent case involving Gilbane Building Co. points out how important it is to read the additional insured endorsement of a policy. Most construction contracts require the general contractor to obtain various types of insurance and to make various other parties additional insureds on those policies. Typically, a certificate of insurance will be provided showing the additional insureds listed. But, what does the actual insurance policy and its endorsements say with respect to additional insureds?
In this recent case, the contractor’s policy had a typical endorsement titled “Additional Insured – By Written Contract” which provided in relevant part: “WHO IS AN INSURED (SECTION II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.” During performance of the work, the owner alleged that the contractor negligently damaged the excavation shoring system, which damaged a neighboring building.
The owner sued the contractor and the project architect and Gilbane, the construction manager, was subsequently added to the suit as a third party. Gilbane sought coverage as an additional insured under the contractor’s policy. The insurer denied coverage to Gilbane contending that Gilbane was not an additional insured under the language of the endorsement because Gilbane did not have a written contract with the contractor. The Court agreed that Gilbane under the language of the endorsement, in order to be an additional insured a written contract with Gilbane was required. Since there was no contract between Gilbane and the contractor, Gilbane was not an additional insured and the denial of coverage was proper.
There are several key points to take away from this decision: (1) certificates of insurance do not provide coverage, just because you are identified as an additional insured does not mean you are covered under the terms of the policy; (2) to ensure that a party is properly included in an insurance policy as an additional insured, one must read the policy and any applicable endorsements relating to the issue; (3) the review of the policy terms must be thorough because as the Court noted in Gilbane if just the word “with” in the endorsement had been removed the outcome would have been different and (4) insureds charged with adding additional insureds should work with their insurance agents to ensure the proper endorsement form is used.
If you have any questions about the subject of this article please contact Michael A. Stover, Esq., mstover@wcslaw.com/410-659-1321.