New York’s highest court recently ruled that a commercial general liability (CGL) policy’s additional insured provision, similar to ISO form no. CG 20 33 04 13, does not grant additional insured status to a third party not contracting directly with the named insured. The contract between the project owner and the subcontractor required the subcontractor to name the construction manager as an additional insured on the subcontractor’s CGL policy. Because the construction manager did not contract directly with the subcontractor, the court held that the construction manager was not an additional insured under the blanket “Additional Insured – By Written Contract” clause in the subcontractor’s CGL policy — even though the Certificate of Insurance (COI) identified the construction manager as an additional insured. The insurance policy, not the COI, controlled the insurance coverage.
This ruling highlights two important best practices. First, to provide additional insured coverage to a party with whom the named insured does not have a direct contract, the insurance policy should contain a blanket additional insured endorsement equivalent to ISO Form CG 20 38 04 13 (or a manuscript endorsement specifically naming the additional insured). ISO Form CG 20 38 04 13 provides additional insured coverage to a third party as long as the coverage is required in a written contract to which the named insured is a party. This endorsement does not require a direct written contract between the named insured and the additional insured. Second, an additional insured should not rely on a COI for coverage. When possible, the additional insured should obtain a complete copy of each insurance policy (including endorsements), or, at a minimum, a copy of the additional insured clause, to assess the available coverage.
What You Need to Know
- If you do not contract directly with an entity required to name your company as an additional insured, you must ensure that the applicable insurance policy grants additional insured status without a written contract directly between the named insured and the proposed additional insured similar to ISO form CG 20 38 04 13.
- A COI is not evidence of insurance coverage; the insurance policy controls the available coverage.
- Obtain a copy of the insurance policy with all endorsements when expecting coverage as an additional insured to avoid unpleasant surprises later on. If you cannot obtain the entire insurance policy, seek a copy of the additional insured clause to assess the available coverage.
Summary of the Court’s Decision
In the New York case Gilbane Building Co./TDX Construction Corp., et al. v. St. Paul Fire and Marine Insurance Co., allegedly defective excavation work while building an addition to Bellevue Hospital in New York allegedly cause an adjacent building to sink and resulted in additional remediation costs and litigation against the subcontractor.
The subcontractor, Samson Construction Company (subcontractor), contracted with the project owner, Dormitory Authority of the State of New York (project owner), but not with the construction manager, Gilbane Building Co./TDX Construction Corp. (construction manager). The subcontractor agreed to name as additional insureds: “Dormitory Authority of the State of New York, The State of New York, the Construction Manager (if applicable) and other entities specified on the sample Certificate of Insurance provided by the Owner.”
The subcontractor procured a CGL policy that named as an additional insured “any person or organization with whom you [the insured] have agreed to add as an additional insured by written contract.” The COI named the construction manager as an additional insured: “The following are Additional Insureds under General Liability as respects to this project: City of New York; City of New York Health & Hospital Corporation; Forensic Biology Laboratory; Dormitory Authority-State of New York; Gilbane/TDX Construction Joint Venture.”
The project owner sued the subcontractor and the project architect for the allegedly defective excavation, and the architect filed a third-party claim against the construction manager. The project owner notified the insurer of the claim approximately five months after suit was filed.
The construction manager sued the insurer for defense and indemnity. The insurer moved for summary judgment arguing that the construction manager did not qualify as an additional insured. The trial court denied the insurer’s motion because it found that the policy “requires only a written contract to which the Subcontractor is a party,” which was satisfied by the subcontractor’s contract with the project owner.
The appellate court reversed because the subcontractor did not contract directly with the construction manager as the subcontractor’s policy required. The court stated that “the ‘Additional Insured-By Written Contract’ clause of the [Insurer’s] policy clearly and unambiguously requires that the named insured execute a contract with the party seeking coverage as an additional insured. Since there is no dispute that the Subcontractor did not enter into a written contract with [the Construction Manager], the Subcontractor’s agreement in its contract with the Project Owner to procure coverage for [the Construction Manager] is insufficient to afford [the Construction Manager] coverage as an additional insured under the [Insurer’s] policy.” The court applied a “literal” application of the clause and required a contract directly between the construction manager and the subcontractor. Finding no contract, the court denied coverage to the construction manager.