Commercial Division Blog
Additional Insured Clause Covers Only Those With Written Contracts Directly With Named Insured
On September 15, 2016, the First Department issued a decision in Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire & Marine Insurance Co., 2016 NY Slip Op. 06052, holding that an "Additional Insured-By Written Contract" clause in a prime contractor's commercial general liability policy did not cover a construction manager who had no written contract with the contractor, notwithstanding the fact that the contractor was obligated under a contract with a state agency to provide insurance coverage for the construction manager.
In a decision by Justice Renwick, the Court granted summary judgment to the insurance company, explaining:
Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies. Well-established principles governing the interpretation of insurance contracts provide that the unambiguous provisions of an insurance policy, as with any written contract, must be afforded their plain and ordinary meaning, and that the interpretation of such provisions is a question of law for the court. If, however, there is ambiguity in the terms of the policy, any doubt as to the existence of coverage must be resolved in favor of the insured and against the insurer, as drafter of the agreement. A contract of insurance is ambiguous if the language therein is susceptible of two or more reasonable interpretations, whereas, in contrast, a contract is unambiguous if the language has a definite and precise meaning, unattended by danger of misconception in the purport of the agreement itself, and concerning which there is no reasonable basis for a difference of opinion.
In this case, the "Additional Insured-By Written Contract" clause of the CGL policy provides additional insured coverage to "any person or organization with whom you [Samson] have agreed to add as an additional insured by written contract." Contrary to Supreme Court's determination, . . . we find that the language in the "Additional Insured-By Written Contract" clause of the Liberty 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 Samson did not enter into a written contract with the JV, Samson's agreement in its contract with DASNY to procure coverage for the JV is insufficient to afford the JV coverage as an additional insured under the Liberty policy.
Justice Kahn dissented and would have ruled that the construction manager was an additional insured, explaining:
Liberty's "additional insured" endorsement on its face is poorly drafted in terms of its syntax (defining "additional insured" as "any person or organization with whom you have agreed to add as an additional insured by written contract"), in that the word "whom" is the object both of the preposition "with" and of the infinitive "to add." To make the parties' intent clear, the language should be read without the unnecessary preposition "with," i.e., "any . . . organization . . . whom you have agreed to add as an additional insured by written contract." Read in this manner, the Samson-Liberty policy would be understood to cover any party the policyholder agreed by written contract to cover. This reading appears to best reflect the intent of the parties, since the alternative, i.e., reading the language without the verb "to add," would make no sense, and an insurance policy must be construed reasonably and must be given a practical construction.