HNRK Coverage Corner

On December 4, 2018, Justice Lebovits of the New York County Supreme Court issued a decision in Chelsea Piers, L.P. v. Colony Ins. Co., Index No. 150402/2017, holding that a purchase order signed by a contractor triggered coverage for the property owner under the additional insured endorsement to the contractor’s CGL policy.

The policy at issue in this case provided additional insured coverage for “any person or organization for whom you [i.e., the contractor] are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization is an additional insured on your policy.”.  The only written agreement was a purchase order, executed by the contractor, which provided that the contractor would indemnify the property owner, and that the contractor’s “general liability insurance shall apply on a primary and non-contributory basis with respect to all protection provided to Chelsea Piers [i.e., the property owner].” Chelsea Piers tendered the defense of an injury lawsuit by an employee of the contractor to the CGL carrier (Colony Insurance).  Colony denied coverage, arguing that (1) the purchase order was not a “written contract” because it was not signed by both parties; and (2) the purchase order fails to state expressly that the contractor is required to provide additional insured coverage to the property owner. 

A coverage action followed.  Justice Lebovits granted summary judgment to Chelsea Piers on the issue of Colony’s duty to defend the lawsuit. The Court held that the fact “that the Purchase Order is not signed by both parties is of no consequence, where, as here, [the] policy merely requires a written contract not a signed one.”. Further, Justice Lebovits found that the purchase order satisfied the “written contract” requirement of the additional insured endorsement, explaining:

[T]he Purchase Order’s language does not lend itself to more than one interpretation, but unambiguously provides that Chelsea shall have coverage under the contractor’s general liability insurance. Colony argues that, while this appears to be the presumption, because the Purchase Order fails to "expressly and specifcally" state so, no additional insured coverage is available. (Trapani v. J O Arial Way Assoc., 30 1 AD2d 644, 647 [2d Dept 2003] [stating that "'(a] provision in a construction contract cannot be interpreted as requiring the procurement of additional insured coverage unless such a requirement is expressly and specifically stated"] .) It also argues that "contract language that merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured.'' (Id. [denying additional insured coverage where contract merely required contractor to provide a certificate of insurance demonstrating that contractor had certain types of coverage]; accord Mangano v Am. n Stock Exch. , 234 AD2d 198, 198-199 (1st Dept 1996] [finding no contractual obligation to procure insurance coverage for fourth-party plaintiff, where contract required fourth-party defendant to obtain insurance without requiring it to name fourth-party plaintiff as an insured].) But, here, the Purchase Order makes express reference to Chelsea and states that Chelsea is to be covered under the contractor's general liability policy. To interpret it as merely requiring EPS to procure coverage for itself, would render meaningless large portions of the Purchase Agreement, namely:

“Lessee’s, contractors, vendors, etc. general liability insurance shall apply on a primary and non-contributory basis with respect to all protection provided to Chelsea Piers thereunder. In addition, the general liability insurance shall provide that no act or omission of lessee, contractor or vendor will in any way effect or reduce the insurance coverage available to Chelsea Piers thereunder.”

While Colony insists that the language is, at best, ambiguous, Colony fails to provide an alternate interpretation. Therefore, defendants fail to demonstrate the absence of the requisite written contract. (See Christ the King Regional High Sch. v Zurich Ins. Co. of N. Am. , 91 AD3d 806, 808 [2d Dept 2012] [finding that the insurance policy’s written agreement requirement for additional insured coverage was satisfied, where the named insured was contractually required to “to provide a ‘(c]ertificate of [i]nsurance freeing [the plaintiff] of all liability, because “the relevant contractual provision . . . refer[red] directly to the (plaintiff, [and could not] be interpreted as requiring only that [the named insured] obtain liability insurance for itself, as that would render the phrase ‘freeing [the plaintiff of all liability’ meaningless”.)

Determining who qualifies as an additional insured under a contractor’s CGL policy is a frequently disputed issue in construction-related insurance coverage matters.  (See our previous posts on this topic.)  Property owners, project managers and general contractors are well-advised to review the additional insured endorsement in a subcontractor’s CGL policy before work commences to confirm that all the requirements for coverage are satisfied.