HNRK Coverage Corner

On July 10, 2018, Justice Schecter of the New York County Commercial Division issued a decision in J.T. Magen & Co., Inc. v. Atlantic Cas. Ins. Co., 2018 NY Slip Op 31584(U), holding that an unsigned purchase order could satisfy the requirement of a “written contract with the Named Insured” to qualify for coverage under an Additional Insured Endorsement to a CGL Policy. J.T. Magen & Co. involves a frequently-litigated coverage issue in construction-related matters – determining who qualifies as an additional insured under a blanket additional insured endorsement to a contractor’s CGL policy. 

The plaintiff in this case was a general contractor seeking coverage under a sub-contractor’s CGL Policy.  The policy at issue stated that to qualify as an additional insured, there must be "a written contract with the Named Insured." Justice Schecter held that an unsigned purchase order that the GC sent to the subcontractor could satisfy the “written contract” condition, explaining:

Where, as here, an insurance policy provides that a condition precedent to becoming an additional insured is a written agreement between the named insured and the additional insured, the existence of an unsigned purchase order can satisfy this condition. Zurich Am. Ins. Co. v Endurance Am. Speciality ins. Co., 145 AD3d 502, 503 (1st Dept 2016) (defendant's policy required "a 'written' contract not a 'signed' one"). There is no contrary controlling authority. Arch's reliance on Cusumano v Extell Rock LLC, 86 AD3d 448 (1st Dept 2011), is misplaced as that case involved a policy that expressly required an "executed" agreement. Id. at 449; see Zurich, 145 AD3d at 503-04 ("As the motion court in Cusumano found, the insurer analogous to defendant in the case at bar expressly included the word 'executed'in[ ] its Policy, thereby requiring that any agreement ... be memorialized in a signed contract"). The Arch Policies have no such requirement; they merely require a written agreement, not an executed agreement. Likewise, while the policy in Nat 'l Abate men/ Corp. v Nat 'I Union Fire Ins. Co. of Pittsburgh. PA, 33 AD3d 570, 571 (1st Dept 2006), "like the subject policy, merely required a 'written contract' ... the issue in National Abatement was whether a written contract existed at the time of the accident." Zurich., 145 AD3d at 504. Here, the Purchase Order is dated February 1, 2005 and predates the Arch Policies by more than two months.

That said, the Purchase Order provides spaces for signatures. Though the Arch Policies do not require signatures, Arch suggests that the absence of any signatures establishes that plaintiff and Piermount never formed a binding contract. Arch is wrong. As plaintiff explains, an unsigned purchase order can evidence a binding agreement if there is evidence that the parties intended to be bound by the unsigned writing. See LMIII Realty. LLC v Gemini Ins. Co., 90 AD3d 1520, 1521 (4th Dept 2011) ("The purchase order was an enforceable agreement despite the fact that it was unsigned because the evidence in the record establishes that the parties intended to be bound by it."); see also Netherland Ins. Co. v Endurance Am. Specialty Ins. Co., 157 AD3d 468, 468-69 (1st Dept 2018) (holding that "Bid Proposal Document" evidencing agreement in which contractor was obligated to name owner as additional insured satisfied policy's "written contract" requirement). Plaintiff submitted evidence from which a reasonable finder of fact could conclude that the Purchase Order reflects the terms of a binding agreement with Piermount. See Dkt. 240 at 11 ("Piermount provided certificates of insurance indicating that [plaintiff] was an additional insured on the Arch [Polcies]": "Piermount performed the work on the Project and was paid for the same"); Dkt 251. Arch, by contrast, proffers no dispositive evidence to the contrary. Plaintiff, therefore, at the very least has raised a question of fact regarding whether it had the "written contract" required by the Arch Policies.

Property owners, construction managers and general contractors typically require “downstream” parties on a construction project (i.e., subcontractors) to provide CGL coverage to them.  This is usually accomplished by means of a blanket additional insureds endorsement on the contractor’s policy.  But the would-be additional insureds need to ensure that their relationship with the named insured is structured to meet the requirements of the additional insured endorsement.  The purchase order was sufficient to avoid summary judgment here – and may ultimately do the trick.  But a formal written contract would have eliminated all doubt, and presumably would have been easy enough to prepare.