In Selective Insurance Co. v. Hospicomm, Inc., 2014 WL 4722776 (N.J. Super. A.D., Sept. 24. 2014), the Appellate Division of the New Jersey Superior Court applied New Jersey law to affirm a trial court decision finding that an insurer that had issued a general liability policy to a general contractor need not defend all claims against the contractor where only some of the claims were covered. The Appellate Division also applied New Jersey law in that case to reverse a trial court order concluding that the general contractor was an additional insured under a policy issued to the its subcontractor.1
The Selective decision arose from the general contractor’s construction of an assisted living home. Hospicomm, 2014 WL 4722776, at *1-3. After construction was completed, cold weather caused water pipes at the home to burst, triggering fire suppression sprinklers and resulting in water damage. The general contractor and its subcontractor were subsequently named as defendants in a number of lawsuits brought by various parties. The claims against the general contractor sounded in negligence, breach of contract, breach of warranty, and intentional violation of New Jersey’s consumer protection statute. Hospicomm, 2014 WL 4722776, at *1. In response to these claims, the general contractor sought a defense from (1) the insurer that had issued it a general liability policy, and (2) the insurer that had issued general liability coverage to the subcontractor. The general contractor asserted that it was an additional insured under the subcontractor’s coverage.
The Appellate Division first affirmed a trial court decision limiting the defense available under the general contractor’s own policy to claims sounding in negligence. Hospicomm, 2014 WL 4722776, at *5-6. The general contractor was not entitled to a defense against claims based on breach of warranty, contract, and statute because those claims focused on the general contractor’s failure to supply a sprinkler system in a workmanlike manner. Id. at 5. The court stated that “CGL policies do not cover an accident of faulty workmanship but rather faulty workmanship which causes an accident.” Id. (internal citation and quotation omitted). The fact that the general contractor was entitled to a defense to negligence-based claims did not change this result because the contract, warranty, and statutory claims did “not represent conflicting theories for the same claim . . . . but rather constitute[d] separate claims for damages. . . .” Id. at 6.
The Appellate Division also found that the general contractor was not an additional insured under the subcontractor’s policy. Hospicomm, 2014 WL 4722776, at *6-7. The subcontractor’s insurance broker had issued the general contractor a certificate of insurance stating that the general contractor was an additional insured under that policy. But the certificate also stated that it was informational only, that it was not a contract, that it conferred no rights on the certificate holder, and that the additional insured must be identified as such in the policy. The policy did not expressly name the general contractor as an additional insured, and while it provided coverage to any party that the subcontractor was contractually obligated to add as an additional insured, the general contractor did not meet that requirement. The Appellate Division therefore reversed a trial court decision finding that the general contractor was an additional insured under the subcontractor’s policy.
Hospicomm is significant for two reasons. First, the decision makes clear that where a complaint asserts both covered and non-covered claims that do not merely raise conflicting theories of recovery, under New Jersey law an insurer will only be required to provide a defense against the covered claims. Second, the decision constitutes another example of a court refusing to find that a party is an additional insured based merely upon the party’s identification as such in a certificate of insurance.