The New York Court of Appeals, in a split decision, has focused on one word in deciding that a owner’s construction manager was not entitled to additional insured status on the general contractor’s policy.

The contract required the GC to include the owner, DASNY, the State of New York, and the owner’s construction manager as additional insured parties. The contract included a sample certificate of insurance identifying each of those parties.

The GC’s policy, though, included the following definition (emphasis added):

WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.

The Court of Appeal held that the GC did not enter into a contract “with” the construction manager, and so the construction manager was not a party “with whom” the GC had agreed to include as an additional insured. Thus, the Court of Appeal construed the phrase “with whom” as modifying the phrase “by written contract.” And said that absent the word “with,” the construction manager would have been included. Finally, the appellate court held that the definition was not ambiguous, and so principles of interpretation of an ambiguous term would not come into play.

The dissent goes on at greater length, exploring the nuance of the policy definition. It stated that “the majority focuses on a single word in the blanket additional insured endorsement at issue while ignoring others, thereby finding clarity where none exists.” Which aptly describes the situation, in my view. Noting that the language “is awkward and unclear, at the very least,” the dissent would have ruled that the phrase “by written contract” modifies “to add.” And not “with whom.” That reading further comports with normal expectations for the scope of additional insured coverage.

So a party who, by industry expectation and by standard convention, should have had additional insured status for claims arising from the general contractor’s work, has been left to shoulder the risk arising from the GC’s operations with its own coverage. The carrier is likely the only one arguing that this was the intent. A poor interpretation of an awkwardly-written clause.

Owner’s reps and other owner consultants may want to insist on reading the prime contractor’s additional insured language.

The case is Gilbane Bldg. Co./TDX Constr. Corp. v St. Paul Fire & Mar. Ins. Co., 2018 N.Y. LEXIS 490 (NY Court of Appeal, Mar. 27, 2018).