Acts by policyholders that can invalidate coverage— such as misrepresentations, or even nonpayment of premiums—often do not impair the rights of additional insureds. Recent decisions in New York and Florida show that this immunity does not apply to defenses based on the underlying invalidity of the insured risk.

Admiral Insurance Co. v. Joy Contractors arose out of the collapse of a tower crane during construction of a high-rise building in Manhattan. The crane operator’s excess liability policy with Admiral identified the building’s owner as an additional insured. Admiral sought to avoid coverage for the owner, because the operator’s underwriting submission had falsely stated that it did not perform exterior work, and that it performed no construction work above two stories. In response, the owner cited cases in which policyholders’ misrepresentations did not affect coverage for additional insureds.

In one such case, an auto policy made a dealer an additional insured, but it misidentified the insured lessee. New York’s Court of Appeals distinguished this case, on the ground that the misstatement “did not deprive the insurer of . . .[an] opportunity to evaluate the risks for which it was later asked to provide coverage.” That is, the insurer was misled about who would drive the car, but it still understood it was insuring the dealer against theft. By contrast, the crane operator’s false statements to Admiral prevented the insurer from anticipating that it would insure any party against the collapse of a crane.

In Interstate Fire & Casualty Co. v. Abernathy, the holder of a liability policy supplied an inflatable bungee run to the Choctaw Touchdown Club for its Jellyfish Festival, with predictably tragic consequences. Four days after a young girl was injured, the policyholder obtained a Certificate of Insurance, naming the club as additional insured. A Florida Appellate Court held that any agreement to provide the club with coverage for the accident would be void under the known loss doctrine; the claimant’s status as additional insured did not mitigate the force of that fundamental defense.