Recently, in Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire and Marine Ins. Co., et al., the New York Court of Appeals affirmed that an insurer was not obligated to defend and indemnify construction managers as additional insureds where the policy at issue specifically limited coverage to entities with whom the primary insured had contracted in writing to add to the policy.
In this case, Dormitory Authority of the State of New York (“DASNY”) contracted with general contractor, Samson Construction Company (Samson) to build a forensic laboratory for use by New York City’s Office of the Chief Medical Examiner. Additionally, DASNY entered into a separate agreement with Gilbane Building Company and TDX Construction Corporation (hereinafter “Gilbane”) which designated Gilbane as the construction manager for the job site.
Under the terms of the original construction agreement between Samson and DASNY, Samson was required to obtain general liability insurance with an endorsement naming construction manager Gilbane as an additional insured. To comply with this request, Samson obtained general liability insurance coverage from Liberty Insurance Underwriters (“Liberty”) which contained the following provision entitled “Additional Insured-By Written Contract,”:
“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 you operations or premises owned by or rented to you.”
Ultimately, conflict later ensued after the construction of the forensic laboratory. Specifically, DASNY sued Samson and the project architect, alleging that Samson negligently removed a section in the excavation support system, which caused settling in the foundation of a neighboring building. As a result, the project architect then initiated a third-party action against construction manager Gilbane. Once Gilbane received notice of the pending suit against it, Gilbane provided notice to Liberty seeking defense and indemnity under the policy, which Liberty disclaimed. Consequently, construction manager Gilbane brought an action seeking declaration that the insurer was obligated to defend and indemnify it as an additional insured under the CGL policy issued by the insurer to general contractor Samson.
The New York Court of Appeals ultimately affirmed the lower court’s finding that Liberty did not owe a duty to defend and indemnify construction manager Gilbane. In reaching this decision, the court determined that the terms of the policy at issue required a written contract between the named insured and an additional insured, if coverage was to be extended to an additional insured. The Court further noted that because Gilbane had no written contract with Samson denominating it an additional insured, no coverage was owed to Gilbane under the policy.
This decision has made clear the importance of consulting with an attorney to ensure that you have properly obtained additional insured status and to fully understand the scope and limitations on this type of coverage.
