Many liability policies contain provisions, typically in endorsements, automatically bestowing additional insured status on third parties when called for in certain types of contracts. These endorsements usually require that such contracts be in writing and signed by both parties prior to the date of the event for which coverage is sought. In Selective Ins. Co. of Am. v. BSA, No. 15-0299, 2018 U.S. Dist. LEXIS 56178 (E.D. Pa. April 2, 2018), a Philadelphia federal judge recently enforced the signed written agreement requirement as an unambiguous condition precedent to coverage, denying additional insured status where the underlying contract had not been signed by the named insured.
At issue was a Blanket Additional Insured clause which provided coverage to any organization that the insured, Keystone College, agreed to add to the policy in a written contract, so long as the contract was signed by both the named insured and the additional insured before any loss. The Boy Scouts of America (“BSA”) sought coverage under this provision after a Keystone student was injured on campgrounds owned by BSA. The campground rental agreement required that Keystone add the BSA as an additional insured. Crucially, however, Keystone never signed it.
Rejecting the BSA’s argument that Keystone’s post-accident ratification of the contract sufficed to make BSA an additional insured, the Court held that Selective was entitled to insist upon true compliance with policy’s express requirement of “a written agreement signed by both parties.” The Court thus distinguished the legally-irrelevant issue of whether the policy holder and the BSA had entered a binding agreement among themselves from the distinct, and controlling, issue of whether the policy’s express conditions for automatic coverage had been satisfied. Because they were not, the court refused to find that the third-party agreement expanded the insurer’s coverage obligations under the policy.
The takeaway from this decision is that insurers are entitled to insist that unambiguous conditional language of policies be enforced as written. The relevant inquiry was not whether the parties to the incompletely-executed underlying contract considered themselves bound to it, but whether those conditions had been complied with. As is should be, the insurer was only bound by the terms it had agreed to in the policy, and the policyholder’s failure to comply with this unambiguous condition precedent precluded automatic additional insured status under the policy for its contractual counterparty.