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Where subcontractor agreed by contract to procure insurance for itself and the prime contractor, the prime was deemed to be insured under the subcontractor’s policy from the date it was issued without regard to the fact that the certificate of insurance naming it as an additional insured was not issued until several months later – long after an accident had occurred.

Navigators Insurance Company provided primary liability coverage to the subcontractor (A&B) under the Commercial General Liability (CGL) policy effective April 18, 1997.  The policy included a Blanket Additional Insured Endorsement.  As part of the policy, that endorsement was also effective on the date the policy was issued.

An accident occurred on May 1, 1997, causing personal injury to an employee of A&B.   The injured employee sued the project owner in a personal injury suit.  The city in turn cross-complained against the prime contractor.  Travelers Indemnity Company (Travelers) defended the city and the prime contractor, and paid to settle the lawsuit.  It then sued A&B’s insurer, Navigators Insurance Company, to recover under equitable subrogation.  Navigators refused to defend or indemnify the parties because it believed the insurance was not in force on the date of the accident.

It was only after the date of the accident that Navigators received a request for approval, via a certificate of insurance, identifying Esquivel as an additional insured.  Esquivel was named as a certificate holder on the certificate of insurance issued on August 4, 1997.  The certificate and an additional insured endorsement were approved by Navigator’s underwriter on August 7, 1997.  On that same date, the injured A&B employee also filed suit against the City.

The basic dispute between the insurance companies was that Travelers asserted that the blanket endorsement afforded coverage to Esquivel effective on the date the policy was issued to A&B.  Navigators countered that coverage under the blanket endorsement became effective when Esquivel, the additional insured, received Navigator’s approval.  The Court states that “the explicit contract language required A&B, not Esquivel, to procure and maintain insurance at its own expense.  Therefore, Esquivel was not required to make a direct request to Navigators to be added to A&B’s policy.”  The court also found that by including the blanket endorsement, A&B intended to provide coverage for Esquivel, a party with whom it was required to procure insurance per its contract.

As noted by the court, there are a number of cases holding that blanket endorsements automatically extend additional insured status to organizations or persons by virtue of the contract requiring insurance.  The result is that automatic insureds are considered additional insureds as of the date the named insured was required by contract to purchase insurance for another party.

Navigators’ blanket endorsement was different from the industry standard endorsement because it included a unique 30-day approval clause.  Navigators’ endorsement extended coverage to organizations or persons “that the named insured is obligated by virtue of a written contract or agreement to provide insurance such as is afforded by this policy and is approved by the company in writing within 30 days.”  The court concluded that this was patently ambiguous because it did not include a reference point for the 30-day period and it does not explain the basis for approval or disapproval.

In deciding in favor of Travelers against Navigators, the court held that nothing in the policy or blanket endorsement suggests that the parties intended that coverage for an additional insured covered by the blanket endorsement would begin on a different date than the policy itself.   The fact that A&B paid a premium for the blanket endorsement at the outset and did not pay additional premium when Navigators’ “approved” Esquivel confirms, says the court, that the parties intended that the blanket endorsement coverage would commence at the beginning of the policy period.  Travelers Indemnity Co. v. Navigators Insurance Co., No. C 99-4509 CRB, 2000 U.S. Dist. LEXIS 6702 (May 8, 2000).

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 2, No. 10 (Oct 2000).

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