Where contractor was expected to make the construction manager (“CM”) an additional insured under its general liability policy, but failed to do so, the contractor’s insurance companies had no duty to provide coverage to the CM.
The contractor’s insurance policies provide additional insured status to those with whom the contractor enters into written contracts. Where the CM, Morse Diesel, had no written contract with the contractor, it would not be an additional insured pursuant to the terms of the policies. In the case of Lanarello v. City University of New York, 774 N.Y.S. 2d 517 (2004), the court found that even if the CM were a third-party beneficiary of the contracts between the contractors and the project owner, that would merely give the CM standing to sue the contractors for breach of their contractual duty to the project owner to name the CM as an additional insured under their policies. This would not, however, create any independent duty of the insurance carriers to rewrite their policies to name the CM as an additional insured. Moreover, the fact that the insurance companies had issued certificates naming a predecessor construction manager as an additional insured, did not require them to treat Morse Diesel as an additional insured since that firm had not been specifically named as such and since Morse Diesel did not show that it had relied on the certificates that had been issued to its predecessor.
Practice Note: As indicated in the court’s decision, a contractor’s general liability insurance policy may state that parties with which it enters into signed contracts will be considered “additional insureds” under the policies. According to that language, third parties that are not in direct contract with a contractor will not be given additional insured status. For such a third party to become an additional insured, a request will need to be made of the insurance carrier and a certificate of insurance will need to be issued by the carrier to make a special exception to name such a third party as an additional insured. Unless that is done, the third party has no recourse directly against the contractor’s insurance company. For these reasons, it is important to dot the I’s and cross the t’s when it comes to requesting and tracking certificates of insurance.
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. 6, No. 6 (Sep 2004).
Copyright 2004, ConstructionRIsk.com, LLC