Where a named insured under the commercial general liability (CGL) policy failed to comply with the claim notice provisions of its policy, the insurance company denied coverage to additional insured entities despite the fact that those entities provided timely notice and documentation of claims against them.  A trial court granted the carrier’s declaratory judgment action – declaring there was no coverage due to the Named Insured’s failure to meet the notice provisions of the policy.

This was reversed on appeal, with the appellate court holding although the named insured and additional insureds were under the same policy, only the named insured had a duty to provide notice to the carrier of the “occurrence,” which was bodily injury to a laborer.  Nothing in the policy, said the court, made coverage for the additional insureds contingent on the named insured’s compliance with its independent duty under the notice provision.  Since the additional insureds complied with their own duty under the notice provision of the policy by giving prompt notice of a claim against them, they were entitled to coverage as additional insureds.

Another issue resolved in favor of the additional insureds was the question of whether the carrier could deny coverage to one of the additional insured entities because that entity was not named in the contract with named insured as one to whom additional insured coverage was owed.  In deciding there was coverage the court considered not only the contract but also the work order and the certificate of insurance.  The court looked at the totality of the circumstances.  Mt. Hawley Insurance Company v. Robinette Demolition, Inc., 994 N.E. 2d 973 (Ill. 2013).

The additional insureds complied with the notice requirements of the policy by providing timely notice of a laborer’s injuries and lawsuit.  The carrier argued that the court should consider the notice provisions in light of the policy’s separation of insureds provision, which provided:

“Except with respect to the Limits of Insurance, any rights or duties specially assigned in the Coverage Part to the first Named Insured, this insurance applies:  (a) As if each Named Insured were the only Named Insured; and (b) Separately to each insured against whom claim is made or ‘suit’ is brought.’”

By this language, the court states “the insurer recognizes an obligation to additional insureds distinct from its obligation to the named insured.”  The carrier, however, argued that for purposes of the policy notice requirements, the first named insured, and the additional insureds are under one policy, and it must then follow that the Named Insured’s breach of the notice requirement bars coverage for the additional insureds as well as for itself.  But the court rejected that argument, saying that while the Named Insured and the additional insures were under the same policy for purposes of the Named Insured’s duty to notify the carrier of the accident, it was only the Named Insured that had the duty to provide notice of the occurrence.

The court went on to explain, “Moreover, a court ascertains the parties’ intent from the policy language.  There is nothing in the notice provision of the policy making coverage for the additional insured contingent on the named insured’s compliance with its duty to notify…. Since the defendants [additional insureds] complied with their duty under the notice provision of the policy, they are entitled to coverage as additional insureds.”


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. 16, No. 4 (Apr 2014).

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