When determining an insurer’s obligations to provide insurance coverage to a purported additional insured, courts will scrutinize the precise language of an additional insured endorsement very closely. In insurance disputes involving construction contractors, the insurance policy and not an underlying agreement between the parties will ultimately control.

In the recent decision of Gilbane Building Co./TDX Constr. Corp. v. St. Paul Fire and Marine Ins. Co., which we discussed in Of Interest, the New York Court of Appeals held that where an additional insured endorsement requires a direct contract between the named insured and the party seeking coverage, additional insured coverage will not be afforded to any party not in direct contractual privity with the named insured. We are now seeing the first few cases interpreting Gilbane making their way through the lower courts.

In Turner Constr. Co. v Endurance Am. Specialty Ins. Co.,  the Appellate Division, First Department was faced with interpreting language very similar to the policy in Gilbane. DASNY, the owner of the project, retained Skidmore Owings & Merrill, LLP to provide architectural services. Skidmore contracted with Turner Construction Company for Turner to provide construction management services. DASNY also hired KJC Waterproofing, Inc. for the roofing and exterior waterproofing work. KJC subcontracted the installation of the garden roofing to Plant Fantasies, the underlying plaintiff’s employer. Pursuant to the DASNY-KJC contract, KJC obtained insurance coverage from Endurance along with an excess liability policy from Everest National Insurance Company. Turner and Skidmore commenced a declaratory judgment action against Endurance and Everest, seeking a declaration that Endurance was obligated to defend and indemnify them as additional insureds under the Endurance policy.

The additional insured endorsement in the Endurance policy defined insured as “any person or organization with whom you agreed, because of a written contract or written agreement or permit to provide insurance such as is afforded under this policy, but only with respect to your operations, your work or facilities owned or used by you.”

The First Department relied upon its decision in Gilbane, upheld by the Court of Appeals, in its interpretation of the Endurance additional insured endorsement. In order to obtain additional insured status, Turner and Skidmore were required to have a direct contract with Endurance’s named insured, KJC. Because neither Turner nor Skidmore had such an agreement with KJC, they could not qualify for coverage under the additional insured endorsement. Thus, Endurance was not obligated to defend or indemnify them in the underlying action.

Thanks to Jorgelina Foglietta for her contribution to this post and please write to Mike Bono with any questions.