New Jersey’s New Complex Litigation Rules — What’s New? (NJ)

Introduction and Background

As many have experienced, New Jersey Courts can become a quagmire in construction defect (and other complex) cases. To potentially fix this issue, on September 1, 2018 New Jersey implemented brand new Complex Business Litigation Program (“CBLP”) rules – rules that presumptively include all complex construction defect cases with a value above $200,000. This post is a general guideline on (1) what the CBLP changes; and (2) how to effectively utilize the CBLP in an advantageous fashion.

One Judge Per County

The CBLP requires each New Jersey county to designate a CBLP judge to rule on motions or otherwise preside over the inevitable discovery disputes common to CD cases. This particular rule, §4:102-3, should hopefully allow more prompt discovery rulings that allow cases to progress quicker than the current system.

Result: The new CBLP rules will likely result in a more efficient discovery practice as the presiding Judge will be familiar with complex construction actions and the complications of the same.

Initial Conference

  1. §4:103 requires all parties, prior to (a) discovery commencing; and (b) an initial case management conference, to hold a conference among all counsel. This initial conference is where smart litigants can really obtain an advantage. During this conference, counsel is required to:
  2. Set initial case deadlines, including deposition and discovery end dates;
  3. Set deadlines for initial disclosures;
  4. Set limits for discovery requests. The current CBLP rules limit discovery requests to 15 interrogatories per party, including sub-parts, unless otherwise stipulated or ordered by Court.
  5. Set limits for the hours and amounts of depositions. The CBLP Rules presumptively limit, unless otherwise stipulated by the parties or ordered by the Court, a limit of 70 hours for plaintiff depositions and 70 hours total for all defendant depositions.

This conference is where a smart litigator can utilize the rules in a fashion to craft an advantage for a client. Is the client a 3rdor 4thparty defendant with limited liability? If so, it would be best to limit discovery as much as possible. Is the client the target defendant? If so, it would be best to expand discovery as much as possible.

Result: If played properly, the new rules allow for tactical decisions to benefit the client and/or limit defense costs.

Initial Disclosures

As noted above, initial disclosures are now required in all CBLP cases. The disclosures include the following information: (1) all relevant insurance policies; (2) identity of individuals with discoverable information; (3) initial relevant documents or categories of relevant documents; and (4) alleged damages.

The Initial Disclosures are a blessing for risk-transfer purposes. Often, through the intransigence or indifference of counsel, the actual insurance policies often must be subpoenaed – which is not a short process. Consequently, the new CBLP rules allow the risk-transfer phase of construction litigation to commence at an earlier stage. Specifically, this allows initial tenders and specific responses at an earlier date – which starts the clock for potential reimbursement of costs and/or fees.

Result: The inclusion of the mandated exchange of insurance policies is a massive benefit to the program. Moreover, the disclosures additionally require all parties to disclose the identities of individuals with relevant information at an early stage, without specific requests, This can also allow the early joinder of relevant parties as well as an analysis of possible contribution and/or risk-transfer possibilities.

Meet and Confer

However, with respect to discovery motions, the new CBLP rules also require the parties to “meet and confer” prior to the filing of the motion. This is similar to the requirement in Federal Courts, that require the relevant parties to attempt to resolve the dispute in good faith prior involving the Courts.

Result: Parties will likely no longer unreasonably withhold discoverable information that another party is entitled to. Discovery motions will no longer be commonplace but rather only result where a genuine dispute exists between the parties.


These new rules are designed to streamline the litigation process.  Whether or not they actually effectuate change and make construction defect litigation more efficient remains to be seen.  We’re only two months into the new rules, so much remains to be seen!

Thanks to Matt Care for his work on this post.  For more information about it, please contact ">Bob Cosgrove.

Measure Twice, Cut Once – Invalid Agreement Nullifies Claim for Arbitration (PA)

On April 27, 2018, the Superior Court of Pennsylvania affirmed the trial court’s decision to deny a defendant’s preliminary objections to compel arbitration in Brennan v. NVR, Inc.,  Plaintiffs Terrance and Gladys Brennan executed a purchase agreement with defendant NVR, Inc. (NV Homes) for the construction of their home.  The agreement stated that the purchaser would receive a limited warranty before settlement on the home, which contained language mandating binding arbitration.  The plaintiffs did not receive a copy of the limited warranty until nine months after settlement.

Prior to settlement, the plaintiffs had an inspection done which identified defects in the house-wrap, flashing, and window installation which would allow water intrusion.  The plaintiffs brought these findings to NVR’s project manager prior to settlement who reassured them that NVR would take care of the issues.  Based on this representation, the plaintiffs completed settlement.  After settlement, however, the plaintiffs noticed water leaks around their doors, windows, and walls and a subsequent inspection found that the original defects had not been fixed.

The plaintiffs filed a complaint alleging fraudulent misrepresentation and violation of Pennsylvania’s unfair trade practices and consumer protection laws. NVR filed preliminary objections in the form of a motion to compel arbitration based on the warranty agreement.  The trial court overruled these preliminary objections and ordered NVR to file an answer.  NVR then filed an appeal.

First, the Superior Court first found that an order denying a motion to compel arbitration is immediately appealable in Pennsylvania, which allowed the Court to examine the agreement on the merits.  The court next moved to whether the arbitration agreement was enforceable.  To decide whether arbitration should be compelled, courts use a two-part test: 1) does a valid agreement to arbitrate exist; and 2) is the dispute within the scope of the agreement.  Here, the court found that there was no valid agreement to arbitrate.  First, the original purchase agreement did not contain an arbitration clause.  Next, the warranty that does mention mandatory arbitration was never signed by the plaintiffs, was buried in the homeowner’s manual, and was only provided to them nine months after settlement.  Even if there was a valid agreement, the court found that it would not fall within its scope as the warranty only dealt with disputes over improper construction of the home and not claims for fraudulent misrepresentation.

An agreement must be valid and cover the scope of the dispute.  If a company provides a clear and well-drafted agreement, then it can avoid the costs and risks, known and unknown, presented by trial, by moving a case into arbitration. Here, the contractor included an arbitration agreement in the HO manual, but never mandated its execution before settlement on the home.  As such, there was no de facto agreement in place.

This decision also highlights prudent pleading by plaintiff’s counsel — by alleging fraudulent misrepresentation instead of improper construction, plaintiff’s suit did not fall within the scope of the arbitration agreement, even if the agreement were valid.  Thanks to Peter Cardwell for his contribution to this post.  Please email Brian Gibbons with any questions.

The Last Domino Falls: New Jersey Is Now Officially “Continuous Trigger” on CD Cases.

It was a long time in the making (or preventing), but New Jersey is now officially a continuous trigger jurisdiction when it comes to construction defect litigation and CGL policies.

In the case of Air Master v. Selective Insurance, the appellate court was faced with a “typical” NJ construction defect case, i.e. a large condominium complex which years after completion experienced water infiltration and resulting damages.

The case’s key facts are:

• Air Master’s work was conducted between November 2005 and April 2008;

• Water damage (allegedly resulting from the work) was noticed as soon as February 2008;
• But, it was not until April 2010 that an “expert” documented the water issues;

• Penn National insured Air Master from November 2005 to April 2008;

• Selective insured Air Master from June 2009 until June 2012; and

• Harleysville insured Air Master from June 2012 to June 2015.

The Superior Court, in an approved for publication decision, was effectively asked to determine whether Selective’s policy obligations were limited to “property damage” that occurred during its policy periods. In a 29 page opinion, the Superior Court held that:

(1) a “continuous trigger” theory of insurance coverage may be applied in this State to third-party liability claims involving progressive damage to property caused by an insured’s allegedly defective construction work.

(2) the “last pull” of that trigger — for purposes of ascertaining the temporal end point of a covered occurrence — happens when the essential nature and scope of the property damage first becomes known, or when one would have sufficient reason to know if it.

(3) the “last pull” of the trigger does not occur until there is expert or other proof that “attributes” the property damage to faulty conduct by the insured.

So, what does all of this mean? The bad news (especially for Selective in the case at bar) is that insurers will no longer able to argue that, in the absence of evidence of “property damage” during the policy period, there is no coverage — so, earlier in time insurers are likely to bear more risk. But, the good news is that the “trigger” ends (it seems) when there is actual or constructive notice of the “property damage” — which means that later in time insurers should be able to limit coverage…if they can establish notice of the problems.

The last domino has finally fallen, but a new game is about to begin.

For more information about this post please e-mail Bob Cosgrove.

Construction Defect Claim Accrues When Any Property Owner Knows of Potential Claim (NJ)

Condominium construction defect cases present thorny issues for contractors caught up in litigation years after the work is completed.  Statute of limitations defenses are often raised with a key issue being whether the trigger is substantial completion of work or whether the statute has been tolled for discovery.

In the recent case of The Palisades at Fort Lee Condominium Association, Inc. v. 100 Old Palisades, LLC, the New Jersey Supreme Court ruled that a construction defect cause of action accrues at the time the building’s original or subsequent owners first knew or, through the exercise of reasonable diligence, should have known of the basis for a claim.

In Palisades, the plaintiff condominium association filed several suits against contractors in 2009 and 2010 after it assumed control of the Board and had its own engineer investigate conditions on the property.  However, the history of the building began years earlier.  The building was constructed beginning in 1999 with substantial completion in 2002.  Initially built as a residential apartment building, the original owner had an engineering evaluation performed in 2004 that found some issues with the construction but generally reported it to be in good condition.  That same year, the property was sold and converted to condominiums.

The public offering for the condominiums included the 2004 engineering report.  By July 2006, 75% of the units had been sold and control of the association turned over to the unit owners.  The association commissioned an engineering inspection by Falcon that found a number of defects identified in a 2007 report.

The defendants moved for summary judgment, arguing that the claim was barred due to the six-year statute of limitations using the 2002 substantial completion date as the trigger for the statute. The trial court agreed with the defendants.  The Appellate Court rejected this and found that the  action had not accrued until the 2007 Falcon report when the unit-owned association learned of the defects.  In doing so, the Appellate Court rejected potential notice of the original owner.

Ultimately,  the New Jersey Supreme Court struck a middle position.  It eschewed a substantial completion of work trigger, but found that the statute of limitations begins to run when either an original or subsequent owner first has a reasonable basis to believe that a cause of action exists.    The Court remanded the case for further findings on when an owner (original or subsequent) knew or should have known of a cause of action.  This case highlights the importance of obtaining specific and targeted discovery concerning the date that a plaintiff became aware of, or should have known of, a construction defect on their property.

Thanks to Heather Aquino Obregon for her contribution.

For more information, contact Denise Fontana Ricci at .



Continuous Trigger Coverage Expanding in PA or Still Only About Asbestos?

That was the question (effectively) posed before the Commonwealth Court in the case of Pennsylvania Manufacturers’ Association Insurance Company v. Johnson Matthey, et al. In the case (which was brought in the Commonwealth Court because PA’s Department of Environmental Protection was a defendant), Pennsylvania Manufacturers sought a declaration that it did not owe coverage for an environmental contamination lawsuit filed by DEP against Johnson Mathey. In the underlying lawsuit, DEP alleged that from 1951 through to 1969, a Johnson Mathey predecessor company allowed hazardous substances (arising out of the manufacture of alloy tubes) to escape into Chester County, PA. Pennsylvania Manufacturers insured Johnson Mathey from 1969 through to 1971. The contamination was not discovered until 1980 and thus no contamination at the Site was detected during the Policy period.

Pennsylvania Manufacturers, which assumed its insured’s defense under a reservation of rights, argued that for coverage to attach, the property damage must manifest itself during the policy period. The Commonwealth Court agreed with this basic coverage principle and noted that the “trigger of coverage under an “occurrence” insurance policy is ordinarily the first manifestation of the injury that is alleged to have been caused by the insured.” If only the decision had ended there!

However, the court went on to write that under the reasoning of the J.H. France Refractories Co. v. Allstate Insurance Co., 626 A.2d 502 (Pa. 1993) decision (which expanded the trigger of coverage with respect to asbestos bodily injury claims and held that all “occurrence” policies from the date of exposure to the date of first manifestation are triggered), there was no specific reason for continuous trigger coverage to be limited to asbestos cases. The Commonwealth Court wrote that “the justification for the multiple trigger of coverage was not the peculiar nature of asbestos disease, but the long latency of the claim for which coverage was sought.” Applying this reasoning to the facts at bar, the Commonwealth Court held “On the record before us, this case therefore presents the long latency of continuing, undetected injury or damage that supports a trigger of insurance coverage prior to manifestation under the Supreme Court’s decisions in J.H. France Refractories Co. and St. John.”

So, what does this mean for the insurance marketplace? What it means is that there are now, at least, two possible scenarios in which continuous trigger exposure applies in PA – asbestos and environmental pollution. We suspect to see the plaintiff’s bar citing Pennsylvania Manufacturers’ Association Insurance Company v. Johnson Matthey, et al. in other contexts – and our suspicion is that the attack will start in the construction defect arena. Stay tuned for what happens next!

For more information about this post please e-mail Bob Cosgrove.

What Lurks Within the 4 Corners of the Complaint?: Oregon Supreme Court Expands Scope of AI Coverage in Construction Arena

In a move that is sure to shakeup insurance underwriting, the Oregon Supreme Court, in West Hills Development Co. v. Chartis Claims, Inc., recently expanded the scope of coverage afforded by an Ongoing Operations AI Endorsement. What makes this case particularly interesting—or concerning, from an insurer’s standpoint—is that the underlying complaint clearly alleged damage based on the completed work of the contractors. Yet, the Oregon Supreme Court nevertheless read the complaint to trigger coverage for ongoing operations.  The state’s highest court affirmed an appellate court decision, effectively requiring an insurer to provide completed operations coverage, where none was obtained by the insured.

As in many faulty workmanship cases surrounding CGL policies, the underlying action involved defective work in the construction of a residential development. When the new homeowners of Arbor Terrace took up residence in their brand-new townhomes, they quickly discovered shoddy construction was causing significant water intrusion. The Arbor Terrace homeowners then sued the general contractor, West Hills Development Co, alleging negligent construction based on faulty workmanship.

West Hills then tendered the Arbor Terrace suit to its subcontractor, L&T Enterprises, and the sub’s insurer, Oregon Automobile Insurance Company. Oregon Auto denied coverage, among other reasons, because its policy only provided coverage to additional insureds for property damage occurring in the course of L&T’s ongoing operations performed for West Hills. As there were no allegations of damage to townhomes while L&T was actually working on the project, and L&T did not purchase Completed Operations coverage for additional insureds, West Hills did not qualify for coverage under the Oregon Auto policy.

After settling the Arbor Terrace action with the homeowners, West Hills commenced a DJ against Oregon Auto to recover defense costs incurred. West Hills argued that the Arbor Terrace complaint triggered Oregon Auto’s duty to defend because the allegations sufficed to create the possibility that West Hills would have been subject to liability for L&T’s ongoing operations. West Hills also argued that the Ongoing Ops endorsement applied to damages arising out of L&T’s ongoing operations, and this covered consequential damages that resulted from L&T’s work. Oregon Auto argued the underlying complaint did not allege any negligence on the part of its insured, only that West Hills was negligent. As the Oregon Auto policy did not cover West Hills for its own negligence, no coverage was owed. Further, Oregon Auto claimed coverage was only afforded if there were allegations of damages occurring while L&T was working on the Arbor Terrace project. Because no allegations were made, West Hills was not entitled to coverage under the policy’s ongoing operations endorsement. The trial court and court of appeals agreed with West Hills, and Oregon Auto appealed to the Supreme Court of Oregon.

Unsurprisingly, the potential that the state’s highest court would rule in favor of West Hills encouraged a plethora of amicus briefs, including ones from the Property Casualty Insurers Association of American, the National Association of Mutual Insurance Companies, and the Oregon Trial Lawyers Association. There were many issues on appeal, but the crux of the matter boiled down to whether the 4-corners of the complaint could be read to allege property damage caused by L&T’s ongoing operations performed for West Hills, despite the clear evidence the work on the Arbor Hills development was complete by the time the suit was filed.

Both the court of appeals and the Supreme Court of Oregon found one particular allegation by Arbor Terrace to be dispositive: the homeowners alleged the property damage occurred by the time they purchased their townhomes. Taking a broad interpretation of this allegation, the Court held it was possible the damages occurred earlier, and thus it did not rule out the possibility that damage occurred before L&T finished its operations. The Oregon Supreme Court performed some legal gymnastics in a strained reading of the Arbor Terrace complaint to find coverage was potentially triggered under the ongoing operations endorsement. As a result, although there were no allegations that damage arose before work was completed, the Court nevertheless found coverage because the complaint could be reasonably interpreted to allege damage to the Arbor Terrace properties before the homeowners purchased their townhomes.

Ignoring the syntax and grammar of the allegations (all in the past-tense and referring to prior work), the court concluded one allegation was sufficient to grant the insured more coverage than that which it bargained for (i.e., converting Ongoing Operations into Completed Operations coverage). This speculation on what could be meant by a party’s allegations exceeds the traditional scope of the 4-corners rule. Normally, an insurer compares the 4-corners of the complaint with the policy to determine whether anything alleged falls within the scope of coverage. If the allegations fail to plead facts that could trigger coverage under the policy, the insurer is relieved of its coverage obligations. Now (at least in Oregon), so long as the complaint does not expressly state facts ruling out coverage (e.g.,  no “occurrence,” injury/damage occurred before inception of policy, etc.) there would be a duty to defend. Undoubtedly, attorneys will use this to their benefit by making their allegations as ambiguously broad as possible, as a way to trigger coverage.

Thanks to Dan Beatty for his contribution to this post. If you have any questions about this post, please call or email Dennis Wade at for additional information.

WCM Awarded Summary Judgment in Philadelphia County Construction Defect Case.

Partner Bob Cosgrove and associate Erin Connolly were awarded summary judgment in the Pennsylvania Court of Common Pleas, Philadelphia County, in a construction defect lawsuit.
The case of Horowski v. Neal F. Rubin, et al. arose out of the new construction of a single family residence in Philadelphia, PA, which the plaintiffs bought and thereafter alleged to have been defective. As a result of the defects, the plaintiffs sued a number of parties, including the general contractor. In turn, the general contractor sued our client, a roofing subcontractor. In its joinder complaint, the general contractor alleged, inter alia, that our client’s roofing work was defective.
After the completion of discovery and depositions, we moved for summary judgment, arguing that there was no evidence demonstrating that Aklym’s work was defective. In support of our argument, we highlighted the depositions of the City’s inspector and the plaintiffs’ home inspector as well as the plaintiffs’ expert reports, all of which clearly demonstrated that our client’s work was not defective. Ultimately, the court agreed with our position and dismissed all claims against our client.
For more information about this post please e-mail Bob Cosgrove .

Faulty Workmanship Is Not An Occurrence (PA)

Construction defect claims raise insurance coverage questions when the damages sought are essentially for the work of the insured.  A federal court judge in the Eastern District of Pennsylvania recently ruled that an insurer had no duty to provide coverage or defend its insured, a contractor, for its negligent roof installation.

The case State Farm Fire and Casualty Co. v. Kim’s Asia Construction, stemmed from an underlying lawsuit filed by Powerline Imports, Inc. alleged that the State Farm’s insured, Kim’s Asia Construction negligently installed a new roof that leaked during minor rain storms. Kim’s Asia sought defense and indemnification from State Farm for the claim.

State Farm began defending Kim Asia’s under a reservation of rights but subsequently filed a declaratory judgment action.  State Farm argued that the underlying complaint essentially amounted to a claim of property damage based on faulty workmanship against its insured and that allegations of negligence against the insured did not bring the action within the scope of coverage. The court agreed with State Farm, ruling that State Farm had no duty to defend or indemnify Kim’s Asia under the policy.

The court cited the well-established four corners rule namely that “an insurer’s duties under an insurance policy are triggered by the language of the complaint against the insured.” See Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896 (Pa. 2006). In comparing the four corners of the underlying complaint to the insurance policy, the court held that leaks that arose from the contactor’s negligent installation of the roof were not entitled to defense or indemnity under the policy. Although Kim’s Asia argued that the leaks arose from alternative sources and were based upon claims of negligence, the analysis of the underlying complaint did not contain a causal nexus between the property damage and a fortuitous event, as required by the policy. The court, parsing the language of the complaint, arrived at the conclusion that the only claim alleged within the underlying complaint was faulty workmanship which does not qualify as an occurrence under the policy.

Thanks to Sathima Jones for her contribution.

For more information, contact Denise Fontana Ricci at .

Contract for Elevator Maintenance Creates Duty of Care (NY)

In Fajardo v. Mainco El Elec. Corp., the Second Department recently discussed how an elevator maintenance company assumes a duty of care to third-parties injured in elevators the company contracts to inspect and repair.

The case stems from injuries sustained by the plaintiff in 2008 in a building owned by defendant Underbruckner Realty Co., LLC and leased by defendant Bronx Center for Rehabilitation and Healthcare (“Bronx Center”) for use as a nursing home.

Plaintiff, a Bronx Center employee, was injured when he attempted to access the building’s freight elevator. The elevator became stuck between floors, and the plaintiff leaned into the elevator shaft, placed his foot on the top of the elevator, and attempted to call down to his co-workers on the floor below. The elevator’s hoist cable snapped, causing the elevator and the plaintiff to fall into the shaft. The plaintiff sued the building owner, the Bronx Center, and Mainco Corp., the elevator maintenance company that entered into an elevator repair agreement with the Bronx Center. Among the flurry of motions and cross motions made to the Supreme Court, Mainco moved for summary judgment dismissing the complaint insofar as asserted against it. The Supreme Court denied Mainco’s motion.

On appeal, the Second Department held that Mainco failed to demonstrate prima facie entitlement to summary judgment, because an elevator company that agrees to maintain the subject elevator may be liable to passengers for the alleged failure to discover or correct any dangerous conditions. Further, any party that enters into this type of services agreement “may be said to have assumed a duty of care – and thus be potentially liable in tort . . .  where the contracting party has entirely displaced the other party’s duty.” The Second Department found that Mainco’s maintenance agreement with the Bronx Center required Mainco to periodically inspect the subject elevator and to perform mandatory annual inspections. Further, the evidence indicated that the Bronx Center would report any and all elevator issues to Mainco, who would inspect the elevator, issue a repair proposal, and perform the required repairs upon acceptance of its proposal. Accordingly, the Second Department held that the Supreme Court properly denied that aspect of Mainco’s motion.

Thanks to Evan King for his contribution to this post.  Please email Brian Gibbons with any questions.

In a Surprising Change of Pace, the 1st Department Limits Scope of Additional Insured Coverage (NY)

In a decision that is sure to have substantial reverberations in construction coverage disputes, the First Department, Appellate Division recently ruled that blanket AI endorsements require contractual privity between the named insured and the party seeking additional insured status. In short, the decision upsets the status quo for AI coverage; where coverage is usually triggered as long as the named insured agrees in a contract to name the person/organization as an AI.

The facts surrounding Gilbane are standard fare as coverage disputes go: a construction manager, Gilbane Building Co./TDX Construction Corp. (TDX), was hired by the Dormitory Authority of the State of New York (DASNY) to provide services in connection with the construction of a 15-story building for use by the City of New York. DASNY also contracted with a general contractor to perform work on the project, and the contract required the GC to procure additional insured coverage for TDX and DASNY. The GC’s work caused structural damage to adjacent properties, which required DASNY to incur additional costs.

Thereafter, the GC and architects were sued for the negligent work, and the construction manager was impleaded by the architects. TDX then tendered to Liberty, the GC’s CGL carrier, seeking coverage as an additional insured. Liberty denied the tender, stating that it had not been provided with a contract whereby its named insured entered into a contractual relationship with TDX for additional insured coverage. The Liberty policy contained a relatively standard blanket AI endorsement naming as additional insureds “any person or organization with whom you have agreed to add as an additional insured by written contract…” TDX then commenced a DJ for a declaration that Liberty is obligated to provide defense and indemnification in connection with the underlying action.

The lower court denied Liberty’s summary judgment motion because the AI endorsement “requires only a written contract to which [the GC] is a party,” and the DASNY-GC contract satisfied this requirement. On appeal, the First Department reversed the Supreme Court’s decision, holding that the language in the Liberty AI endorsement “clearly and unambiguously requires that the named insured execute a contract with the party seeking coverage as an additional insured.” Interestingly, the cases cited by Liberty and relied on by the Court were previous decisions in which the AI endorsement granted coverage “when you and such organization have agreed in writing in a contract or agreement.”  TDX argued that this language materially differs from that included in the Liberty policy because it requires contractual privity, whereas the Liberty policy simply requires a written contract, any written contract, where the GC agreed to name TDX as an AI.

The Appellate Division rejected this argument because it “place[s] undue emphasis on the phrase ‘by written contract’ and completely ignore[s] the inclusion of the words ‘with whom’ as the object of the verb phrase ‘you agree’.” After a short grammar lesson, the court held the plain meaning of the Liberty AI endorsement is indistinguishable from the substance of the language in other endorsements. TDX also argued that was obvious from the DASNY-GC contract there was a clear intent for TDX to be named as an AI on the Liberty policy. The court noted that although this may be true, it does not mean “the policy issued by Liberty can be judicially rewritten to cover TDX.”

It’s also worth noting that the decision contains a lengthy dissenting opinion by Justice Kahn. In brief, the dissent would have found coverage for TDX for two reasons: 1) the DASNY-GC is a written contract where the GC agreed to name TDX as an AI, therefore triggering coverage; and 2) viewing the endorsement as ambiguous, all extrinsic evidence supports finding that TDX is an additional insured under the Liberty policy.  Last, the dissent makes a rather foreboding warning that “the majority’s unduly narrow reading of Liberty’s policy provision on additional insureds would upend the established customs and practices of the construction industry and its insurers.” Although the majority claims this dire prediction “rings hollow,” it nevertheless underscores the likelihood of increased coverage disputes pertaining to AI coverage.

Although the decision is recent, its potential effects cannot be understated. Many AI endorsements contain language identical to that in the Liberty policy. It is also commonplace for construction agreements, such as those promulgated by the AIA, to require a plethora of parties/entities as additional insureds.  If the CGL policy contains an AI endorsement similar to Liberty, this now requires that the contractor enter into separate contracts with all of those entities in order for additional insured status to extend.

It would not be surprising to see the Court of Appeals grant certification if TDX decides to appeal, particularly in light of the lengthy dissent. Nevertheless, over the past decade, courts have frequently expanded the scope and breadth of additional insured coverage. The decision in Gilbane may be a sign that there is a ceiling to an insurer’s assumption of risk under a blanket AI endorsement.

Thanks to Dan Beatty for his contribution to this post. If you have any questions about this post, please call or email Brian Gibbons at Brian Gibbons for additional information.