It is easy for claims professionals, contractors, and others to look no further than an underlying contract when determining whether a tendering party qualifies as an additional insured. After all, when the promise to procure additional insured coverage is memorialized in a written contract, parties may expect the coverage to follow.
Of course, the experienced professional knows that insurance policy language determines additional insured status, not an underlying contract. But it is important to carefully parse policy language as well, because even judges are capable of struggling with the application of clear policy language. One additional endorsement that often causes confusion in the construction, legal, and insurance industries is the additional insured endorsement requiring contractual privity.
The Second Circuit recently addressed that issue in Cincinnati Insurance Company v. Harleysville Insurance Company. There, the injured claimant was the employee of a sub-subcontractor on a construction project who was injured while performing his job duties. After suit was filed, the general contractor’s insurer claimed its insured was an additional insured under the sub-subcontractors policy because the sub-subcontractor’s contract required it to name the general contractor as an additional insured.
Like many policies, the sub-subcontractor’s policy contained a blanket additional insured endorsement. However, that endorsement conferred additional insured status on a third party “when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.” When the issue was presented to the trial court, it ruled that the general contractor was an additional insured because the underlying contract required that party to be named as an additional insured, but the Second Circuit reversed.
Relying on relatively recent New York precedent, the Second Circuit reasoned that when interpreting the intention of parties to an insurance contract, courts are confined to the four corners of the policy, not extrinsic evidence such as underlying contracts. Because the policy required privity between the insured and purported additional insured, the general contractor was not an additional insured.
Cincinnati should serve as a reminder to always start with policy language when analyzing rights and obligations under a policy. Even then, words are to be afforded their actual meaning. We expect this decision to widely cited going forward, to support the privity requirement in assessing AI status. Thank you to Michael Gauvin for his contribution to this post. Please email Brian Gibbons with any questions.