In American Ins. Co. v Schnall, the Appellate Division, First Department recently dealt with the issue of whether blanket additional insured coverage could be triggered simply by an agreement between the parties to procure such coverage – without an indemnity agreement between the parties.

Brooklynbaca, LLC, doing business as The Brooklyn Star operated a bar and restaurant in the Brooklyn neighborhood of Williamsburg. In order to better serve its (hipster) patrons, Brooklynbaca contracted with Scientific Fire Prevention Company to install a cooking exhaust duct in the restaurant.  The service agreement contained an insurance procurement provision in favor of Scientific but Brooklynbaca did not assume Scientific’s tort liability.  A fire erupted in the restaurant’s kitchen damaging the building owner’s property.

American Insurance Company insured Brooklynbaca under a liability policy. Scientific sought coverage under the American policy’s additional insured endorsement which provided coverage to organizations that Brooklynbaca was “required by a written insured contract to include as an insured.”  The parties became embroiled in litigation and Scientific sought a declaration that it was entitled to additional insured coverage.  A New York State trial court denied the insurers’ motion for summary judgment and an appeal followed.

The First Department reversed the trial court finding that although the service agreement contained an insurance procurement provision it did not require that Brooklynbaca assume any tort liability on the part of Scientific.  As such, without a clause requiring Brooklynbaca’s assumption of tort liability, the service agreement did not constitute a “written insured contract.”  The First Department thus found that Scientific was not entitled to additional insured coverage under the American policy.

Thanks to Steve Kaye for his contribution to this post and please write to Mike Bono for more information.