Landlord Found To Be An Additional Insured Under Tenant's Policy Where Lease Required Tenant To Procure Coverage For The Mutual Benefit Of Both Parties
June, 2009
In Kassis v. The Ohio Casualty Insurance Company, 2009 N.Y. Slip Op 5207 (June 25, 2009), Joseph Kassis ("Kassis") leased property in Syracuse, New York to Kassis Superior Sign Co., Inc. ("Superior Sign"). The lease executed by Kassis and Superior Sign required Superior Sign to procure commercial general liability coverage "at its sole cost and expense and for the mutual benefit of" Kassis and Superior Sign with specified aggregate and per occurrence coverage amounts. Id. at 2.
Superior Sign obtained a commercial general liability insurance policy on the property from The Ohio Casualty Insurance Company ("Ohio Casualty"). Ohio Casualty's policy contained a blanket additional insured provision which extended coverage not only to Superior Sign as the named insured, but also to "any person or organization whom [the named insured is] required to name as an additional insured on this policy under a written contract or agreement." Id. at 2. The policy did not require Superior Sign to submit additional insured certificates or notification forms to Ohio Casualty listing those persons or organizations that Superior Sign was contractually required to name as additional insureds under the policy.
In the Winter, 2004, one of Superior Sign's employees was injured after he slipped on an accumulation of snow and ice on the leased property. The injured employee commenced a lawsuit against Kassis. Ohio Casualty disclaimed liability to Kassis on the ground that the policy only named Superior Sign as an insured and did not afford any coverage to Kassis.
Kassis and Superior Sign commenced litigation against Ohio Casualty seeking a declaration that Ohio Casualty was obligated to defend and indemnify Kassis in the underlying personal injury lawsuit. In its Motion for Summary Judgment, Kassis took the position that he was an additional insured under Ohio Casualty policy's blanket additional insured endorsement and that he was an intended third-party beneficiary under the policy. The trial court partially granted Kassis' Motion for Summary Judgment, declaring that Ohio Casualty was obligated to provide a defense in the personal injury lawsuit. Id. at 2.
A divided New York Appellate Division rejected both of Kassis' arguments and reversed the trial court, finding that Ohio Casualty had no obligation to defend or indemnify Kassis. 51 A.D.3d 1366 (4th Dep't 2008). As two justices dissented on the questions of law presented in the Appellate Division's Opinion, Kassis appealed as of right to the Court of Appeals. See, CPLR 5601(a).
The Court of Appeals noted that in insurance contracts, "the well-understood meaning of the term [additional insured] is an entity enjoying the same protection as the named insured." Id. at 3. As the policy does not require Superior Sign to provide Ohio Casualty with notice of those persons or organizations Superior Sign is contractually required to name as additional insureds on the policy, the Court of Appeals held that Kassis would be considered an "additional insured" under the policy if, "under the lease, Superior Sign was required to ensure that Kassis received general liability insurance coverage equivalent to the coverage Superior Sign enjoyed." Id.
The Court stated that the general liability insurance provision of the lease in question obligated Superior Sign to obtain coverage against "claims for bodily injury, personal injury and property damage, ... at its sole cost and expense and for the mutual benefit of [Kassis] and [Superior Sign]." Id. The Court concluded that the natural and intended meaning of the term "mutual benefit" as used in this provision is that Kassis and Superior Sign are intended to enjoy the same level of coverage. Id.
The Court also looked to the provisions of the lease related to the procurement of fire, business interruption, and other types of insurance coverage to determine the meaning and intent of the term "mutual benefit." The Court found that the lease expressly contemplated that both Kassis and Superior Sign will enjoy fire insurance coverage, while Superior Sign may obtain certain types of insurance just for itself. Id. In other words, the lease expressly noted where the insurance to be procured was not for the parties "mutual benefit."
Reading the provisions of the lease as a whole, the Court held that Kassis was required to be named as an additional insured on Superior Sign's CGL policy, as the lease obligated Superior Sign to procure the same level of CGL coverage for Kassis as it did for itself. Id. at 4. Therefore, as an additional insured under the policy, Ohio Casualty was obligated to defend Kassis in the underlying personal injury action and, if appropriate, indemnify him as an additional insured in accordance with the policy.
Learning Point: In order to be considered an additional insured under a blanket additional insured provision similar to the one at issue in Kassis, the written contract or agreement entered by the insured does not need to expressly state that the third-party be "named as an additional insured." It will be sufficient if the language of the written contract or agreement requires the insured to procure insurance for the third-party that is equivalent to the coverage enjoyed by the insured.
For more information contact Eric T. Krejci at ekrejci@clausen.com.
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