Additional Insured Coverage Is Not Permitted
July, 2010
In Hargob Realty Associates, Inc. v. Fireman’s Fund Insurance Company, 901 N.Y.S.2d 657 (2d Dep’t 2010), the Appellate Division, Second Department, issued a decision rejecting three alternative arguments put forth in favor of conferring additional insured status to an apparent indemnitee of a carrier’s named insured. This insurance coverage dispute arose out of a construction site accident and resulting underlying personal injury action. Hargob Realty Associates, Inc. (“Hargob”) entered into a construction contract with U.S.A. Interior, LLC (“USAI”), pursuant to which USAI was to perform demolition work at the premises owned by Hargob. The only written agreements between USAI and Hargob pertaining to the project were a one-page proposal from USAI specifying the bid price, work to be performed and a hold harmless agreement.
Pursuant to the hold-harmless agreement, USAI agreed to indemnify and hold harmless Hargob “from and against any and all claims, suits, liens, judgment, damages, losses and expenses arising in whole or in part . . . from the acts, omissions, breach or default of [USAI] in connection with the performance of any work by or for [USAI],” except for claims arising from Hargob’s own negligence.
Fireman’s Fund Insurance Company, doing business as Interstate Fire & Casualty Company (“Fireman’s Fund”), issued a commercial general liability policy (“CGL”) to USAI that contained a “blanket” additional insured endorsement. Under the terms of the endorsement, the Fireman’s Fund policy extended insured status to “any entity the Named Insured is required in a written contract to name as an insured . . . but only with respect to liability arising out of work performed by or on behalf of the Named Insured for the Additional Insured.”
Fireman’s Fund denied Hargob’s tender for additional insured coverage on the ground that it did not qualify as an insured under the terms of the policy and the additional insured endorsement. As a result, Hargob commenced a declaratory judgment action, contending that it was owed defense and indemnity from Fireman’s Fund because of USAI’s indemnity obligations to Hargob; by operation of a certificate of insurance which listed Hargob as an additional insured; and, by operation of the policy’s “Supplementary Payments” section, wherein the policy stated that it will provide a defense to USAI’s indemnitees under certain conditions.
The trial court held in favor of Fireman’s Fund on summary judgment. On appeal, the Second Department affirmed, rejecting Hargob’s three alternative arguments for additional insured coverage.
Noting that “[t]he four corners of an insurance agreement govern who is covered and the extent of coverage” and that “when determining whether a third party is an additional insured under an insurance policy, a court must ascertain the intention of the parties to the policy, as determined from within the four corners of the policy itself,” the Court held that Hargob was not entitled to coverage under the policy because there was no written agreement requiring USAI to name Hargob as an additional insured and Hargob did not otherwise qualify as an insured under the policy’s Section II, which defines the persons and entities that are insured. Id. at 659.
The Court further held that the certificate of insurance listing Hargob as an additional insured under the Fireman’s Fund policy was insufficient to alter the language of the policy itself, “especially since the certificate recited that it was for informational purposes only, that it conferred no rights upon the holder, and that it did not amend, alter, or extend the coverage afforded by the policy,” in line with prevailing New York case law on the issue. Id.
In addition, the Court stated that the policy’s Supplementary Payments section, which contained a provision obligating the carrier to defend an indemnitee of the named insured when certain specified conditions are met, does not afford liability coverage. The Second Department noted,
[c]ontrary to the plaintiff's contention, the supplementary payments provision did not demonstrate an intent by the defendant insurer to afford the plaintiff coverage solely on the basis that it is an indemnitee of the named insured, in the absence of the plaintiff's addition as “an insured” under Section II of the subject policy pursuant to the additional insured endorsement … Liability coverage under the policy is afforded by Section I, not the supplementary payments provision. Id. at 660.
Learning Point:
Hargob Realty reaffirmed prevailing New York law holding that insured status is determined by the four-corners of the insurance policy, irrespective of the named insured’s indemnity obligations. Further, neither certificates of insurance nor a policy’s Supplementary Payments section, providing defense for an indemnitee under certain conditions, confer liability coverage to a third-party.
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