Oral Agreement To Procure Insurance May Trigger Additional Insured Coverage Despite “Written” Requirement In Additional Insured Endorsement
January, 2011
In Empire Builders & Developers, Inc. v. Delos Ins. Co., 910 N.Y.S.2d 548, 2010 N.Y. Slip Op. 08059 (2d Dep't 2010), the Appellate Court held that a premises owner and a construction manager were not additional insureds under a liability policy's additional insured endorsement which provided additional insured coverage to a person or organization whom the named insured is required to add as an additional insured under a "written contract, agreement or permit" which must be executed prior to the loss.
Plaintiff Empire Builders & Developers, Inc. ("Empire") was the construction manager for a construction project on a property owned by Plaintiff 187 20th Realty Corp. ("Realty"). When a personal injury action was commenced against Empire and Realty by the estate of an employee of a subcontractor, Lecapife Corp. ("Lecapife"), who was killed while working for the construction project, they tendered their interests to Scottsdale Insurance Company ("Scottsdale"), which issued a liability insurance policy to Lecapife (the "Policy"). Scottsdale disclaimed coverage to both Empire and Realty, asserting that they did not qualify as additional insureds under the Policy. Empire and Realty then commenced a declaratory judgment action against Scottsdale, seeking a judicial declaration that Scottsdale was obligated to defend and indemnify Empire and Realty as additional insureds under the Policy. Id. at 549.
The Policy did not list either Empire or Realty as an additional insured. Id. at 549. However, the Policy contained a "Blanket Additional Insured Endorsement" ("Endorsement"), which provided additional insured coverage to any person or organization whom the named insured [Lecapife] is required to add as an additional insured under a written contract, agreement or permit "which must be executed prior to the injury." Id. at 549. Plaintiffs sought additional insured coverage under the Endorsement.
There was no written agreement requiring Lecapife to procure additional insured coverage to Plaintiffs. However, Empire's agent testified that he had a verbal understanding with Lecapife's agent that Lecapife would provide Empire with additional insured status.
Although the Court noted that the oral agreement to procure insurance constituted an "agreement" to have plaintiffs named as additional insureds within the meaning of the Endorsement, the Court ultimately concluded that Plaintiffs did not qualify as additional insureds under the Endorsement because the oral agreement was not "executed" prior to the accident - - the agreement was neither reflected in a signed document nor fully performed by the parties. Id. at 549.
Learning Point
Some courts will strictly construe the "written" requirement in an additional insured endorsements. There is also a line of cases in which the courts found that the phrase "written contract, agreement or permit" under additional insured endorsements is ambiguous because the word "written" could be interpreted to modify the words "contract," "agreement" and "permit," but it also can be reasonably interpreted to only modify the word "contract." In such cases, the courts will likely find coverage in favor of an additional insured even if there is no written agreement requiring the named insured to name the purported additional insured under its liability policy.
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