Assignee Of Additional Insured Deemed To Be An Insured As Well

April 22, 2022 / Writing and Speaking

By Don R. Sampen, published, Chicago Daily Law Bulletin, April 19, 2022

The 1st District Appellate Court recently held that an additional insured’s assignment of its contract with the named insured entitled the assignee to assume the assignor’s insurance rights and become an additional insured.

The case is Secura Insurance v. Phillips 66 Co., 2022 IL App (1st) 210069 (Feb. 22). The insurer, Secura, was represented by Wolf & Laudicina Ltd. of Chicago. Reed Smith LLP of Chicago represented the assignee, Phillips 66.

Premier Insulation LLC entered into a master service agreement (MSA) with ConocoPhillips Company to perform work at its Wood River refinery. The contract required Premier to indemnify ConocoPhillips in connection with Premier’s work.

It also required that Premier procure liability insurance coverage for the risks it assumed and include ConocoPhillips and certain affiliates as additional insureds.

Shortly after the MSA took effect, ConocoPhillips spun off a portion of its operations to Phillips 66, including those operations for which Premier was providing services. In connection with the spinoff, ConocoPhillips assigned the MSA to Phillips 66, and Premier began working for Phillips 66 at the refinery.

Subsequently, a Premier employee was injured when he fell from a scaffold at the Phillips 66 refinery. The employee brought suit against Phillips 66 and several other members of the so-called Projects Group, which supervised safety issues at the refinery. Although Premier was a member of the Projects Group, it was not named a defendant.

Premier had commercial general liability coverage with Secura. The policy included, among other things, an additional insured endorsement that extended coverage to persons for whom Premier was performing operations, when Premier and such person agreed in a written contract that the person be added as an additional insured.

Upon the filing of the employee’s lawsuit, Phillips 66 tendered to Secura, which agreed to defend under a reservation of rights. Secura then filed this declaratory action, taking the position that Phillips 66 was not an additional insured because of the absence of a written agreement naming Phillips 66 as such.

Following the filing of cross-motions for summary judgment, the trial court agreed with Secura and found it had no duty to defend. Phillips 66 took this appeal.

Analysis

In an opinion by Justice Michael B. Hyman, the 1st District reversed. He initially addressed the main case upon which Secura relied, Westfield Insurance Co. v. FCL Builders, Inc., 407 Ill. App. 3d 730 (2011). In that case, a general contractor was held not to be entitled to additional insured coverage under a sub-sub-contractor’s policy because, according to the court, no written agreement ever existed between the general contractor and the sub-sub-contractor.

According to Hyman, however, Westfield was not controlling. It was not controlling because it did not involve an assignment. Hence, in the case here, wrote Hyman, when ConocoPhillips assigned the MSA to Phillips 66, that satisfied the writing requirement for an additional insured.

In sum, under longstanding principles regarding assignments, Phillips 66 stepped into Conoco-Phillips’s shoes, satisfying the writing requirement and obligating Secura to defend Phillips 66 in the underlying litigation.

Hyman also addressed another argument raised by Secura, namely, that for Secura to be obligated to defend under the policy, the underlying injury had to be caused in whole or in part by Premier. And here, Premier was not named a defendant in the underlying case and it was not otherwise alleged to have been partially or wholly responsible for the injury.

Hyman rejected the argument because, as the plaintiff-employee’s direct employer, Premier had tort immunity under the workers’ compensation laws. As a result, Hyman ruled that the silence in the complaint about Premier’s acts or omissions could be understood as following directly from its tort immunity and not a concession on its negligence.

The 1st District therefore found in favor of coverage, reversed the decision of the trial court, and remanded for the entry of summary judgment for Phillips 66.

Key Points

  • According to this court, the assignee of an additional insured to whom is assigned all the rights of the assignor, steps into the shoes of the assignor with respect to the insurer’s additional insured obligations.
  • The employer of an underlying plaintiff need not be identified in an underlying complaint as having committed acts or omissions giving rise to liability, even if the insurer’s obligation to provide a defense to an additional insured named as a defendant is conditioned on the underlying injuries having been caused in whole or in part by the employer.
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