‘Executed’ Requirement In Insurance

June 16, 2015 / Writing and Speaking

The 2nd District Appellate Court recently held that a general contractor was an additional insured under a subcontractor’s liability policy, even though the subcontract agreement requiring that the general to be added was not signed and only appended to a work “proposal” that was signed.

The subcontractor’s insurer, West Bend Mutual, was represented by McKenna, Storer. Cray, Huber, Horstman, Heil & VanAusdal LLC represented the general contractor, DJW-Ridgeway Building Consultants. West Bend Mutual Insurance Co. v. DJW-Ridgeway Building Consultants Inc., 2015 IL App (2d) 140441 (May 19, 2015).

Ridgeway was the general contractor on the construction of a commercial building called the Village Commons. Jason the Mason was the masonry subcontractor. In 2008, the claimant, Brian delaTorre, was injured while working on the site. In 2010, he sued Ridgeway and Jason the Mason, among others.

Ridgeway tendered its defense to West Bend, insurer for Jason the Mason. Ridgeway claimed it was an additional insured under the policy pursuant to a blanket additional insured provision extending coverage to persons that Jason the Mason was required to add as an additional insured under a written contract so long as the written contract was “executed” prior to the bodily injury.

The West Bend policy also provided that the additional insurance was excess over any other insurance available to the additional insured “unless a written contract specifically requires that this insurance be either primary or primary and noncontributing.”

As proof of having met the “written contract” requirement, Ridgeway relied on both a proposal and an agreement between Ridgeway and Jason the Mason. The proposal described the work to be performed by the subcontractor and was signed by both parties. It did not, however, impose any additional insurance requirements on Jason the Mason.

The agreement was not signed but contained language stating that it was “supplemental to and part of” the proposal “to which it is attached.” It required that Ridgeway be named as an additional insured on Jason the Mason’s liability policy with a minimum limit of $2 million. It further required that a certificate issue showing compliance with the requirement.

In addition, the agreement had an Exhibit A attached reflecting subcontractor insurance requirements and listing commercial general liability coverage for Ridgeway in the amount of $2 million aggregate coverage and a separate provision referencing umbrella coverage.

Prior to delaTorre’s injury, Ridgeway also communicated with Jason the Mason’s insurance agent and procured a certificate of insurance reflecting that Ridgeway had been named an additional insured on the West Bend policy.

West Bend brought this declaratory action, primarily arguing that Ridgeway was not an additional insured on its policy because the agreement had not been executed as defined by the blanket additional insured provision. It further argued that, even if Ridgeway was an additional insured, the coverage was excess.

Following cross-motions for summary judgment, the trial court found in favor of Ridgeway. West Bend took this appeal.

“Executed” Requirement

In an opinion by Justice Joseph E. Birkett, the 2nd District affirmed. He initially addressed whether the additional insured requirement in the agreement had been executed.

He observed that the term was not defined in the policy and that both the agreement and the proposal actually constituted the full written contract between the parties.

He further noted that the agreement denominated itself as part of the proposal, and that Jason the Mason, through its insurance agent, complied with the requirement of furnishing the certificate of insurance as required by the agreement, which manifested Jason the Mason’s assent to the agreement’s additional-insured requirement.

West Bend relied on West Bend Mutual Insurance Co. v. Athens Construction, 2015 IL App (1st) 140006, for the proposition that the certificate of insurance itself could not be used as a basis for enforcing additional insurance rights. Birkett observed, however, that the subcontract agreement in that case did not actually impose additional insurance compliance and thus was distinguishable from the subcontract agreement here.

He therefore concluded that the requirement of an executed written agreement was met.

Excess Or Primary

As for whether West Bend’s coverage was excess or primary, Birkett agreed with West Bend that the additional insured language of the policy indicated that coverage was excess unless the parties’ agreement “specifically requires” that it be primary.

He interpreted the specificity requirement, however, as meaning only that the parties’ agreement so indicate in a definite manner, not that the agreement necessarily use precise terms.

Here, the Exhibit A to the agreement drew a distinction between the $2 million of primary CGL coverage and separate umbrella coverage.

Birkett agreed with Ridgeway that this distinction suggested that the $2 million of coverage that Jason the Mason was contractually required to provide was primary insurance. He further noted that if Ridgeway had intended for Jason the Mason to provide excess coverage, the requirement would have so indicated.

On this basis he concluded that the agreement was sufficiently specific as to require Jason the Mason to provide primary coverage.

The court therefore affirmed summary judgment in favor of Ridgeway and found that West Bend had a duty to defend.

Key Point

Multiple contract documents may be relevant to determining whether the requirements for additional insured status have been met.

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