(Article from Insurance Law Alert, April 2018)
For more information, please visit the Insurance Law Alert Resource Center.
The New York Court of Appeals ruled that an insurer was not obligated to provide additional insured coverage to a construction manager where there was no contractual privity between the manager and the named insured. Gilbane Building Co. v. St. Paul Fire and Marine Ins. Co., 2018 WL 1473553 (N.Y. Mar. 27, 2018).
The Dormitory Authority of the State of New York (“DASNY”) engaged with Samson Construction to build a forensic laboratory. Samson, in turn, contracted with Gilbane to serve as construction manager. DASNY’s contract with Samson required Samson to obtain liability insurance listing Gilbane as an additional insured. Samson’s contract with Gilbane, however, included no additional insured requirement. Samson secured coverage with Liberty under a policy containing the following additional insured provision: “WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract.” A “Sample Certificate of Insurance” listed Gilbane as an additional insured. When negligent construction litigation arose, Gilbane sought coverage from Liberty as an additional insured, which the insurer denied. A New York trial court ruled that Gilbane was entitled to coverage as an additional insured under the policy. An appellate court reversed and the New York Court of Appeals affirmed the appellate court ruling.
The Court of Appeals held that the phrase “with whom you have agreed to add” was unambiguous and required a written contract between Samson and Gilbane denominating Gilbane as an additional insured. Because no such contract existed, the court concluded that Gilbane was not entitled to additional insured coverage.
As the dissent noted, a contrary result was reached in Liberty Mutual Fire Ins. Co. v. Zurich Am. Ins. Co., 2016 WL 452157 (S.D.N.Y. Feb. 4, 2016), which involved similar policy language. There, the court declined to “add a requirement of direct contractual privity between the named insured and the purported additional insured that [did] not exist in the policy language.” An Oklahoma appellate court similarly rejected a contractual privity requirement for additional insured coverage in JP Energy Marketing, LLC v. Commerce and Industry Ins. Co., 412 P.3d 121 (Okla. Ct. App. 2017).