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June 25, 2018 Practice Points

No “Additional Insured” Coverage for Project Managers

Despite general contractor’s agreement with project owner to provide such coverage, a New York court found coverage was not conferred

by Eric Hermanson and Tony Miscioscia

Project managers overseeing large construction projects almost always try to transfer their risk of liability downstream to general contractors, subcontractors, and suppliers. One of the key ways they do so is through contractual requirements that call for those parties to purchase CGL coverage naming the project manager as an “additional insured.”

Recognizing these arrangements, many insurers now include endorsements on their policies that provide “blanket additional insured” coverage to upstream parties. ISO Form 20 33 07 04 is one such endorsement. It provides as follows:

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 but only with respect to liability arising out of your operations or premises owned by or rented to you …

But what if the general contractor’s agreement—calling for the general contractor to name the project manager as an “additional insured”—is not “with” the project manager itself? What if the agreement calling for coverage is between the contractor and the owner of the project? In that case, the project manager may be out of luck.

In Gilbane Bldg. Co. v. St. Paul Fire & Marine Ins. Co., __ N.Y.S. __, 2018 N.Y. LEXIS 490 (N.Y. Mar. 27, 2018), the New York Court of Appeals found—as a matter of first impression—that the language of ISO Form 20 33 07 04 only conferred “additional insured” coverage if the “written contract” entered by the policyholder was “with” the additional insured itself. The court based this ruling on the plain language of the endorsement, which it found to be “facially clear.” Given its ordinary meaning, the court held, the language of the endorsement “can only mean that the written contract must be ‘with’ the additional insured.” A “written contract” with a third party—in this case, the owner of the project—would not confer coverage under the endorsement even though the parties clearly intended it to do so.

The lesson for upstream parties is clear: know your endorsement, review it closely, and pay careful attention to the risk transfer mechanism it requires. If a downstream party’s policy contains ISO Form 20 33 07 04, and you are relying on someone else’s agreement with the downstream party to confer coverage, that agreement may not suffice.

Eric Hermanson and Tony Miscioscia, are partners with White and Williams.

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