Additional Insureds Be Warned! The Pitfalls with Blanket Endorsements

A recent Massachusetts ruling underscores the need for additional insureds (AI) to consider pressing for endorsements that specifically name them and their place of business so, in the event of a coverage dispute, they can press for coverage in a jurisdiction convenient to their operations.

Blanket AI endorsements can create jurisdictional issues. In D.F. Pray, Inc. v. Wesco Ins. Co., No. 22-P-734 (Mass. App. Ct. Sept. 14, 2023), a general contractor sought coverage from its subcontractor’s CGL insurer on the grounds that it was an AI under the policy. The Massachusetts Appeals Court held it did not have personal jurisdiction over the insurer, which sold the involved policy to a New York subcontractor. The policy had a blanket AI provision. That AI endorsement did not specifically identify the Massachusetts-based plaintiff as an AI. Because the insurer was a nonresident of Massachusetts, the court began its analysis under Massachusetts’ long-arm statute. The court found the insurer contracted to insure a person located in Massachusetts (even though the contract was with the New York insured), so the court proceeded to analyze due process, which entailed three requirements:

1. Minimum contacts must arise from some act by which the defendant purposefully availed itself of the privilege of conducting activities in Massachusetts.
2. The claim must arise out of or relate to the defendant’s contacts with the forum.
3. An assertion of jurisdiction over the defendant must not offend traditional notions of fair play and substantial justice.

The court found that although the insurer had certain minimum contacts with Massachusetts, the plaintiff’s claims “did not sufficiently relate to those contacts to satisfy the due process standards for personal jurisdiction.” The AI offered no evidence that when the insurer sold the policy to the insured, it knew of the subcontract between the insured and the Massachusetts-based additional insured. The court therefore declined to hear the dispute.

To the extent an AI wants to avoid this outcome, an AI can consider using AI endorsements that specifically name it, its place of incorporation and/or the location of its business operations, such as ISO Form CG 20 10 11 85 or CG 2010 04 13 (or their equivalent).