ADDITIONAL INSURED CONSIDERATIONS AT THE CLAIM DESK
I . BASICS
A. An Insurer's Duty To Defend Its Insured Is Exceedingly Broad
“If a complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend.” Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa. 15 N.Y.3d 34 (C.A. 2010) (An Insurer) "may be required to defend under the contract even though it may not be required to pay once the litigation has run its course.” BP A.C. Corp. v. One Beacon Ins. Group,8 N.Y.3d 708 (C.A. 2007)
B. Applies Equally To Additional Insureds And Named Insureds.
“the well-understood meaning of the term (additional insured) is an entity enjoying the same protection as the named insured.” BP A.C. Corp. v. One Beacon Ins Supra. Regal Constr. Corp. v. National Union Fire Ins. Supra
C. Scope Of Additional Insured K Language Equally Broad
“A contractual provision which requires that a party be named as an additional insured in a liability policy mean(s) that the additional insured is insured for all liability arising out of the activities covered by the agreement.” Pecker Iron Works of N.Y. v. Traveler's Ins. Co.,290 A.D.2d 426, 427, 736 N.Y.S.2d 103 (2d Dept.2002) affirmed 99 N.Y.2d 393 “not ... the precise cause of the accident, ... but upon the general nature of the operation in the course of which the injury was sustained” Consolidated Edison Co. of New York, Inc. v. Hartford Ins. Co. 203 A.D.2d 83 (1st Dept.,1994)
D. Additional Insured / Indemnification available before Negligence determined.
Even though “An agreement to procure insurance is not an agreement to indemnify and hold harmless, and the distinction is well recognized.” Kinney v. Lisk Co.,76 N.Y.2d 215, (C.A. 1990)
It is now well settled that an agreement to indemnify another through insurance is enforceable as an appropriate loss allocation device, which does not implicate any statutory prohibition against indemnifying another for that party's negligence. McKinney's General Obligations Law § 5–322.1. Tishman Constr. Corp. of N.Y. v. CNA Ins. Co., 236 A.D.2d 211 (1st Dept. 1997)
II CHOICE OF LAWS : Varies not only State but by Division as well.
A. Downstate Interpretations of Additional Insured Endorsements broader
See for exmple Petrillo Stone Corp. v. QBE Ins. Corp. 42 Misc.3d 1207(A), 984 N.Y.S.2d 634 (Table) N.Y.Sup.,2014.
The Selective Additional Insured endorsement would also cover the situation where an employee of a subcontractor was injured during the course of his employment while doing work for the Additional Insured even where the injuries were the result of the negligence of the Additional Insured, another subcontractor at the scene, or the plaintiff's own fault ( see id.; Chelsea Associates, LLC v. Laquila–Pinnacle, 21 AD3d 739, 740 [1st Dept 2005] ).
B. Deciding which State law controls interpretation can be uncertain.
It had seemed that the Court of Appeals settled the issue with the simple rule that the domicile of the Contractor providing the Additional Insured Coverage would control.
Lloyd's, London v. Foster Wheeler Corp. 36 A.D.3d 17, N.Y.A.D. 1 Dept.,2006.
But the Appellate Division of the First Department upset that rule with two decisions that decided the question of the traditional "grouping of contacts" analysis. Usually better for New York General Contractor and Owners, but less certain in predictability and certainty.
Davis & Partners LLC vs. QBR Ins. Corp. 113 A.D.3d 544 N.Y.A.D. 1 Dept.,2014.
Illinois Nat. Ins. Co. v. Zurich American Ins. Co. 969 N.Y.S.2d 11 N.Y.A.D. 1 Dept.,2013.
III. "ILLUSORY" COVERAGE
A Anticipated Coverage can be ruined by Exclusions for "own employee"
This insurance does not apply to
(i) bodily injury to any employee of any insured, to any contractor hired or retained by or for any insured or to any employee of such contractor, if such claim for bodily injury arises out of and in the course of his/her employment or retention of such contractor by or for any insured, for which any insured may become liable in any capacity;
(ii) any obligation of any insured to indemnify or contribute with another because of damage arising out of the bodily injury; or
B. Unsuccessfully argued that coverage containing this exclusion is Illusory
Sigma Contracting Corp. v. Everest Nat. Ins. Co. 907 N.Y.S.2d 104 N.Y.Sup.,2010
C. A good idea to make sure coverage with this exclusion is not used in the first place.
i. Provide that insurance cannot be purchased through carriers known to use this
ii. Provide that insurance must be purchased through carriers known Not to use it
iii. Confirm compliance and get proof before signing Contract
iv. Have policy submitted with bid and as a condition of getting work.
D. Even when it is too late a good claim practice to give a retrospective observation to the insureds and clients. Often Real Estate entities that can benefit by avoiding problems in the future. Beneficial not only to client but also to carrier.
IV TENDERING A DEFENSE AND LATE NOTICE
A. The Tenders have to go out to All Levels, including Excess Coverage
B. New York is now a "No Prejudice State:
i. Regarding Policies written after 1/1/09
ii. Still a window of older policies being involved.
iii. Late Notice Defenses Frowned on.
iv. Most common example of Prejudice from Late Notice in scenarios where a Default has already been taken.
Insurance Law 3420:
[c](2)(B) Notwithstanding subparagraph (A) of this paragraph, an irrebuttable presumption of prejudice shall apply if, prior to notice, the insured's liability has been determined by a court of competent jurisdiction or by binding arbitration; or if the insured has resolved the claim or suit by settlement or other compromise.
C. Possible exception where Default is lifted.
Castillo v. Prince Plaza, LLC 43 Misc.3d 335, 981 N.Y.S.2d 906 N.Y.Sup.,2014
The Supreme Court, Kings County, Edgar G. Walker, J., held that, in matter of first impression, irrebuttable presumption of prejudice to insurer from late notice of claim does not apply where default judgment against insured is entered prior to notice of claim but vacated after notice.
V. OTHER INSURANCE
A. A provision found in both property and liability insurance policies
Establishes apportionment among insurers when more than one policy covers the same loss. Some policies provide no coverage some pay a pro rata share, and others apply in excess.
Where the same risk is covered by two or more policies... priority of coverage (or allocation) is determined by comparison of their respective other insurance clauses.
Where "other valid and collectible insurance is available"
B. Expectation of Primacy where Subordinate entity adds an additional insured
4. Other Insurance
If other valid and collectible insurance is available to the insured for a loss we cover ... our obligations are limited as follows: ...
b. Excess Insurance This insurance is excess over: ...
“(2) Any other insurance, whether primary, excess, contingent or any other basis that is valid and collectible insurance available to you as an additional insured under a policy issued to: (a) A contractor performing work for you.”
Excess “other insurance” clause in face of primary coverage an insured receives by being added as an additional insured, trumps a “pro rata other insurance' clause.”
Sport Rock Intl., Inc. v. American Cas. Co., 878 N.Y.S.2d 339;
QBE Ins. Corp. v. Public Service Mut. Ins. Co., 958 N.Y.S.2d 103 [1st Dept.2013].)
C. The words "excess coverage" alone, however, are not magic.
When each policy contains an excess “other insurance clause", giving the clauses effect would leave no primary insurance, so insurers are required to cover loss on pro rata basis.
Central Park Studios, Inc. v. Slosberg 121 A.D.3d 562 N.Y.A.D. 1 Dept. 2014.
The language utilized in the Delos policy, which provides excess coverage solely to the Delos primary policy noted on its declarations page, does not negate the possibility of contribution from other insurers. More importantly, the policy does not contain an “other insurance” (and) the Delos excess policy fails to indicate its premium, another indicium of its intent to provide the insured with final tier coverage at a reduced premium ( see Bovis Lend Lease, 53 A.D.3d at 148, 855 N.Y.S.2d 459).
VI. EXPECTATIONS OF COUNSEL
A. Provide good counsel of Choice of Laws Issues
B. Provide good counsel on Policy Interpretations, Limits, Contractual Risk Transfer
C. Discovery Demands have to ensure that entire Policies are obtained and that all insurance policies including excess are obtained.
i. When your policy is going to be provided it is customary to redact sensitive financial information.
ii. Names of other additional insured may itself be competitive information
iii. In certain cases a protective order, attorney eyes only or even two tiered provisions may be desired.