As we wrote in April 2017, the case of Gilbane Bldg. Co./TDX Constr. Corp., v. St. Paul Fire & Mar. Ins. has become the harbinger of the insurance world in regard to the effectiveness of an additional insured endorsement. On March 27, 2018, New York State's highest court affirmed the decision of the appellate panel, which held that there was no entitlement to coverage to a party named as an additional insured when such party did not have a written contract with the insured.
To recap, Gilbane was a joint venture construction manager with TDX Construction (the Gilbane JV) that entered into a contract with the Dormitory Authority of the State of New York (DASNY) for a Bellevue Hospital building. The DASNY entered into a separate contract with Samson Construction whereby Samson would act as the prime contractor for the project.
Pursuant to the DASNY-Samson contract, Samson was required to name several parties, including the Gilbane JV, as additional insureds on its commercial general liability policy. When a property damage claim arose, DASNY sued Samson and the project architect, the latter of which filed a third-party action against the Gilbane JV for the damage. The Gilbane JV sought coverage from Samson's carrier, Liberty, which denied coverage on the basis, in sum, that there was no written contract between Samson and the Gilbane JV and that language of the additional insured endorsement required such a contract.
The case came down to the specific language of the endorsement which stated that the additional insured endorsement extends coverage to "any person or organization with whom you (the insured) have agreed to add as an additional insured by written contract." The pivotal word, "with," in the language of the endorsement, was the basis of the court finding that the language required there be a written contract between the Gilbane JV and Samson and not merely a contract amongst Samson and another party requiring such coverage.
The court's decision has been and will continue to be hotly debated and requires the party bargaining for additional insured status to carefully read the endorsement language to ensure that they are getting the coverage they expect. Separate contracts between insured and additional insured to affirm this coverage will certainly be the new standard. Whether changes to Insurance Services Office, Inc. endorsements will be triggered by this decision is yet to be known.
We will be tracking how this decision impacts the construction industry and addressing needed changes to insurance provisions in contracts.
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