Chapter Ten

• Jurisdiction: New York

Chapter ten

Additional Insureds

Jean F. Gerbini, Esq.

I. Introduction

A person or entity who was not originally intended to be a primary beneficiary of a liability insurance policy may nonetheless acquire rights to coverage as an “additional insured.” The Court of Appeals defines “additional insured” as an entity enjoying the same insurance protection as the primary or named insured.¹¹²³ Thus, the same standard that governs an insurer’s duty to defend its named insured also governs its duty to defend its additional insured.¹¹²⁴ Further, as between the insurer and its additional insured, such coverage is primary.¹¹²⁵

However, the priority of coverage between such an insurer and another purportedly primary insurer is determined by reference to the policies’ respective other-insurance clauses, and not by reference to additional insured status.¹¹²⁶ That coverage, moreover, may be primary—so that the additional insured need not first exhaust other sources of coverage before recovering under a particular policy as additional insured.¹¹²⁷ To paraphrase George Orwell, however, some additional insureds are “more equal than others.” An insurance policy endorsement may at once grant additional insured status and limit the scope of the coverage.¹¹²⁸

Generally speaking, it is the insurance policy itself that confers additional insured status.¹¹²⁹ Therefore, the attorney for a putative insured would be well advised to obtain and review the insurance policy to ascertain the existence and scope of coverage. A certificate of insurance generally may not be relied upon as proof of additional insured status, and does not bind the insurer,¹¹³⁰ absent the classic elements of promissory estoppel.¹¹³¹

Likewise, a contractual requirement that one party procure insurance for the other party neither proves the existence of coverage nor binds the insurer.¹¹³² The promisor may be liable for breach of the insurance-procurement contract, however,¹¹³³ although the damages available for such breach may be limited by the availability of other insurance secured by the promisee.¹¹³⁴ The obligation to procure insurance coverage is distinct from an obligation to indemnify.¹¹³⁵ A judicial determination on the breach of the insurance-procurement obligation need not await final determination of the underlying liability in a personal injury action.¹¹³⁶

II. The Existence Of “Additional Insured” Coverage

A. Coverage Is Created by Insurance Policy Language

An insurance policy may provide additional insured coverage to a person or entity either by naming the person or entity expressly, or by referring to a class to which the person or entity belongs. For example, the policy may define “insureds” to include, generically, persons for whom the named insured is required under a “written contract, agreement or permit” to provide insurance coverage.¹¹³⁷ It is unclear whether this clause confers coverage in the absence of a written contract to procure insurance. The clause has been held to be ambiguous in this respect.¹¹³⁸ Another iteration of the clause in ISO Form CG 20 33 10 01, covering as an insured a person or organization whom the named insured has “agreed in writing in a contract or agreement” to add to the insurance policy has been held to require a writing.¹¹³⁹ Such a writing need not take a specific form, so long as “a clear written intent to include an entity as an additional insured is manifested prior to the loss.”¹¹⁴⁰ Even a generally expressed requirement that a party shall maintain insurance for the “mutual benefit” of both parties to the contract is sufficient to state such an intent.¹¹⁴¹ Some such generic clauses require that the contract be “executed,” a term that has been interpreted to require either (a) signing, or (b) completed performance.¹¹⁴²

A subtle difference in the wording of a generic additional insured clause may make the difference between coverage and no coverage. An endorsement that provides that an additional insured is “any person or organization with whom you [the named insured] have agreed to add as an additional insured by written contract” requires that there be privity of contract between the additional insured and named insured.¹¹⁴³ An endorsement that provides that an additional insured is someone “required by written contract signed by both parties prior to any ‘occurrence’ in which overage is sought” does not require such privity.¹¹⁴⁴

Except as discussed in Section 10.4 of this chapter, additional insured coverage does not exist absent a valid and enforceable insurance policy. Thus, where the insurance policy is void ab initio because the named insured made material misrepresentations in procuring it, the policy is likewise void as against the innocent additional insured.¹¹⁴⁵

B. Certificates of Insurance

1. Coverage Not Created

A certificate of insurance alone does not bind the insurer to cover the certificate holder as an additional insured, at least when the certificate expressly states that it is a matter of information only and confers no rights on the certificate holder.¹¹⁴⁶ Occasionally, a court will find that a certificate of insurance is insufficient to confer rights under the policy without noting whether or not the certificate of insurance contains any disclaimer to that effect.¹¹⁴⁷

2. Coverage Created by Estoppel

Although certificates of insurance generally do not confer additional insured status, such status nonetheless may arise if traditional elements of estoppel are met. Such estoppel arises where an insurer or its authorized agent issues certificates of insurance with the intent of influencing a potential additional insured and the potential additional insured relies on the certificate to its detriment. In Linarello v. City University of New York, for example, the court held, in dictum, that the insurer was not estopped to deny additional insured status based upon certificates of insurance because there was no showing that the insurer issued the subject certificate with the intent of influencing the purported additional insured and that the purported additional insured relied upon the certificate to its detriment.¹¹⁴⁸

On the other hand, estoppel cannot be used to create additional insured coverage where the insurance policy has been cancelled. In Wainwright v. Charlew Construction Co., Inc., the insurance policy had been cancelled for non-payment of premiums, and therefore estoppel could not be used to create coverage, notwithstanding the purported insured’s reliance upon the certificate of insurance.¹¹⁴⁹

C. Contracts to Procure Insurance

1. Coverage Not Created

An insurance-procurement agreement to which the insurer is not a party does not bind the insurer. The wording of an insurance policy—not the wording of the procurement contract—determines the existence and scope of coverage. In United States Fidelity & Guaranty Co. v. CNA Insurance Companies,¹¹⁵⁰ the court held that it was not at liberty to rewrite the insurance policy to conform to the terms of an insurance procurement agreement. The court disregarded the insurance procurement contract in favor of the language of the insurance policy.¹¹⁵¹

On occasion, this rule results in the additional insured enjoying more insurance than bargained for in the procurement contract. For example, in Tomco Painting & Contracting, Inc. v. Transcontinental Insurance Co.,¹¹⁵² the court held that the defendant (the subcontractor’s insurer) must afford the plaintiff additional insured (the general contractor) with coverage up to the full policy limit of $1 million per occurrence in accordance with the policy’s provisions, even though the insurance procurement contract only obligated the subcontractor to provide insurance with limits of $500,000 per occurrence. The court held that the general contractor, as additional insured under the policy, was entitled to enjoy the “same protection as the named insured.”¹¹⁵³

2. Claim for Breach of Contract to Procure Insurance

When a party agreeing to procure insurance for another fails to obtain the required insurance, the promisee may bring a claim for breach of contract. The requirement to procure insurance does not violate the N.Y. General Obligations Law (GOL).¹¹⁵⁴ In Kinney, pursuant to a contract with a general contractor, a subcontractor was required to procure insurance to cover the general contractor. In a resulting personal injury action brought by an employee of the subcontractor, the general contractor brought a third-party action against the subcontractor, based on an indemnification requirement in the subcontract. At trial, the general contractor was found partially at fault, and it moved for summary judgment in its third-party action against the subcontractor, based upon the subcontractor’s failure to procure insurance. The subcontractor raised the defense of GOL § 5-322.1, which prohibits agreements intended to free certain promisees from liability for their own negligence. The Court of Appeals found for the general contractor, holding that an agreement to procure insurance is not an agreement to indemnify or hold harmless.¹¹⁵⁵

A party’s obligation to procure insurance for another is distinct from its obligation to indemnify.¹¹⁵⁶ Therefore, a judicial determination of the existence of a breach of duty to procure insurance need not await final determination of the underlying liability.¹¹⁵⁷

By requiring a promisor to procure insurance, a promisee does not waive its right to indemnification from the promisor for liability in excess of the insurance procured. In North Star Reinsurance Corp. v. Continental Insurance. Co.,¹¹⁵⁸ the Court held that the notion of a waiver was contradicted by language in the contract that explicitly reserved the promisee’s right to indemnification from the promisor.

A promisee may assert a viable claim for breach of the promisor’s obligation to procure insurance where the promisor has procured some insurance, but the insurance policy does not completely meet contract specifications...