Just this year, a landmark court case ruling on blanket endorsements came to a close. After nearly seven years of a protracted legal battle to be indemnified as an Additional Insured under an Insurer’s policy, a decision was finally ruled in favor of the Insurer’s motion in Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire & Marine Ins. Co.
The court reversed their original decision which ruled that Gilbane qualified as an Additional Insured under the primary contractor’s policy, and was therefore liable for coverage. The new ruling reaffirmed the plain meaning of the endorsement provision by Liberty Insurance Underwriters, stating that their blanket endorsement required a direct contract to exist between a primary contractor and subcontract in order to have the latter qualify as an Additional Insured.
Spoiler Alert: The Little Guy Loses
If you haven’t been following this important case, then you probably need a bit more context to fully understand the significance of this decision. Gilbane/TDX was a subcontractor hired by the general contractor, Samson Construction Co., to work on a new forensic laboratory commissioned by the Dormitory Authority of the State of New York (DASNY). Due to problems arising from the construction, DASNY sued Samson Construction for damages done to neighboring structures. Samson and co., in turn, filed a third-party action against Gilbane/TDX.
Here’s where the problem began. Gilbane/TDX, remembering that it had been listed as an Additional Insured under Samson’s insurance policy, sought to be indemnified by Samson’s Insurer, Liberty. However, the Insurer denied the motion, citing that the blanket endorsement stated that Additional Insured coverage only applied to “any person or organization with whom you [the primary contractor] have agreed to add as an additional insured written by contract.”
Because of the peculiar wording of the endorsement, the court initially ruled that Gilbane/TDX qualified for the status. Gilbane initially argued that it didn’t matter whether or not a contract existed, citing that it “would conflict with the plain meaning of the Liberty endorsement.” However, that decision was ultimately reversed since there was no direct contractual relationship between Gilbane/TDX and Samson, they didn’t count as Additional Insureds under the provision of the endorsement.
Have You Checked the Wording on Your Blanket Endorsements?
Blanket endorsements were originally created to help Additional Insureds who forget to check whether they were actually covered by their primary contractors’ policies. With a blanket endorsement, automatic coverage would be given to anyone who satisfies two conditions:
1) Has a written contract between both parties requiring Additional Insured coverage;
2) The loss in question should be connected to the Named Insured’s actions or non-action in some way.
However, it’s an imperfect solution to Additional Insured oversight, and Insurers themselves are not too keen to cover just anybody that the Named Insured wants to add in. We think IRMI cites the heart of the problem with Blanket Endorsements best:
“A project owner may enter into a contract with a general contractor that obligates the general contractor and all subcontractors to name the owner as an additional insured on their general liability policies. Even if the general contractor, in turn, requires the subcontractors to name the owner as an additional insured and the subcontractors procure policies containing blanket additional insured endorsements, it is not always clear that the subcontractor’s insurer will be obligated to provide additional insured coverage to the owner due to the absence of a direct contract between those parties.”
Afford the Luxury of Review with COI TRACKER
This has great implications for any company subcontracted as an additional insured. As an Additional Insured yourself, are you sure that you’re covered by your vendors’ insurance policies if they’re using a blanket endorsement? Do you see the need for a contract with them any time soon?
Additional Insured oversight is a pesky problem to deal with, and in the case of Gilbane/TDX it was an arduous and costly one. But it’s not unavoidable, or unsolvable for that matter. In fact, if Gilbane had people checking on the actual provisions of the endorsements before the dispute happened, the entire ordeal could have been avoided entirely.
As someone in charge of managing your company’s certificates of insurance, it falls on you to find out whether or not these hold any power at all when disputes arise, before you get into hot water. Of course, you need a lot of time to do that – time you don’t necessarily have if you’ve been doing compliance review manually.
COI Tracker will guarantee that you have the luxury to review your endorsements carefully and secure the terms of your coverage regularly by automating a good deal of your tasks. From data entry to communicating with your vendors, COI Tracker takes the menial tasks from your desk and completes them in minutes, not days.
Contact us today for a free demo and secure yourself from costly litigation arising from Additional Insured oversight!