A Contract of Insurance is a Binding Contract

Appellate Court May Not Rewrite Insurance Policy

Construction contracts are risk transfer devices. They often require each subcontractor to name the general contractor and the owner as an additional insured. The requirement can include multiple additional insured. Insurance policies, even though they are written in easy-to-read language are the least read contracts in business. They should be read and understood or the parties must be ready to suffer the financial consequences. Failure to read and understand an insurance policy can be painful in the event of a loss and very expensive to he who did not read and understand the policy.

Modern liability insurance policies issued to builders and owners of property under construction, rather than individually endorse a policy to name all additional insureds, allow the named insured, by contract, to make anyone an additional insured with whom the named insured has a contract to make someone an additional insured. In Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire and Marine Insurance Company, et al., Liberty Insurance Underwriters, 2018 NY Slip Op 02117, No. 22, Court of Appeals of New York (March 27, 2018) the highest court in the State of New York was asked to interpret an insurance policy wording to require it to accept a risk it claimed it never took.


In January 2002, Dormitory Authority of the State of New York (DASNY) contracted with Samson Construction Company (Samson), a general contractor, for construction of a new forensic laboratory for New York City, to be built next to Bellevue Hospital. Although the lab was constructed for use by New York City’s Office of the Chief Medical Examiner, the construction documents identified DASNY as the owner. DASNY also contracted with a joint venture between Gilbane Building Company and TDX Construction Corporation (hereinafter, “Gilbane JV”) for Gilbane JV to be the construction manager for the project. DASNY’s contract with Samson provided that Samson would obtain general liability insurance for the job, with an endorsement naming as additional insureds: “DASNY, the State of NY, the Construction Manager [Gilbane JV] and other entities specified on the Sample Certificate of Insurance provided by DASNY.” Samson obtained general liability insurance coverage from Liberty Insurance Underwriters (Liberty). The Sample Certificate of Insurance listed as “Additional Insureds under General Liability as respects this project: . . . Gilbane/TDX Construction Joint Venture.”

In 2006, DASNY sued Samson and Perkins Eastman, Architects, P.C., the project architect, alleging that Samson damaged the excavation support system in August of 2003 by negligently removing a section of steel plating which caused the foundation of the neighboring building to settle several inches. Perkins then commenced a third-party action against Gilbane JV in 2010.

Gilbane JV provided notice to Liberty by letter in April of 2011, seeking defense and indemnity under the Liberty policy for Perkins’ suit against it, which Liberty denied in July of that year. Gilbane JV sued in September of 2012, arguing that it qualified for coverage under the Liberty policy as an additional insured. The trial court denied Liberty’s motion for summary judgment, holding that Gilbane JV is an additional insured under the policy. The Appellate Division subsequently reversed, granting Liberty’s motion.

The relevant portion of the Liberty policy is the “Additional Insured-By Written Contract” provision, which reads: “WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.” (emphasis added).


Gilbane JV has no written contract with Samson denominating it an additional insured, but argues no such contract is necessary, because that requirement would conflict with the plain meaning of the Liberty endorsement; with “well-settled rules of policy interpretation”; and with the parties’ reasonable expectations. Alternatively, Gilbane JV argues that the Liberty endorsement is, at most, ambiguous on that point, and therefore must be construed against Liberty and in favor of coverage. Gilbane JV is incorrect; the endorsement is facially clear and does not provide for coverage unless Gilbane JV is an organization “with whom” Samson has a written contract.


Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on specific language of the policies. In determining a dispute over insurance coverage, we first look to the language of the policy. As with the construction of contracts generally, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning.

The endorsement would have the meaning Gilbane JV desires if the word “with” had been omitted. But Samson and Liberty included that preposition in the contract between them, and the appellate court must give it its ordinary meaning. The “with” can only mean that the written contract must be “with” the additional insured. Gilbane JV proposes other wordings that, in its view, would more clearly require the existence of a written contract between Samson and an additional insured, but those formulations are no clearer and, in any event, the endorsement’s meaning is plain and unambiguous.1

The appellate court did not try to undermine an industry market solution aimed at efficiently allocating risk among entities involved in construction projects. Rather, it merely required contracting parties who desire the result proposed by Gilbane JV to remove the word “with” from their future contracts or make sure their future contracts include a requirement that it be made an additional insured.

Gilbane JV tried to change the situation by introducing extrinsic evidence of the intent of the parties. The court concluded, however, that extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide. Gilbane JV might have a claim against Samson for failing to obtain additional insured status for Gilbane JV, because of extrinsic evidence produced at trial, but that breach would not permit the appellate court to rewrite Samson’s contract with Liberty. The court refused to rewrite the contract of insurance and Gilbane JV received no coverage from Liberty.


The insurance policy required a written contract between the named insured and an additional insured if coverage was to be extended to anyone as an additional insured. Samson obtained general liability insurance coverage from Liberty Insurance Underwriters. Since Gilbane JV had no written contract with Samson denominating it as an additional insured, no coverage was available for Gilbane JV by Liberty. An unhappy, but accurate, result because of a failure by the parties to read the policy when it was acquired and a failure by Gilbane JV to include in the contract a requirement that it be named as an additional insured.

© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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