An Insurance Contract Only Provides Coverage to a Person Named as an Insured or an Additional Insured

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Failure to Read the Full Policy Defeats Insurance Claim

Liability insurance is nothing but a run-of-the-mill contract. It seems to me that I am the only person who actually reads insurance policies I have acquired to defend or indemnify me.

Construction contracts are masters of risk transfer. The owner requires all contractors and subcontractors to indemnify he, she or it and to name the owner as an additional insured on their liability policies. The general contractor does the same with each subcontractor. Unfortunately, unless the owner and general contractor have effective risk managers, they often rely on certificates of insurance and do not read the full policy as any prudent person should before relying upon the person promising to make the owner and general as an additional insured.

In Bellet Construction Co. Inc. v. Tudor Insurance Co., et al 2020 NY Slip Op 33372(U), INDEX NO. 654347/2018, Supreme Court Of The State Of New York New York County Part I As Motion 38EFM (October 13, 2020) Tudor Insurance Company (“Tudor”) sought dismissal of the complaint against it asserting that it had no duty to defend and indemnify plaintiff Bellet Construction Company, Inc. (“Bellet”) in an underlying personal injury action because Bellet was not a named insured or an additional insured under the policy Tudor issued to its insured, non-party LSQ Contracting Corp. (“LSQ”).

BACKGROUND

Bellet, a general contractor specializing in exterior building work entered into a contract with 321 West 78th Street Corp. (“Owner”), the owner of a building at 321 West 78th Street, New York, New York (the “Building”), to act as general contractor for a construction project involving, among other things, exterior work on the Building. On that same date, Bellet entered into a subcontract with LSQ in which LSQ agreed to perform exterior and pointing work at the project (the “Bellet-LSQ Subcontract”). Under the Bellet-LSQ Subcontract, LSQ agreed to defend, indemnify, and hold Bellet harmless against any and all liability, including bodily injury arising out of LSQ’s work at the project. LSQ also agreed to procure general liability insurance naming Bellet as an additional insured on a primary and non-contributory basis.

Tudor issued a commercial general liability insurance policy to LSQ with a limit of $1 million per occurrence. Bellet asserts that it is an additional insured under this Tudor insurance policy.

After the work began Margarito Hernandez was injured when he allegedly was struck by falling debris at the project and died from his injuries. Hernandez’s estate sued Bellet, the Owner, LSQ, and others. In that action, Bellet interposed cross-claims against LSQ asserting common law and contractual indemnification.

Later Bellet sued seeking declarations that Tudor was obligated to defend and indemnify Bellet in connection with the Underlying Action. As against Tudor, Bellet asserted that it is entitled to a declaratory judgment and that Tudor is liable for breach of contract. Attached to the complaint, Bellet submitted a certificate of insurance dated February 21, 2013, which indicated that LSQ was issued Tudor policy number NPP8061093 and that Bellet was listed on that policy as an additional insured.

In moving to dismiss, Tudor asserted that, at the time of the accident, LSQ was the named insured on Tudor policy and that the policy did not contain an additional insured endorsement; and Bellet was not a named insured, nor did it qualify as an insured under policy.

DISCUSSION

On a motion to dismiss, the allegations of the pleading are liberally construed, accepted as true and accorded the benefit of all favorable inferences and a motion seeking dismissal based on documentary evidence, is appropriately granted only where the documentary evidence utterly refutes the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law.

In an insurance coverage dispute the party claiming insurance coverage has the burden of proving entitlement. A party that is not named an insured or additional insured on the face of the policy is not entitled to coverage. Whether a party is a named or an additional insured is determined by the parties’ intention as expressed in the language of the policy. When a third party seeks the benefit of insurance coverage, the policy terms must clearly evince the intent to provide such coverage.

Tudor  submitted its policy along with a letter by Rosemary D’Aco, Vice President of Underwriting and Marketing, certifying that this was the policy issued to LSQ.

After reading the full policy the court determined that the policy clearly does not name Bellet as an insured. There is no additional insured endorsement. In addition, Bellet does not qualify as an insured under “Section II – Who Is An Insured.” Bellet is not designated in the Declarations, and, therefore, does not qualify as an insured under the policy provision. The policy wording, as documentary evidence, establishes Tudor’s defense.

The fourth and fifth causes of action and the portion of the sixth cause of action against defendant Tudor are dismissed, and Tudor is entitled to a declaration that it is not obligated to defend or indemnify Bellet in the Underlying Action as an additional insured under the Tudor policy and Tudor Insurance Company has no obligation to defend or indemnify plaintiff Bellet Construction Co., Inc., in the underlying action.

ZALMA OPINION

RTFP (Read The Full Policy) is a rule that must be followed by every person seeking insurance, especially when seeking the position of an additional insured from another person’s insurance. Certificates of Insurance are limited to the date of issue and are a statement of opinion from a broker not an insurer. The prudent person seeking additional insured status must insist on seeing and reading the full policy. Had Bellet done so it would have been obvious to its risk manager that LSQ’s policy with Tudor provided no coverage to Bellet. Bellet has no one to blame but itself. Assuming that coverage exists is useless.


© 2020 – Barry Zalma

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 52 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.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

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