Court Reads Policies Since Parties Did Not

Refusal to Pay for Services Because of Claimed Failure to Obtain Insurance

Almost every commercial contract requires the vendor to obtain insurance to protect the interests of the customer. When the customer fails to provide the insurance the customer refuses to pay the contract because of the breach of the insurance condition. Such a claim, however, must be based upon the actual words of the insurance contracts read fairly to find that the vendor complied with the insurance contract.

In Long Painting Company v. General Electric Company and Alstom Renewable US LLC, 17-cv-9975 (KBF), United States District Court Southern District Of New York (July 9, 2018) Long Painting sued to collect invoice charges for work done by it (“Long”) pursuant to a contract with defendants General Electric Company (“GE”) and Alstom Renewable US LLC (“Alstom”) (collectively, “defendants”). Defendants deny that they owe payment and assert counterclaims against Long on several grounds, one of which alleges that Long breached the contract by failing to procure insurance as required (the “Counterclaim.


On August 29, 2016, defendants’ representative sent one of Long’s Project Managers a solicitation for a quote to perform cleaning and painting services on the Priest Rapids Dam (the “Project”). Defendants accepted Long’s quote for labor and materials and transmitted a purchase order, along with GE’s Power Terms of Purchase and the Priest Rapids Flow Down Provisions, on September 8, 2016. A modified purchase order was transmitted on September 15, 2016. Both purchase orders contained identical eight-page attachments entitled “GE Power Terms of Purchase Rev. A. – U.S.” (the “Terms of Purchase”) and dated October 1, 2015, as well as identical documents entitled ”

The Terms of Purchase contain a section that states: “The terms set forth in this Order take precedence over any additional or different terms in any other document connected with this transaction unless such additional or different terms are: (a) part of a written agreement (“Agreement”), which has been negotiated between the parties and which the parties have expressly agreed may override these terms in the event of a conflict; or (b) set forth on the PO to which these terms are attached.”

The Terms of Purchase also contain sections relating to indemnity and insurance. Section 12.1., the indemnity provision, requires Long to “defend, indemnify, release and hold Buyer [GE] and its Affiliates [Alstom] harmless from and against any and all claims . . . arising from any act or omission of Supplier.” Section 12.2, the insurance provision, requires that Long maintains: Commercial general/public liability insurance; Business automobile liability insurance in the amount of $2,000,000 per occurrence; Employers’ liability in the amount of $2,000,000 per accident; Property insurance of an “all-risk” basis covering the full replacement cost value of all the GE’s property in Long’s care, custody, or control; Appropriate workers’ compensation insurance; and Professional/errors and omission liability insurance in the minimum amount of $5,000,000 per claim.

Crucially, the Terms of Purchase allow additional insurance policies (e.g., an excess/umbrella liability insurance policy) to be utilized to meet the coverage requirements (of $2,000,000 to $5,000,000) outlined in the first three sections listed above.

Long procured insurance from Arch Insurance Company (“Arch”) that provides commercial general liability coverage and products/completed operations liability coverage to all parties where required by a written contract as additional insureds (the “Policy”). The Policy also contains an endorsement providing commercial general liability coverage to “any state or political subdivision requiring that they be named as an additional insured on your policy solely because it has issued a permit with respect to operations performed by you or on your behalf,” which includes Grant County PUD.”  The policy also contains a “Designated Construction Projects General Aggregate Limit” endorsement that provides commercial general liability coverage to “all construction projects of the insured unless otherwise excluded,” which includes the Project.

Long’s insurance broker, Propel Insurance (“Propel”), sent a copy of each certificate of insurance to defendants at the address at the bottom of each form, and it emailed a copy to Wendy Allan, an Alstom representative. Long is required to ensure that defendants receive a copy of the certificates; the Terms of Purchase note that acceptance of certificates by defendants of a non-compliant policy does not imply that defendants waived any requirements.


The parties agree that the Terms of Purchase require Long to procure insurance; they disagree over whether the Policy actually satisfies the requirements of the Terms of Purchase. Defendants argue that the Policy does not comply as to the particular types and amounts of insurance and that the Policy contains provisions that are contrary to the provisions in defendants’ contract with Long.

Defendants first claim that they required Long to obtain $5,000,000 in insurance coverage that provided for “cross liability,” and that Long breached the contract because its policy covered only up to $2,000,000. However, the last sentence of Section 12.2 provides that the “above-referenced insurance limits . . . can be either via each policy or via a combination of these policies and an excess/umbrella insurance policy.”

When Long’s excess liability coverage is added to the various limits, the coverage limit meets its contractual requirement of $5,000,000—thus, Long did not breach for failing to obtain the minimum amount.

Long’s motion for partial summary judgment was granted.


Litigation over insurance is a total waste of time if the policies are not read. The court found that the coverage existed because it added the primary and excess policies together. Why GE and Alstom wasted their time, their vendor’s time and the time of the court.

© 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 and

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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