When an Additional Insured is not Entitled to Defense or Indemnity

Additional Insured only Covered for Liability Resulting from the Acts of the Named Insured

Owners and General Contractors almost always require that the subcontractor make the owner and General Contractor an additional insured on its policy. Additional insured provisions come in various types providing greater and less coverages. Assuming that every additional insured provision is the same as every other can be very expensive.

In Comcast of Garden State, LP v. The Hanover Insurance Company and JNET Communications, LLC, t/d/b/a Vitel Communications, LLC, DOCKET NO. A-3245-17T4, Superior Court of New Jersey Appellate Division (July 10, 2019) Comcast learned an expensive lesson.

FACTS

The Hanover Insurance Company (Hanover) and JNET Communications, LLC (JNET) appeal from orders granting plaintiff Comcast of Garden State, LP (Comcast), summary judgment, finding Comcast is entitled to a defense and indemnification under an insurance policy Hanover issued to JNET, awarding Comcast $349,468.83 in defense costs and fees, and denying Hanover’s motions for summary judgment dismissing the complaint. Comcast cross-appeals asserting that if it is determined the court erred by finding Comcast is entitled to a defense and indemnification under the policy, we should reverse the court’s order denying Comcast’s motion for summary judgment on its contract claim against JNET.

Richard Endres sued alleging he sustained injuries due to the negligence of JNET and Comcast when he tripped over a temporary above-ground cable JNET installed while performing work as Comcast’s contractor. Comcast tendered its defense to Hanover under the comprehensive general liability policy it issued to JNET as the insured, and Hanover accepted the defense and assigned counsel to Comcast and JNET. At the trial on Endres’s claim, the jury found Comcast sixty percent liable and JNET forty percent liable, and awarded damages.

Comcast sued Hanover and JNET seeking a declaratory judgment that Hanover was obligated to defend and indemnify Comcast because Comcast was an additional insured entitled to coverage under the policy. Comcast also asserted a claim against JNET alleging that if Comcast was not covered under the policy, JNET breached its contract with Comcast by failing to obtain the insurance required under that contract.

The trial court granted Comcast’s subsequent motion for summary judgment finding Comcast was an additional insured entitled to a defense and indemnification under the policy, awarded Comcast $349,468.83 in defense costs and fees, and denied Hanover’s motion for summary judgment for dismissal of the complaint. The court also denied Comcast’s motion for summary judgment on its breach of contract claim against JNET, determining there was no basis for the claim because JNET had, in fact, obtained the required insurance coverage under its contract with Comcast.

JNET is the named insured under the policy. Comcast is entitled to a defense and indemnification from Hanover under the policy only if Comcast qualifies as an additional insured for its own negligence.

ANALYSIS

The basic rule of insurance interpretation is to determine the intention of the parties from the language of the policy, giving effect to all parts so as to give a reasonable meaning to its terms. Generally, policies should be construed liberally in favor of the insured to the end that coverage is afforded to the full extent that any fair interpretation will allow. Where the parties dispute the interpretation of the policy, it is the insured’s burden to bring the claim within the basic terms of the policy.

Hanover argues that under the circumstances presented Comcast is not an additional insured for its own negligent acts under the plain language of the policy. More particularly, Hanover notes the policy provides Comcast is an additional insured but “only with respect to” JNET’s work. Hanover contends Comcast is not an additional insured for its own negligence because the jury based its finding of Comcast’s liability on Comcast’s direct negligence unrelated to JNET’s work and not vicarious liability based on JNET work.

To qualify as an additional insured under the policy Comcast must be a party for whom JNET, as the named insured, agreed to provide insurance. That condition is satisfied here; JNET agreed to provide insurance under its contract with Comcast. However, Comcast’s status as a party to whom JNET contractually agreed to provide insurance does not, by itself, render Comcast an additional insured entitled to coverage.

Those parties to whom JNET agreed to provide insurance are additional insureds but “only with respect to . . . Your Work.” The policy defines “Your Work” as JNET’s “[w]ork or operations” or “[m]aterials, parts or equipment furnished in connection with such work or operations.”

Comcast made no showing that its liability for Endres’s injuries was based on JNET’s work or that the jury found it vicariously liable for JNET’s negligence in the performance of JNET’s work. Instead, the jury apportioned liability based on JNET’s and Comcast’s separate and distinct negligence.

The plain language of the policy did not support a finding that Comcast is an additional insured for its own negligence. The policy does not provide that Comcast is an additional insured with respect to its own work or negligence.

The court was, therefore, compelled to enforce the policy as written and could not interpret it to provide more coverage than that to which Hanover and JNET agreed.

In this case the additional insured provision does not include the “arising out of” language found in other policies. Comcast was only an additional insured only in reference to or in relation to JNET’s work.

The policy provides no source of confusion. Comcast is an additional insured “only with respect to” JNET’s work. The evidence established that its liability was not based on JNET’s work. The jury found Comcast separately liable based on its own negligence and with reference and relation to its own work.

Because Comcast’s liability was not determined in reference to or in relation to JNET’s work, Comcast is not entitled to coverage as an additional insured for its own negligent acts under the policy and the trial court’s decision in that regard was reversed.

The trial court vacated the order denying Comcast’s motion for summary judgment on its breach of contract claim against JNET. As a result the case was remanded for the court to address the motion whether JNET obtained the insurance required by the contract on the merits and for such other further proceedings that may be appropriate.

ZALMA OPINION

As I have stated many times before: it is essential that insurance policies must be read and understood before a loss occurs. This case would never have been filed if Comcast read JNET’s policy, found it wanting, and required a more inclusive additional insured agreement. The policy provided limited coverage to the additional insured and if that was a breach of the contract between Comcast and JNET it should have bee found before anyone was injured. Comcast was not without a remedy. If the contract was breached its suit against JNET is viable.


© 2019 – 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.

Over the last 51 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.

Excellence in Claims Handling Courses From Experfy.com

The Excellence In Claims Handling program provides everything a person or entity presenting a claim needs to effectively present the claim and provides the insurance claims person with everything he or she needs to properly represent the insurer.

The insured, risk manager, or corporate counsel will be able to present a first party property claim – whether a fire, theft, or windstorm or some other insured against cause – with little difficulty and professionalism and present a sworn proof of loss acceptable to an insurer.

The insurance claims person completing the course will be able conduct a thorough investigation of the policy and claim. The insurance claims person will also be able to assist an insured to fulfill all of the promises made by the insured to the insurer and the insurer to provide the indemnity promised by the insurance policy.

The series of courses was designed so that the student can obtain the needed information easily while he or she sits down in the morning for a first cup of coffee or any other time in the day in short, easy to consume lessons. For instance “Insurance and Claims” is made up of three modules and 27 lectures while “Investigating the Property Claim” is made up of four modules and 65 lectures. You can review each course, each module and each lecture at the links below.

Each person completing the course will be able to claim that he or she is a professional first party property claims person ready to provide excellence in claims handling and be ready to resolve any claims problem that arises for the benefit of the insurer and the policy holder.

Insurance and Claims: https://www.experfy.com/training/courses/insurance-and-claims

Investigating the Property Claims: https://www.experfy.com/training/courses/investigating-the-property-claim

Insurance Law: https://www.experfy.com/training/courses/insurance-law

Solving Claims Problems: https://www.experfy.com/training/courses/solving-claims-problems

 

Share

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.
This entry was posted in Zalma on Insurance. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.