Must an Additional Insured Have a Written Contract With the Named Insured to Get Coverage? It Depends Which Court You Ask

There is a growing list of trial court decisions in New York where the courts disagree of whether an additional insured endorsement to an insurance policy requires a written contract between the additional insured and the policy’s named insured for additional insured status to apply. The U.S. District Court for the Southern District of New York recently held in Liberty Mutual Fire Insurance Company v. Zurich American Insurance Company that contractual privity with the named insured was not required.

In Liberty Mutual, the additional insured endorsement included as an additional insured:

Any person or organization with whom you have agreed, through written contract, agreement or permit, executed prior to the loss, to provide additional insured coverage ….

(Emphasis added). The party seeking additional insured coverage did not have a contract with the named inured. Instead, the seeking party was listed as a party entitled to coverage in a written contract between the named insured and another party. The insurer issuing the policy sought to avoid coverage and argued that the endorsement’s language requires a direct contract between the named insured and the party seeking additional insured coverage for that party to qualify as an additional insured. To support its argument, the insurer cited, and the District Court acknowledged, but declined to follow, two other trial court decisions applying New York law (one state and one federal) finding that additional insured endorsements using similar language required contractual privity. These cases are Zoological Society of Buffalo, Inc. v. Carvedrock, LLC, No. 10-CV-35-A(Sr), 2014 U.S. Dist. LEXIS 103800 (W.D.N.Y. July 29, 2014), and Murnane Building Contractors, Inc. v. Zurich American Insurance Company, 941 N.Y.S.2d 539, 539 (Sup. Ct., Suffolk County 2011).

The District Court in Liberty Mutual rejected the insurer’s argument “as an incorrectly cramped reading of the policy language” and concluded that the endorsements in Zoological Society and Murnane “add a requirement of direct contractual privity between the named insured and the purported additional insured that does not exist in the policy language” of the additional insured endorsement before it.

For example, in Zooligical Society, the Western District of New York considered an additional insured endorsement extending additional insured status to:

Any person or organization with whom you have agreed, in a written contract, that such person or organization should be added as an insured on your policy, provided such written contract is fully executed prior to an “occurrence” in which coverage is sought under this policy.

(Emphasis added.) The Zoological Society court ruled that “[t]he legal issue here is very straightforward” and concluded that the endorsement before it, as a whole, plainly requires not only that there be a “written contract,” but that the named insured and the party seeking additional insured coverage are parties to the “written contract” for additional insured status to exist. In particular, the Zooligical Society court observed that if the word “for” in the endorsement’s phrase “with whom you have agreed” were substituted for the word “with,” so that the endorsement would be “[a]ny person or organization for whom you have agreed,” then the party seeking additional insured coverage “might have a stronger argument” that contractual privity was not required. Since the endorsement was not drafted in that way, the District Court found that it “must interpret the endorsement as it is written.”

It appears that courts agree on the significance of the term “written contract” in an additional insured endorsement, but disagree about the importance of the phrase “with whom” when resolving the existence of additional insured coverage.

Alas, many learned courts and judges can disagree. Thus, until New York’s appellate courts weigh-in on this issue, insurers should anticipate different results in different trial courts.

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