Contractor, Subcontractor, and Additional Insured Coverage
November 3, 2014
The contractor sought coverage as an additional insured under the subcontractor's general liability policy when the contractor was sued after the subcontractor was killed while working on the job site. This case is Schafer v. Paragano Custom Bldg., Inc., 2010 WL 624108 (N.J. Super. Ct. App. Div. Feb. 24, 2010).
Paragano was the general contractor for the renovation of a home and subcontracted a portion of the work to K&D Builders and Carpenters. Schafer was installing a window in a second-floor bathroom. Paragano had erected a scaffold in connection with the work, but it was not high enough to permit Schafer to complete his work. So, Schafer placed an A-frame ladder on the top of the scaffold and climbed up. While perched on the ladder and trying to fit the window into place, Schafer lost his balance and fell to his death.
Schafer's estate sued Paragano claiming that the scaffolding had been improperly erected. Paragano sought coverage under K&D's general liability policy as an additional insured. The trial court ruled in favor of coverage and the liability insurer, Harleysville Insurance Company, appealed.
The Superior Court of New Jersey, Appellate Division, noted that Paragano was made an additional insured on the Harleysville policy only with respect to liability caused in whole or in part by K&D's acts or omissions in the performance of its ongoing operations for Paragano. The court found no ambiguity in this wording. It was clear that coverage was available to Paragano as an additional insured only for liability caused in whole or in part by the acts or omissions of K&D. The policy did not provide coverage for liability caused by Paragano's own acts or omissions. In other words, Paragano had vicarious liability coverage under the Harleysville policy, not liability coverage for its own acts or omissions.
The order of the trial court was reversed.
Editor's Note: The Appeals Court faced the question of whether the additional insured was covered for its own acts or omissions or whether it had coverage only for vicarious liability. The policy wording was clear in this instance that the additional insured was an insured only for vicarious liability.
This issue of additional insured coverage for a general contractor under the liability policy of a subcontractor has led a number of states to refuse to allow subcontractors through the use of additional insured endorsements to indemnify a contractor for its own negligence. These anti-indemnity statutes act to make sure the general contractor has liability coverage under its own liability insurer's policy. Even ISO has gotten into the act by stating in some of its additional insured endorsements that coverage is restricted to the extent allowed by law.