Additional Insured Coverage for General Contractor under CGL Form
September 14, 2015
The subcontractor's commercial general liability insurer brought an action for declaratory relief against the general contractor, claiming that the insurer did not owe the general contractor a duty to defend as an additional insured in a construction negligence lawsuit. This case is West Bend Mutual Insurance Company v. DJW-Ridgeway Building Consultants, 2015 IL App (2d) 140441.
In April 2008, delaTorre was injured while working on the construction of a commercial building. The developer of the project had hired Ridgeway as the general contractor and Ridgeway in turn hired Jason the Mason as the masonry subcontractor. After delaTorre was injured, he sued Ridgeway and Jason the Mason for negligence. Ridgeway tendered the defense of the action to West Bend on the theory that Ridgeway was an additional insured on a liability policy that Jason the Mason held with West Bend.
When West Bend filed a declaratory judgment action seeking a ruling that it had no duty to defend Ridgeway, the circuit court ruled in favor of Ridgeway and this appeal followed.
The Appellate Court of Illinois, Second District, noted that Ridgeway had faxed Jason the Mason's insurance agent a note stating that Ridgeway was to be named as an additional insured on a primary and non-contributory basis under Jason's CGL form. The agent complied with this note by sending a certificate of insurance to Ridgeway that stated Ridgeway was an additional insured as requested. The certificate also stated that the certificate did not amend or alter the coverage afforded by the CGL form.
The insurer pointed out that the policy requires an additional insured designation under a written contract or agreement that was executed prior to the injury for which coverage is claimed. The insurer claimed that the agreement was not executed because it bore no signatures and so, it was ineffective in its mandate that Jason the Mason add Ridgeway as an additional insured. The court said that the definition of “execute” means to affix a signature, to make a legal document valid by signing. There were no signatures on the agreement. However, the court found that the proposal between Ridgeway and Jason the Mason was signed and decided that the two documents (the agreement and the proposal) did comprise a written contract or agreement requiring that Ridgeway be named an additional insured under the policy. Moreover, Jason the Mason's conduct following its receipt of the proposal from Ridgeway confirmed that Jason considered itself bound by the agreement. The court ruled that Jason the Mason, in complying with the agreement's mandate that it obtain a certificate of insurance confirming coverage for Ridgeway, manifested assent to the agreement's terms.
The court found that the undisputed facts demonstrate the existence of a written contract or written agreement requiring that Ridgeway be named as an additional insured under the policy.
West Bend also argued that even if Ridgeway was an additional insured, the coverage afforded to Ridgeway was excess and not primary and so, West Bend still had no duty to defend. The court noted that the policy provides additional insured coverage as excess insurance over any other valid and collectible insurance available to the additional insured unless a written contract specifically requires that the insurance be either primary or primary and noncontributing. In this instance, the only coverage described as excess is the umbrella coverage, said the court and if Ridgeway and Jason the Mason had intended for the general liability coverage to be excess, they would have so labeled it, as they did the umbrella coverage. The court concluded that the general liability coverage is primary.
Because Ridgeway's additional insured coverage under the policy includes primary coverage as a portion of its total coverage, the court ruled that West Bend had a duty to defend Ridgeway. The ruling of the trial court was affirmed.
Editor's Note: The Appellate Court of Illinois rules that the general contractor was an additional insured on the subcontractor's policy and that the coverage was primary, not excess. This ruling was based on the theory that all of the writings taken together in this case plus the actions of the insured contained all of the essential elements to show a valid contract between the subcontractor and the general contractor. Moreover, since the policy specifically stated that the insurance for the general contractor was primary and noncontributing, that coverage was primary