The Supreme Court of Rhode Island determined that an additional insured is not entitled to coverage when it is not being held liable for the acts or omissions of the named insured. The case is Bacon Constr. Co. v. Arbella Prot. Ins. Co., 208 A.3d 595 (R.I. 2019).
The Underlying Case
U.S. Drywall was hired as a subcontractor for a building project at the University of Rhode Island. The general contractor, Bacon Construction, required U.S. Drywall to purchase a CGL policy that named Bacon as an additional insured. U.S. Drywall obtained the necessary policy from Arbella Protection Insurance.
That winter, a U.S. Drywall employee named Thiago Almeida missed his footing and tumbled down a staircase, receiving extensive injuries. Six months later, Almeida sued Bacon for negligence related to his fall; he made no claims against U.S. Drywall.
Litigation
In its initial response to Almeida’s lawsuit, Bacon brought U.S. Drywall into the suit through a third-party action, claiming the company was obligated to defend Bacon and alleging breach of contract. Bacon, however, dismissed the entire third-party action implicating U.S. Drywall with prejudice, roughly two years after Almeida had filed suit, calling the move a “strategic legal decision.”
Instead, Bacon sought recovery of its defense costs from Arbella. Bacon claimed Arbella was obligated to cover Almeida’s lawsuit because Bacon was listed as an additional insured on the policy U.S. Drywall had purchased from Arbella.
Arbella disagreed. The insurer argued Bacon’s right to coverage could only be activated if a person or entity sought to hold Bacon liable as the general contractor for actions taken or not taken by U.S. Drywall, Bacon’s subcontractor and the named insured on the Arbella policy.
Bacon pursued summary judgment, arguing that Arbella, as the insurer, was duty-bound to provide indemnity via the additional insured endorsement on U.S. Drywall’s CGL policy. Arbella likewise filed a motion for summary judgment. The insurer maintained that Bacon was only covered if it was being held liable for an act or omission committed by U.S. Drywall. Since Almeida’s complaint made no allegations against U.S. Drywall, Bacon could not be held liable for U.S. Drywall’s actions or inactions. Therefore, it was legally impossible for the suit to trigger Arbella’s coverage obligations to Bacon.
The trial judge noted that Almeida’s lawsuit indicated a desire to hold Bacon liable for Bacon’s negligence and contained precisely zero complaints against U.S. Drywall. Without U.S. Drywall’s liability to bridge the gap between Bacon and Arbella, there was no hook on which Bacon could hang its right to coverage. The court ruled in favor of Arbella, and Bacon appealed.
…Or Not to Be
The Supreme Court of Rhode Island first examined the Additional Insured endorsement on U.S. Drywall’s policy, as it was the lone connection between Bacon and Arbella. The actual policy provided full coverage for U.S. Drywall. The Additional Insured endorsement extended some coverage to “any person or organization for whom [U.S. Drywall was] performing operations” when the contract between U.S. Drywall and the other party required U.S. Drywall to arrange additional insured coverage for that party.
Bacon’s arguments effectively stopped there. The company had a subcontracting agreement with U.S. Drywall, and that agreement explicitly required U.S. Drywall to purchase an insurance policy that provided Additional Insured coverage to Bacon. Ergo, Bacon was entitled to coverage under the plain language of the endorsement.
The justices were not convinced. Another part of the endorsement, in equally plain language, stated that any additional insured was “an additional insured only with respect to liability for 'bodily injury'; 'property damage' or 'personal and advertising injury' caused, in whole or in part, by: ‘1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured” (italics original). In this context, the references to “you” and “your” indicated the named insured on the policy, U.S. Drywall. The emphasized language shows a necessary component of coverage for an additional insured was the liability of the named insured, whether that liability was full or partial. Here, U.S. Drywall–the policy’s named insured–was not part of the dispute between Bacon and Arbella. If U.S. Drywall was absent from the suit, then so was its liability.
Word Play
But Bacon had another argument ready: the so-called “negligence trigger” for U.S. Drywall that Arbella asserted as a defense didn’t exist because the endorsement didn’t actually mention “negligence.” Without negligence, Bacon only needed to show that the underlying plaintiff, Almeida, had been injured while on the job. Bacon also argued that use of the phrase “in whole or in part” created a broader scope of coverage than Arbella suggested.
The court disregarded these arguments. Admittedly, the Additional Insured endorsement did not reference “negligence” by name. It did, however, explicitly state that Bacon’s liability was “limited to liability for ‘bodily injury’ * * * caused, in whole or in part, by" the acts or omissions of U.S. Drywall or its agents” (emphasis added). The bolded text in the previous statement indicated it would still be necessary to establish a connection between Bacon and Arbella based on “the acts or omissions of U.S. Drywall or its agents.” The “in whole or in part” language, far from establishing the breadth of coverage Bacon suggested, simply indicated it was necessary to draw a connection between the general contractor and something that U.S. Drywall either did or did not do.
Conclusion
Bacon, as the general contractor, was only connected to coverage from Arbella when Bacon was held liable for some action taken or not taken by its subcontractor, U.S. Drywall. Since U.S. Drywall was not part of Almeida’s lawsuit, it could not be held liable to Almeida for any alleged action or inaction, thereby precluding Arbella’s obligation to indemnify Bacon. The trial court’s verdict was affirmed.
Editor’s Note: Additional insured coverage has a much narrower scope than a typical insurance policy. It only comes into play when there is liability on the part of the additional insured that is also tied to the named insured. The underlying policy specifically stated that U.S. Drywall was not entitled to coverage if the subcontractor was responsible for injuries befalling one of its employees. Bacon’s argument that the endorsement did not include a negligence trigger, had it been accepted by the court, would have created the potential for Bacon to receive coverage related to injuries to Almeida, a U.S. Drywall employee, a situation where the Arbella policy excluded coverage for U.S. Drywall, the policy’s named insured.