It is common practice for a general contractor to require subcontractors to carry liability insurance providing it with coverage in the event of a workplace accident involving a subcontractor employee. See 9 Couch, Insurance § 126:7 (3d ed. 1997). “That the general contractor, because of its over-all supervisory role, would be a target for a claim of negligence as well is precisely the purpose of having the subcontractor's insurance name the general contractor as an additional insured.” Transamerica Ins. Grp. v. Turner Const. Co., 33 Mass. App. Ct. 446, 450 (1992). It is important for general contractors to use precise language in their contracts to ensure that they are in fact named as an “additional insured” on their subcontractor’s insurance. Where the language of the subcontract does not expressly state that the subcontractor has a duty to name the general contractor as an additional insured, or otherwise provide it with direct coverage, it is unlikely that courts will imply such an obligation into the contract. See, e.g., RCS Grp., Inc. v. Lamonica Const. Co., 75 Mass. App. Ct. 613, 619 (2009). A recent decision by the United States Second Circuit underscores the need for a general contractor to also review the insurance policy obtained by its subcontractor to ensure that the requested protection will be provided. See Endurance American Specialty Ins. Co. v. Century Surety Co., 2015 WL 6717686 (2nd Cir. November 4, 2015).
Hayden Building Corporation hired Pinnacle Construction as a subcontractor. One of Pinnacle’s employees was injured in the course of its work. He sued Hayden. Hayden and its insurer, Endurance, sought coverage as an additional insured from Pinnacle’s insurer, Century. The District Court for the Southern District of New York found in favor of Hayden and Endurance. Century appealed. The Second Circuit reversed on the basis that Century’s policy excluded coverage for injury to Pinnacle’s employee. The Century policy contained an exclusion stating that coverage was excluded for bodily injury to “an ‘employee’ of the named insured arising out of and in the course of (a) employment by the named insured.” The Second Circuit observed that Pinnacle was the “only named insured” and that the “coverage being sought is to defend Hayden in a lawsuit” brought by Pinnacle’s employee. Hayden and Endurance argued that the policy’s separation of insureds provision required that this exclusion be interpreted from the perspective of Hayden, the particular insured seeking coverage. They argued that because Pinnacle’s employee was not Hayden’s employee, the policy should not be interpreted to exclude coverage. The Second Circuit disagreed. The court ruled that Century’s policy language “unambiguously” excluded coverage. It noted that “named insureds” and “additional insureds” are distinct mutually exclusive categories of insureds. It determined that the use of the term “named insured” in the Century policy clearly expressed an intent to “specifically exclude coverage for bodily injury to employees of the named insured.”
General contractors often only require a subcontractor to provide an ACORD certificate of insurance indicating that the insurance required by their contract has been procured. It is common for these certificates to simply state that the general contractor has been named as an additional insured. See, e.g., Shea v. Bay State Gas., 383 Mass. 218 (1981). However, “[t]he naming of additional insureds does not extend the nature of the substantive coverage originally given by the policy but merely gives to other persons the same protection afforded to the principal insured.” Massachusetts Tpk. Auth. v. Perini Corp., 349 Mass. 448, 457 (1965). The Second Circuit’s Endurance decision underscores the importance of reviewing the subcontractor’s insurance policy. If this cannot be done in-house, consideration should be given to involving the company’s insurance professional or requesting assurance from the subcontractor’s insurance agent or broker that the terms of the subcontractor’s insurance provide the desired coverage. Merely taking steps to confirm that a subcontractor has insurance naming the general contractor as an additional insured is only half the battle. Careful review of the subcontractor’s policy itself may reveal unanticipated gaps in coverage, and provide an opportunity to obtain adequate protection before a catastrophic loss occurs.
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