Insurance Carrier’s Right to Deny Coverage for Additional Insured’s
In the past, our Legal Alerts took notice to the pitfalls of simply relying on a certificate of insurance, with respect to coverage under insurance policies. Recently a decision was made by the New York State Court of Appeals, stating that the need to obtain and review a full and complete copy of any insurance policy, in which you or your company are named as, is additionally insured so that you are able to confirm that you are actually covered.
On March 15, 2008 a tower crane operated by Joy Contractors, Inc. collapsed causing seven deaths, dozens of injuries and the destruction of a nearby building. Joy Contractors, Inc. was required to name the general contractor and project owner as additional insured’s under its liability and excess policies. Joy carried a comprehensive general liability policy, provided by Lincoln General Insurance, and an excess policy, provided by Admiral Insurance, at the time of the collapse. The general contractor and project owner were listed under the additional insured’s for the insurance policies. Apparently Joy Contractors, Inc. identified it as a drywall installer that did not perform exterior work in its application for insurance coverage.
Following the crane collapse, Admiral Insurance denied coverage to the general contractor and project owner because the insurance policy was issued based on representations by Joy Contractors, Inc. in it insurance application that it was a drywall installer that did not perform any exterior work. A law suit was filed by Admiral Insurance because they were looking for a complete rescission of its insurance policy to avoid responsibility for any claims arising out of the crane collapse.
It’s been said that Joy Contractors, Inc. did not affect Admiral Insurance’s responsibility to provide coverage for the additional insured’s based on the longstanding principal that an insurer has separate obligations to each of the insured’s.
The New York State Court of Appeals overturned the decision of the lower courts and upheld admiral Insurance’s right to deny coverage to the additional insured’s because of the misrepresentations by Hoy Contractors, Inc. in its insurance application. This was held because Admiral Insurance believed it was providing coverage’s insuring for the risks associated with interior drywall installation and not the obviously much greater risk presented by exterior construction work with a tower crane.
The full story about what is and what is not actually covered in an insurance policy is not told in the certificates of insurance. Only the name of the carrier and the limits of liability are identified. The policy endorsements are the only documents that identify who and what are actually covered and the circumstances under which a carrier is required to provide coverage.
It is highly recommended that you construction attorney is consulted to review your contract and insurance policies under which you are named in as an additional insured. This is important because you need to make sure that you are actually obtaining the coverage of protection you need to avoid being left without insurance coverage in an accidental situation.
