On March 27, 2018, the Court of Appeals, New York State’s highest court, in Gilbane Bldg Co. v. St. Paul Fire and Marine Comp., affirmed an appellate division decision that declared that an additional insurance endorsement in a commercial general liability (CGL) policy issued by insurer to prime contractor which expressly provided that an additional insured was “any person or organization with whom you [the policy holder] have agreed to add as an additional insured by written contract” covered only those that had written contracts “directly with named insured”.
The Court of Appeal’s decision hinged on the inclusion of the word “with” as a term that defined an additional insured. The Court found that the term must be given its ordinary meaning. Thus, the Court found that the term “with” can only mean that the written contract of the named insured must be “with” the additional insured. Seeking to minimize the effect of its decision on the insurance industry, the Court noted a simple solution could be achieved to effectively allocate risk among entities involved in construction projects by removing the word “with” from their future contracts.
As a result of the Court’s decision, to now adequately protect themselves, those seeking the benefit of additional insured status must timely perform their due diligence before any work on a project is permitted to begin by demanding a copy of the insurance policy procured by all those who possess the contractual obligation to procure them such insurance to ensure the endorsement language adequately protects them and provides them the rightful coverage they contracted for or risk a denial of risk transfer.
