In the high-stakes world of construction insurance, a single word can mean the
difference between coverage and catastrophe. This case demonstrates how the seemingly
minor distinction between being a "named insured" versus an "additional named insured"
can leave property owners exposed to millions in losses—even when they thought they were
fully protected. Read how the appellate court ruled that the rights of an additional
named insured are determined by the language of the policy, which limited coverage for
lost rental income or soft costs to only the "named insured." Also, discover why the
court ruled that the policy language must be enforced as written even if it led to a
nonsensical result.
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The Coverage Dispute: The Builders Risk Insurer Contends
That the Additional Named Insured Is Entitled to Less Coverage Than a Named
Insured
In 2015, an owner hired a general contractor to build an apartment complex in Missouri. As part of the agreement, the general contractor was required to obtain builders risk insurance, which it did by obtaining a builders risk policy from Travelers. The policy listed the general contractor as the "named insured" and the owner as an "additional named insured."
After a retaining wall collapsed during construction, the owner recovered an arbitration award against the general contractor and other subcontractors in excess of $7.2 million. The general contractor then declared bankruptcy.
The owner then sought $1.4 million from Travelers for lost rental income and soft costs allegedly caused by the delay. Travelers initially advanced $200,000 toward the claim but ultimately denied coverage. The policy's coverage for soft costs stated, "We will pay your 'Soft Costs' during the 'period of delay in completion.'"
With respect to rental income, the builders risk Special Time
Element Coverage Form stated, "We will pay the actual loss of 'rental value' you sustain." The policy unambiguously defined
"you" and "your" as follows: "Throughout this policy, the words 'you' and 'your'
refer to the Named Insured shown in the Declarations." Accordingly, Travelers argued
that the coverage extension and Special Time Element Coverage Form, specifically
employing the defined term "you," unambiguously applied solely to the named insured
listed in the declarations. The general contractor was the only named insured,
whereas the owner was an additional insured under the policy.
The owner filed suit for breach of contract and vexatious refusal to pay under Missouri law. The federal district court ruled in favor of Travelers, which prompted an appeal from the owner.
Court's Ruling
In BCC Partners LLC v. Travelers Prop.
Cas. Co. of Am., No. 24-1909 (8th Cir. June 9, 2025), the
Eighth Circuit held that the policy clearly stated that coverage for "rental value"
and "soft costs" applied only to the "named insured," defined as the general
contractor. The owner, listed under the policy as an "additional named insured," had
a narrower scope of coverage, limited to its financial interest in the "covered
property," and not for consequential losses, such as lost rent and soft costs. The
court reasoned as follows.
Under the plain meaning of the Policy, only a "Named Insured" is covered for such losses. The Policy's coverage extends to "the actual loss of 'rental value' you sustain" and "your 'soft costs'" that result from certain construction delays. The Policy explicitly states twice that "the words 'you' and 'your' refer to the Named Insured shown in the Declarations." [The general contractor] is the only party identified as "Named Insured" on the Policy's page marked "Common Policy Declarations."
An "Additional Named Insured," on the other hand, has a narrower scope of coverage. The Policy includes a distinct defined term for "Additional Named Insured," which encompasses: (a) "Owners of Covered Property;" (b) "Mortgagees or loss payees;" (c) "Contractors, sub contractors and sub-sub contractors;" and (d) "Lessors or lessees." BCC contends, and Travelers does not dispute, that it qualifies as an "Additional Named Insured" on the basis of its ownership of "Covered Property." Covered Property is defined as the sum of (a) "Permanent Works," such as construction equipment and materials, and (b) "Temporary Works," such as scaffolds, fencing, trailers, or other "temporary buildings or structures incidental to completion of the project." The Policy also specifies that an "Additional Named Insured" is covered "only to the extent of their financial interest in the Covered Property."
Taken together, [the owner's] alleged losses of rental income and soft costs are not covered under the plain meaning of the Policy. [The owner] is an "Additional Named Insured," not a "Named Insured," per the Policy's definitions. And the scope of coverage for an "Additional Named Insured" does not include rental income and soft costs; only a "Named Insured" is covered for such losses.
Next, the court analyzed the owner's argument that the term "additional named insured" was equal to coverage afforded to a "named insured." However, the court noted that the term has not acquired a uniformly agreed-upon meaning within the insurance industry and often does not include those same rights and responsibilities as a named insured. Thus, the court rejected this argument.
Finally, the court addressed the argument that it would be
nonsensical to read the policy in such a way that only the general contractor, and
not the owner, was insured for lost rental income and soft costs because those costs
are inapplicable to the general contractor. The owner asked, why would coverage for
those losses have been included in the policy if the only party covered for those
types of losses, the general contractor, would not even incur those types of losses?
Despite the question, the court ruled that the policy must be enforced as written,
holding as follows.
We acknowledge the possibility that [the owner], and perhaps even Travelers, anticipated that [the owner] would be covered for lost rental income and soft costs. However, under Missouri law, the Policy "must be enforced as written when its language is clear and unambiguous." And the Policy's language is clear and unambiguous: [The owner] is an "Additional Named Insured," an "Additional Named Insured" is distinct from a "Named Insured," and an "Additional Named Insured" is not covered for lost rental value and soft costs. As the district court said, we "must enforce the contract before [us], not the contract [the owner] wishes had been signed." Accordingly, the Policy does not cover [the owner] for rental income lost and soft costs incurred following the construction delays at the Vue Project. Travelers thus did not breach the Policy by declining to make the $1.4 million payment to [the owner].
[Citations omitted.]
Takeaway: Builders risk policies
may draw sharp distinctions between "named insureds" and "additional named
insureds," with significant consequences for coverage, particularly for soft costs
and rental income. Parties relying on such coverage must ensure that they are
properly named in the declarations as named insureds. Otherwise, they risk being
excluded from key policy benefits.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
In the high-stakes world of construction insurance, a single word can mean the difference between coverage and catastrophe. This case demonstrates how the seemingly minor distinction between being a "named insured" versus an "additional named insured" can leave property owners exposed to millions in losses—even when they thought they were fully protected. Read how the appellate court ruled that the rights of an additional named insured are determined by the language of the policy, which limited coverage for lost rental income or soft costs to only the "named insured." Also, discover why the court ruled that the policy language must be enforced as written even if it led to a nonsensical result.
Subscribers to IRMI's Insurance Law Essentials will receive the following as part of their package.
If you are not a subscriber, click here to subscribe today!
*Except for November and December, when the newsletter is sent monthly.
The Coverage Dispute: The Builders Risk Insurer Contends That the Additional Named Insured Is Entitled to Less Coverage Than a Named Insured
In 2015, an owner hired a general contractor to build an apartment complex in Missouri. As part of the agreement, the general contractor was required to obtain builders risk insurance, which it did by obtaining a builders risk policy from Travelers. The policy listed the general contractor as the "named insured" and the owner as an "additional named insured."
After a retaining wall collapsed during construction, the owner recovered an arbitration award against the general contractor and other subcontractors in excess of $7.2 million. The general contractor then declared bankruptcy.
The owner then sought $1.4 million from Travelers for lost rental income and soft costs allegedly caused by the delay. Travelers initially advanced $200,000 toward the claim but ultimately denied coverage. The policy's coverage for soft costs stated, "We will pay your 'Soft Costs' during the 'period of delay in completion.'"
With respect to rental income, the builders risk Special Time Element Coverage Form stated, "We will pay the actual loss of 'rental value' you sustain." The policy unambiguously defined "you" and "your" as follows: "Throughout this policy, the words 'you' and 'your' refer to the Named Insured shown in the Declarations." Accordingly, Travelers argued that the coverage extension and Special Time Element Coverage Form, specifically employing the defined term "you," unambiguously applied solely to the named insured listed in the declarations. The general contractor was the only named insured, whereas the owner was an additional insured under the policy.
The owner filed suit for breach of contract and vexatious refusal to pay under Missouri law. The federal district court ruled in favor of Travelers, which prompted an appeal from the owner.
Court's Ruling
In BCC Partners LLC v. Travelers Prop. Cas. Co. of Am., No. 24-1909 (8th Cir. June 9, 2025), the Eighth Circuit held that the policy clearly stated that coverage for "rental value" and "soft costs" applied only to the "named insured," defined as the general contractor. The owner, listed under the policy as an "additional named insured," had a narrower scope of coverage, limited to its financial interest in the "covered property," and not for consequential losses, such as lost rent and soft costs. The court reasoned as follows.
Next, the court analyzed the owner's argument that the term "additional named insured" was equal to coverage afforded to a "named insured." However, the court noted that the term has not acquired a uniformly agreed-upon meaning within the insurance industry and often does not include those same rights and responsibilities as a named insured. Thus, the court rejected this argument.
Finally, the court addressed the argument that it would be nonsensical to read the policy in such a way that only the general contractor, and not the owner, was insured for lost rental income and soft costs because those costs are inapplicable to the general contractor. The owner asked, why would coverage for those losses have been included in the policy if the only party covered for those types of losses, the general contractor, would not even incur those types of losses? Despite the question, the court ruled that the policy must be enforced as written, holding as follows.
Takeaway: Builders risk policies may draw sharp distinctions between "named insureds" and "additional named insureds," with significant consequences for coverage, particularly for soft costs and rental income. Parties relying on such coverage must ensure that they are properly named in the declarations as named insureds. Otherwise, they risk being excluded from key policy benefits.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.