Finding coverage under an insurance policy often hinges on the appropriate application of very specific terms, for example, "you" and "your" and the party to whom these terms are intended to apply. If not read accurately, an additional insured could jeopardize coverage by failing to identify which notice requirements within a policy apply to them and which are the responsibility of the named insured.
After an "occurrence" has taken place, it is of the utmost importance that an insured make effective, timely notice to various potential insurers to avoid coverage denials. It is generally always better to give notice rather than later suffer the potential (lack of) coverage consequences based on notice provisions contained within the policy. While this broader concept is fairly well recognized by many insureds, what is perhaps less discussed and less clear is what the particular notice requirements are of a party seeking coverage as an additional insured. This is true even in industries where entities with extensive risk transfer and additional insured experience, like construction, have precisely worded risk transfer agreements.
Case Analysis
Could the putative additional insured have its independent right to coverage adversely affected due solely to the failure of the named insured to give timely notice of a job site incident? The case analysis that follows is illustrative of the issues involved in this scenario and can serve to guide the savvy additional insured.
In Mt. Hawley Ins. Co. v. Robinette Demolition, Inc., 2013 IL App (1st) 112847 (Ill. App. Ct. 1st Dist. 2013), the court held that additional insured coverage was in fact owed to a construction contractor ("Robinette"), even where the named insured failed to make a timely claim of the "occurrence" under the policy. The Robinette court reached this decision on appeal, reversing the lower court judgment and holding that Robinette was owed additional insured coverage because it had provided notice according to the policy provisions.
Robinette contracted with a concrete cutting subcontractor to provide services for a particular project. The contract also required that the subcontractor include Robinette as an additional insured on its contractually mandated insurance policies. An employee of that subcontractor was then injured while working on the project and brought suit for his alleged injuries. Upon being named in that suit, Robinette tendered its defense and indemnification to Mt. Hawley (the insurer of the subcontractor from whom Robinette had contracted to be named as an additional insured on their own policy). Mt. Hawley responded by denying liability, arguing that Robinette, as a potential additional insured, "was subject to all policy terms and, therefore, the named insured's late notice was imputed to Robinette." The tender from Robinette was Mt. Hawley's first notification of the accident, which had occurred almost 2 years earlier.
In its analysis, the appellate court acknowledged that the parties were in agreement that the named insured had failed to comply with its duty under the policy notice provisions, noting that in the Mt. Hawley policy the words "you" and "your" referred to the named insured and were used in the relevant notice provision. Mt. Hawley also did not deny that Robinette had complied with the section of the notice provision calling for immediate forwarding of documents received in connection with a suit or claim. The narrow issue left to the court was, therefore, whether the named insured's breach of its notification duty should bar coverage for Robinette, who had complied with its duty under the notice provision.
The Robinette court focused on a case cited by the defendant, American Nat'l Fire Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 343 Ill. App. 3d 93, 104, 796 N.E.2d 1133, 277 Ill. Dec. 767 (2003), with similar circumstances. In American Nat'l, a general contractor was an additional insured on a National Union policy issued to its subcontractor and an American National policy issued to that sub's sub-subcontractor. When an employee of the sub-subcontractor was injured and sued the general contractor, the general contractor requested that the subcontractor tender its defense to National Union, but it did not. Both the general and subcontractor did tender to American National, who settled the underlying suit. American National then sued National Union alleging that it had owed a duty to defend and indemnify the general contractor. In denying American National's motion and granting National Union's motion for summary judgment, the court held that National Union had not received timely notice of the underlying bodily injury suit.
The court in Robinette found it instructive that in American Nat'l, where the additional insured was not entitled to coverage under the National Union policy, the focus had nevertheless been first on the notice required of the additional insured, without addressing the named insured's failure to comply with its duty to notify. The American Nat'l court held that the general contractor, as an additional insured, had no obligation to comply with the policy sections requiring notification to the insurer of an accident and a claim or suit, as had been argued by National Union. These were obligations of the named insured. Coverage was thus denied, due to failure by the additional insured contractor to immediately forward to National Union copies of legal documents in connection with the underlying suit. Despite the general contractor having a copy of the certificate of insurance and, therefore, the ability to readily request a defense under their policy, National Union was only given notice of the underlying injury suit 3 years after it was filed, when it was served with the general contractor's declaratory judgment action.
When comparing the facts in American Nat'l with those of the case before it, the Robinette court focused on Robinette's immediate (2-month) tender of a defense and indemnification request to Mt. Hawley; whereas the additional insured in American Nat'l did not do so for 3 years. Ultimately, the Robinette court found coverage for Robinette as an additional insured, noting that there was no language in the notice provision of the policy that evidenced Mt. Hawley's intent to make coverage for an additional insured contingent on the lack of compliance by the named insured, and crucially, where Robinette had complied with their own duty to give notice.
Conclusion
This case and this issue in particular highlight, as always, the imperative nature of focusing on the details of individual policy language. Where a policy notice provision states that the named insured, as identified by "you" and "your," alone has the obligation to give notice, a very sound argument can be made that the failure of that named insured does not bar coverage for an additional insured. This distinction, that the additional insured's coverage was not negatively impacted by the notice failure of the named insured, prevents the coverage analysis from immediately focusing on any potentially available insurer "notice prejudice" analysis. This "notice prejudice" rule, adopted by an increasing majority of states, holds that an insurer can not avoid its obligation to defend and indemnify an insured due simply to a failure to receive timely notice. Rather, the insurer must demonstrate that it suffered some actual prejudice as a result of the delay.
At the same time, an additional insured must still remain vigilant as to what requirements do in fact fall to it. As a matter of best practice, it is wise for additional insureds to err on the side of caution and give notice (redundant as it may wind up being) as soon as they are aware of a possible "occurrence." Being proactive in this way avoids the dispute entirely and increases the likelihood that the additional insured can avoid the resultant frustration and added cost of pursuing the appropriate coverage later.
The author would like to acknowledge and thank coauthor Brendan C. Holt, an attorney with Saxe Doernberger & Vita, P.C., in Hamden, Connecticut for his contributions to this commentary.
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.
Finding coverage under an insurance policy often hinges on the appropriate application of very specific terms, for example, "you" and "your" and the party to whom these terms are intended to apply. If not read accurately, an additional insured could jeopardize coverage by failing to identify which notice requirements within a policy apply to them and which are the responsibility of the named insured.
After an "occurrence" has taken place, it is of the utmost importance that an insured make effective, timely notice to various potential insurers to avoid coverage denials. It is generally always better to give notice rather than later suffer the potential (lack of) coverage consequences based on notice provisions contained within the policy. While this broader concept is fairly well recognized by many insureds, what is perhaps less discussed and less clear is what the particular notice requirements are of a party seeking coverage as an additional insured. This is true even in industries where entities with extensive risk transfer and additional insured experience, like construction, have precisely worded risk transfer agreements.
Case Analysis
Could the putative additional insured have its independent right to coverage adversely affected due solely to the failure of the named insured to give timely notice of a job site incident? The case analysis that follows is illustrative of the issues involved in this scenario and can serve to guide the savvy additional insured.
In Mt. Hawley Ins. Co. v. Robinette Demolition, Inc., 2013 IL App (1st) 112847 (Ill. App. Ct. 1st Dist. 2013), the court held that additional insured coverage was in fact owed to a construction contractor ("Robinette"), even where the named insured failed to make a timely claim of the "occurrence" under the policy. The Robinette court reached this decision on appeal, reversing the lower court judgment and holding that Robinette was owed additional insured coverage because it had provided notice according to the policy provisions.
Robinette contracted with a concrete cutting subcontractor to provide services for a particular project. The contract also required that the subcontractor include Robinette as an additional insured on its contractually mandated insurance policies. An employee of that subcontractor was then injured while working on the project and brought suit for his alleged injuries. Upon being named in that suit, Robinette tendered its defense and indemnification to Mt. Hawley (the insurer of the subcontractor from whom Robinette had contracted to be named as an additional insured on their own policy). Mt. Hawley responded by denying liability, arguing that Robinette, as a potential additional insured, "was subject to all policy terms and, therefore, the named insured's late notice was imputed to Robinette." The tender from Robinette was Mt. Hawley's first notification of the accident, which had occurred almost 2 years earlier.
In its analysis, the appellate court acknowledged that the parties were in agreement that the named insured had failed to comply with its duty under the policy notice provisions, noting that in the Mt. Hawley policy the words "you" and "your" referred to the named insured and were used in the relevant notice provision. Mt. Hawley also did not deny that Robinette had complied with the section of the notice provision calling for immediate forwarding of documents received in connection with a suit or claim. The narrow issue left to the court was, therefore, whether the named insured's breach of its notification duty should bar coverage for Robinette, who had complied with its duty under the notice provision.
The Robinette court focused on a case cited by the defendant, American Nat'l Fire Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 343 Ill. App. 3d 93, 104, 796 N.E.2d 1133, 277 Ill. Dec. 767 (2003), with similar circumstances. In American Nat'l, a general contractor was an additional insured on a National Union policy issued to its subcontractor and an American National policy issued to that sub's sub-subcontractor. When an employee of the sub-subcontractor was injured and sued the general contractor, the general contractor requested that the subcontractor tender its defense to National Union, but it did not. Both the general and subcontractor did tender to American National, who settled the underlying suit. American National then sued National Union alleging that it had owed a duty to defend and indemnify the general contractor. In denying American National's motion and granting National Union's motion for summary judgment, the court held that National Union had not received timely notice of the underlying bodily injury suit.
The court in Robinette found it instructive that in American Nat'l, where the additional insured was not entitled to coverage under the National Union policy, the focus had nevertheless been first on the notice required of the additional insured, without addressing the named insured's failure to comply with its duty to notify. The American Nat'l court held that the general contractor, as an additional insured, had no obligation to comply with the policy sections requiring notification to the insurer of an accident and a claim or suit, as had been argued by National Union. These were obligations of the named insured. Coverage was thus denied, due to failure by the additional insured contractor to immediately forward to National Union copies of legal documents in connection with the underlying suit. Despite the general contractor having a copy of the certificate of insurance and, therefore, the ability to readily request a defense under their policy, National Union was only given notice of the underlying injury suit 3 years after it was filed, when it was served with the general contractor's declaratory judgment action.
When comparing the facts in American Nat'l with those of the case before it, the Robinette court focused on Robinette's immediate (2-month) tender of a defense and indemnification request to Mt. Hawley; whereas the additional insured in American Nat'l did not do so for 3 years. Ultimately, the Robinette court found coverage for Robinette as an additional insured, noting that there was no language in the notice provision of the policy that evidenced Mt. Hawley's intent to make coverage for an additional insured contingent on the lack of compliance by the named insured, and crucially, where Robinette had complied with their own duty to give notice.
Conclusion
This case and this issue in particular highlight, as always, the imperative nature of focusing on the details of individual policy language. Where a policy notice provision states that the named insured, as identified by "you" and "your," alone has the obligation to give notice, a very sound argument can be made that the failure of that named insured does not bar coverage for an additional insured. This distinction, that the additional insured's coverage was not negatively impacted by the notice failure of the named insured, prevents the coverage analysis from immediately focusing on any potentially available insurer "notice prejudice" analysis. This "notice prejudice" rule, adopted by an increasing majority of states, holds that an insurer can not avoid its obligation to defend and indemnify an insured due simply to a failure to receive timely notice. Rather, the insurer must demonstrate that it suffered some actual prejudice as a result of the delay.
At the same time, an additional insured must still remain vigilant as to what requirements do in fact fall to it. As a matter of best practice, it is wise for additional insureds to err on the side of caution and give notice (redundant as it may wind up being) as soon as they are aware of a possible "occurrence." Being proactive in this way avoids the dispute entirely and increases the likelihood that the additional insured can avoid the resultant frustration and added cost of pursuing the appropriate coverage later.
The author would like to acknowledge and thank coauthor Brendan C. Holt, an attorney with Saxe Doernberger & Vita, P.C., in Hamden, Connecticut for his contributions to this commentary.
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.