This document summarizes a presentation on additional insured endorsements and priority of insurance. It discusses how "primary and noncontributory" language in additional insured endorsements is often ambiguous but generally interpreted as an expression of intent for the additional insured coverage to take priority over other available insurance. It also notes that in a hypothetical commercial construction project where multiple subcontractors name the general contractor as an additional insured, the general contractor's insurance would likely respond first due to the primary and noncontributory endorsements.

1. October 28-29, 2013

2. final
Who’s on First?

3. Brian D. Harrison
Sedgwick LLP
Michael John Miguel
KasowitzBenson Torres & Friedman LLP

4. 
“Primary and Noncontributory”
Language

Allocation with direct insurers

Vicarious liability: impact on priority?

5. 
Additional Insureds – Concept and
Application
 Covers AI from risk arising out of Named Insured’s
conduct or operations
 In definition of “Insured” or by endorsement
 Benefits to the AI – determined by policy language and
applicable law
 Subject of frequent disagreements and litigation over
the scope of liability

6. 
Contribution – what does it mean?
 In General: Joint Tortfeasors/Joint & Several Liability
 Insurance: Determines rights when several carriers
obligated to defend or indemnify same loss or claim
Equitable and Contractual (other insurance clause)
Independent of the Insured’s rights

7. “If the contract between the additional insured and you requires
that the insurance afforded by this policy be primary and noncontributory, this insurance shall be primary and noncontributory but only as to the general/liability policie(s) where
that additional insured is listed as the named insured on the
declaration page(s) of such policy(ies).”
 No definition of “non-contributory”
 Multiple possible meanings; Courts of little help so far
 Other applicable insurance never to be called upon
 Other applicable insurance called upon only after limits
paid
 An agreement by insurer providing additional insured
coverage to waive its equitable contribution rights
 Expression of intent on PRIORITY of insurance

8. Most Reasonable Answer:
Expression of Intent on Priority; Agreement
Not to Seek Contribution:
 Typical requirement of limits for additional insured
indicates understanding that other insurance would
respond once stated limits were reached
 “Other Insurance” clause altered by Endorsement for
particular purposes; other insurance not considered
primary
Problem Most Prevalent in non-ISO policies:
 Post 1999 ISO CGL Policies deal with priority as
between named and additional insureds.
 But query whether subrogation rights are (or can be)
affected.

9. Impact of language on Excess
Liability Coverage
 Vertical v. Horizontal Exhaustion
 Limited Case Law
 Depends on Whether Court looks to
intent of indemnity provision in
underlying contract (Wal-Mart Stores v.
RLI Ins. Co., 292 F.3d 583 (8th Cir.
2002) (vertical exhaustion) or the policy
language (Bovis v. Great Amer. Ins. Co.,
855 N.Y.S. 2d 459 (App.Div. 1st Dept.
2008) (horizontal exhaustion).

10. Primary and Noncontributory language
 Indemnity provisions in the Contract
requiring the naming of the additional
insured; if additional insured is separately
indemnified by name insured, named insured
should pay
 Coverage attaches if liability “arises out of”
named insured’s work or operations.
Ambiguous?


11. Much of case law deals with priority among
insurers in contribution setting: insurers with
arguably equal obligations but for endorsements
and “other insurance” provisions.
 Subrogation comes into play where coverages do
not arguably equally cover the loss.
Transactional Insurance Co. v. Ins. Co. of State
of PA (2007) 148 Cal.App. 4th 1296 (add’l
insurer entitled to recover by way of
subrogation for defense costs allocable to
named insured claims not covered by
additional insurer.)


12. 
Policy Language controls (as always)
Additional insured covered for liability “caused by the acts or
omissions” of named insured. Split among courts in how this
language is interpreted.

No negligence by named insured = NO COVERAGE for additional
insured
Engineering & Const. Innovations v. L.H. Bolduc Co., 825 NW2d 695 (Minn.
2013) (under fault-based interpretation, AI in only insured for
vicarious
liability of named insured)
Garcia v. Federal Ins. Co., 969 So. 2d 288 (Fla. 2007) (policy is not
ambiguous and, therefore, only AI’s vicarious liability for negligent
acts on named insured are covered)

13. 
Any Liability arising out of negligence of named insured: A.I.
COVERED
Evanston Ins. v. Atofina Petrochemicals, 256 SW3d 660 (Tex. 2008)
(AI endorsement covers direct liability as well as vicarious liability;
ambiguity = coverage)
Mikula v. Miller Brewing Co., 701 N.W.2d 613 (Wis.App. 2005)
(“common sense” does not limit liability to direct negligence;
“there need not be negligence alleged against the named insured
for the additional insured to be covered.”)
Presley Homes, Inc. v. American States Ins. Co., 90 Cal.App.4th 571
(2001) (AI entitled to complete defense even if indemnity
coverage limited to liability arising from subcontractor’s work)

14. Recent ISO GCL Insurance Form Revisions
New AI and Other Insured Endorsements
Intended to address recent decisions broadly
applying AI coverage?
Intended to address state anti-indemnification
statutes?

15. Commercial high-rise project in major city, 50story building, mixed-use. Two years into
project, building (currently 29 stories high) found
to be unfit and unstable, and project ceased.
Owners and investors sue General Contractor,
Engineering Sub, Framer Sub, Concrete Sub and
Steel Manufacturer for $700 million. Each sub
names General Contractor on a primary and
noncontributory basis, each in amount of $10
million.
 Whose insurance responds?
 In what priority?

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Brian D. Harrison
Sedgwick LLP
415-627-3454
brian.harrison@sedgwicklaw.com
Michael John Miguel
Kasowitz Benson Torres & Friedman LLP
424-288-7904
mmiguel@kasowitz.com