A New York appeals court recently held that a construction manager isn't entitled to coverage as an additional insured under a contractor's policy because the two companies didn't have a direct contract, a ruling that experts say deepens a judicial divide on the requirements for additional-insured coverage and exacerbates uncertainty among construction industry policyholders.
In a 4-1 decision, a panel of the state Appellate Division's First Department on Sept. 15 flipped a lower court's holding that the construction manager on a Bellevue Hospital building, a joint venture between Gilbane Building Co. and TDX Construction Corp., qualifies as an additional insured under contractor Samson Construction Co.'s commercial general liability policy with Liberty Insurance Underwriters.
According to court documents, Samson had agreed in a contract with the project's financier, the Dormitory Authority of the State of New York, to acquire additional-insured coverage for a number of entities, including the construction manager.
But the appellate panel found that, under the language of the Liberty policy's additional-insured endorsement, that agreement was insufficient to confer insured status on the joint venture. Instead, Samson was required to enter into a direct written contract with Gilbane-TDX in order for the construction manager to be entitled to additional-insured coverage under the policy, the panel said.