NYAD1: WITH WHOM ≠ FOR WHOM

The construction company had an endorsement on its CGL insurance policy that said:

WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.

The construction company signed a contract with DASNY, in which it promised to make the third-party construction manager an additional insured on the policy.

The majority of a panel of the New York Appellate Division, First Department, said that the manager is not covered under the policy, despite the construction company’s promise to DASNY. The court reasoned that the construction company had no agreement with the manager, and the agreement to obtain insurance for the manager was insufficient under the express terms of the insurance policy endorsement.

One justice dissented, noting that the sentence in question was

poorly drafted in terms of its syntax . . . in that the word “whom” is the object both of the preposition “with” and of the infinitive “to add.”

The dissenter also worried that the majority’s rule was out of step with the customary practices and expectations of people in the construction business.

The majority was not persuaded by the dissenter. The court said the endorsement was unambiguous, and quoted precedents favoring literal interpretation:

As the Court of Appeals has made abundantly clear,                  “[E]quitable considerations will not allow an extension of coverage beyond its fair intent and meaning in order to obviate objections which might have been foreseen and guarded against” (Caporino v Travelers Ins. Co., 62 NY2d 234, 239 [1984]). Ultimately, the dissent’s argument ignores the fact that courts “may not disregard clear provisions which the insurers inserted in [the policies] and the insured [here, a sophisticated business entity that presumably relied on experts to advise it] accepted” (id.).

This may not be the last word from New York courts on this, since the majority recognized conflicts in the trial courts on this issue.

Gilbane Bldg. Co./TDX Constr. Corp. v St. Paul Fire & Mar. Ins. Co. (Sept. 15, 2016)