One of our prior Legal Alerts addressed the pitfalls of simply relying on a certificate of insurance with respect to coverage under insurance policies. A recent decision by the New York State Court of Appeals in Admiral Insurance Co. v. Joy Contractors, Inc. No. 93, NYLJ 1202559115718, at *1. June 12, 2012, underscores the need to obtain and review a full and complete copy of any insurance policy in which you or your company are named as additional insured so that you can confirm that you are actually covered.
Joy Contractors, Inc. was working as the concrete superstructure subcontractor on a luxury high rise condominium project located at 303 East 51st Street in Manhattan. A tower crane operated by Joy Contractors, Inc. collapsed on March 15, 2008 causing seven deaths, dozens of injuries and the destruction of a nearby building. Pursuant to its subcontract with the general contractor, Joy Contractors, Inc. was required to name the general contractor and project owner as additional insureds under its comprehensive general liability and excess policies.
At the time of the collapse, Joy carried a comprehensive general liability policy provided by Lincoln General Insurance and an excess policy provided by Admiral Insurance. The general contractor and project owner were named as additional insureds under the insurance policies. Apparently Joy Contractors, Inc. identified it as a drywall installer that did not perform exterior work in its application for insurance coverage.
Following the crane collapse, the general contractor and project owner sought coverage under the insurance policies obtained by Joy contractors, Inc., including the excess policy issued by Admiral Insurance. Admiral Insurance denied coverage to the general contractor and project owner because, among other things, the insurance policy was issued based on representations by Joy Contractors, Inc. in its insurance application that it was a drywall installer that did not perform any exterior work.
Admiral Insurance filed a lawsuit seeking a complete rescission of its insurance policy to avoid responsibility for any claims arising out of the crane collapse because the accident occurred as a result of Joy Contractors, Inc.'s work as a concrete superstructure subcontractor and not a drywall installer.
Initially, the lower courts held that issues regarding coverage of Joy Contractors, Inc. did not affect Admiral Insurance's responsibility to provide coverage for the additional insureds (the general contractor and the project owner) based on the longstanding principal that an insurer has separate obligations to each of the insureds, and that wrongful actions or misleading information of an insured might relieve the insurer of its obligation to that particular insured, but not of its obligations to other insureds.
However, the New York State Court of Appeals overturned the decision of the lower courts and upheld Admiral Insurance's right to deny coverage to the additional insureds because of the misrepresentations by Joy Contractors, Inc. in its insurance application. The Court of Appeals held that because Admiral Insurance believed it was providing coverage insuring for the risks associated with interior drywall installation and not the obviously much greater risk presented by exterior construction work with a tower crane at a height many stories above grade, it was not required to provide coverage for the general contractor and project owner.
Certificates of insurance do not tell the full story about what is and what is not actually covered in an insurance policy. Those certificates only identify the name of the carrier and the limits of liability. The policy and the endorsements are the only documents that identify who and what are actually covered and the circumstances under which a carrier is required to provide coverage.
It is highly recommended that you consult with your construction attorney and insurance broker to review your contracts and insurance policies under which you are named as an additional insured to ensure that you are obtaining the coverage and protection you need to avoid being left without insurance coverage.
If you would like more information on this issue or any other construction related issue, please contact Welby, Brady & Greenblatt, LLP at (914) 428-2100.