INSURANCE: General contractor is “additional insured” under subcontractor’s CGL/umbrella policies, insurers have duty to defend subcontractor’s employee’s injury claim arising out of gas line rupture… Molloy.
WBI entered into a construction agreement with ProPipe in 8/08 to replace a gas pipeline in Richland Co. ProPipe subcontracted with Underground Boring. ProPipe was required under the construction contract to maintain liability insurance. ProPipe procured a CGL policy through Colony and a commercial excess/umbrella policy through National Union. ProPipe employee Dave Shanks ruptured an active gas line with his backhoe 11/10/08 which caused a blast wave that injured him. He sued WBI and Underground Boring in State Court. WBI tendered the claim to ProPipe and its insurers, insisting that WBI is an “additional insured” under both policies and that Shanks’s claim is covered by the construction agreement and policies. Colony denied any obligation to defend or indemnify WBI, and NU did not respond. WBI began defending the underlying suit and on 6/26/12 filed this declaratory action.
WBI is an additional insured under the Colony policy. Colony argues that the insurance provision of the construction agreement is ambiguous because it does not specify the minimum coverage ProPipe was to obtain and references Insurance Form 21160 which WBI failed to attach to the agreement. However, the common sense meaning of the insurance provision is ProPipe’s obligation to maintain coverage to protect WBI against liability for damages arising out of the project, regardless of the minimum coverage required by Form 21160. Colony also insists that the construction agreement required ProPipe to procure coverage for WBI with respect to liability for ProPipe’s negligence, not WBI’s own negligence. Regardless, it obligates ProPipe to procure coverage to protect WBI against liability for damages for the injury of any person “arising in any way out of, in connection with, or resulting from the work or construction provided by [ProPipe].” Colony asks the Court to create a limitation on the provision, but the language is “clear and unambiguous.” Burrell (Mont. 2010). It does not require negligence on the part of any particular party.
Because WBI is an additional insured under the Colony policy, it is also an additional insured under the NU policy. The Colony policy is listed in the Schedule of Underlying Insurance in the NU policy, which follows the terms of the underlying Colony policy. NU insists that WBI cannot qualify as an additional insured under the Colony policy because ProPipe was not required to name WBI as an additional insured where the construction agreement required only that ProPipe “maintain … minimum insurance coverage … to protect [WBI] against liability in connection with ProPipe’s work.” NU avers that “an agreement to maintain insurance that will protect an entity is not an agreement to name that entity as an additional insured under an insurance policy.” However, unlike RCS (Mass.App.Ct. 2009), which it cites, ProPipe did add WBI as an additional insured on the polices, and ProPipe does not contest that it was required to do so. While the construction agreement does not explicitly state that ProPipe must name WBI as an additional insured on its general liability policies, even construing the ambiguity against WBI instead of ProPipe, the Certificate and affidavit of ProPipe’s Project Manager and WBI’s Pipeline Engineering & Integrity Manager are sufficient to show intent of the parties to have WBI added as an additional insured. Scentry Biologicals (Mont. 2014). As strangers to the construction agreement, Colony and NU have no basis to challenge the intent of ProPipe and WBI in executing the agreement. United National (Mont. 1996).
Colony insists that it did not have a duty to defend WBI because Shanks’s claim unequivocally does not fall within the policy coverage. The cornerstone of its argument is its assertion that the complaint does not allege that WBI is vicariously liable for any actions of ProPipe or those acting on ProPipe’s behalf, but only that WBI is liable for its own acts or omissions. Its position that its additional insured endorsement does not cover the factual scenario that multiple parties, including the additional insured, may have contributed to Shanks’s injuries creates an ambiguity in its own policy, which can be construed against it. The background of the endorsement supports the conclusion that it does not restrict coverage solely to WBI’s vicarious liability for ProPipe’s acts or omissions. According to WBI, it is a form endorsement published by the Insurance Services Office, which provides that “caused, in whole or in part, by” means that the “acts or omissions of the additional insured can be a concurrent or contributing cause of the injury or damage, but a direct causal link to the named insured must be made.” Steadele (Mont. 2011). “Not only must the additional insured not be the sole cause of injury or damage, but the named insured must be at least a partial cause.” Id. This interpretation is supported by ProCon (D.Me. 2011) and Plum Creek (Mont. 2009). Because Shanks alleged that the acts or omissions of Underground Boring, an entity acting on behalf of ProPipe, was at least a partial cause of his injuries and that WBI was a contributing cause — but not the sole cause — the additional insured endorsement in the Colony policy does not preclude coverage.
Colony argues alternatively that coverage is precluded by the contractual liability exclusion: “This insurance does not apply to … `bodily injury’ or `property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.” However, it further states: “This exclusion does not apply to liability for damages … assumed in a contract or agreement that is an `insured contract.”’ The parties have briefed at length whether the construction agreement’s indemnification provision renders it an “insured contract” as defined by the policy. Yet, as WBI highlights, the contractual liability exclusion pertains to claims for contractual indemnity and is independent of Colony’s duty to defend WBI as an additional insured. Nevertheless, the construction agreement is an “insured contract” because the agreement pertains to ProPipe’s business, ProPipe assumed the tort liability of WBI to pay for bodily injury to a 3rd person, and Shanks’s injuries were allegedly caused in whole or in part by Underground Boring while acting on ProPipe’s behalf. Unlike cases cited by Colony in which the injured employees did not allege that the subcontractor or subcontractor were negligent and do not discuss insured contract status, the indemnity provision here is clear in that it holds WBI harmless from “any danger … by reason of any and all accidents … in any manner connected with said work … of [Pro Pipe], or any subcontractor.”
The Court rejects Colony’s argument that coverage is precluded by comp exclusivity. Nothing in MCA 39-71-411 precludes a party from being covered as an additional insured under an employer’s policy. Liberty Mutual (9th Cir. 2012).
Like Colony, NU insists that although “vicarious liability imputed to the putative additional insured for the conduct of the named insured falls within the scope of additional insured coverage … liability caused by the putative insured’s own negligent conduct is not covered.” The cases it cites are either distinguishable or inapposite. Again, both requirements of the endorsements are met where Shanks alleges that Underground Boring’s acts & omissions caused, at least in part, his injuries, and he does not allege that WBI’s acts & omissions were the sole cause. NU would also have the Court read into the policy a vicarious liability limitation, which is not justified.
NU ultimately concedes that where Colony owes a duty to defend, it too owes a duty to defend. But it argues that it does not owe WBI a current duty to defend unless and until Colony’s limits are exhausted. Such a position is not without risk. A determination on allocation of defense costs between Colony and NU is reserved pending further briefing on this issue and further notification of the status of the underlying suit.
Because the Court is unaware of any determination of WBI’s liability in the underlying suit, resolution of the indemnity obligation of Colony and NU is premature.
WBI Energy Transmission v. Colony Ins. and National Union Fire Ins., 42 MFR 56, 9/29/14.
Eric Henkel & Fred Simpson (Reep, Bell & Laird), Missoula, for WBI; Brian Taylor (Hall & Evans), Billings, for Colony; Amy Duerk & Robert Phillips (Phillips Haffey), Missoula, Joseph Lang (Bates Carey Nicolaides), Chicago, and Matthew Fink (Nicolaides Fink Thorpe Michaelides Sullivan), Chicago, for NU.
This content is restricted to site members. If you are an existing user, please login. New users may register below.