The issue of additional insured coverage comes up in nearly every case involving claims of property damage or bodily injury occurring in construction settings. Typically, it involves a general contractor or higher-tier subcontractor’s claim for additional insured coverage under its subcontractor’s insurance policy.
Most insurance companies seek to limit the coverage for additional insureds to vicarious liability. Because the duty to defend an insured – or a putative additional insured – is broader than the duty to indemnify, the issue becomes what are the allegations against the additional insured, and do they include allegations of potential vicarious liability for the acts or omissions of the subcontractor or “named insured” under whose policy the additional insured defense/coverage is sought.
In determining whether an insurance company has a duty to defend an insured, including a purported additional insured, courts look to the allegations in the underlying complaint and compare those allegations to the relevant portions of the insurance policy. This basic process becomes more complex, however, when the additional insured is not sued by the underlying plaintiff, but in a third-party claim for contribution and/or indemnity. Is the duty to defend created by the underlying complaint alone, or are other pleadings and documents relevant to and made a part of the inquiry?
In Pekin Insurance Company v. CFR Roofing Contractors, 2015 Ill. App. (1st) 142473-U) and Pekin Insurance Company v. Martin Cement Company, 2015 Ill. App. (3d) 140290 (Sept. 2, 2015) the courts found that these pleadings and documents, though extraneous to the “underlying complaint”, could and should be consulted in assesing the insurer’s duty to defend. In both cases, after considering these additional documents, the Courts found that the allegations against the additional insureds were sufficient to suggest that they could be subject to vicarious liability for the acts or omissions of the applicable policies’ named insureds, thereby triggering the insurers’ duty to defend the additional insureds.
While an insurer’s duty to defend is determined by a liberal reading of the allegations against the insured or additional insured contained in the pleadings, including third-party complaints and counterclaims, such is not the case with respect to an insurer’s duty to indemnify. An insurer’s duty to defend is broader than its duty to indemnify, and in the typical additional insured scenario, the insurer defending the additional insured will only be required to indemnify the additional insured for vicarious liability. For indemnity for direct liability, the general contractor or higher-tier subcontractor must still look to its own insurer and policy where it is the named insured.