The recent decisions in Collick v. Weeks Marine Inc. and its sister lawsuit, Weeks Marine v. Evanston Insurance Co., provide two examples of how careful companies must be when agreeing to contracts that employ the commonly used “additional insured” provisions that have led to so much confusion and been the subject of no less than 30 different standard forms for added coverage—the most recent made in 2013—by the Insurance Services Office.
There are some important reminders in the decisions about risk management, too.
The two lawsuits involved a Weeks-employed dockworker, Joseph Collick, who sustained a broken ankle while working at a project almost 10 years ago at the Earle Naval Weapons Station in Leonardo, N.J. He underwent numerous surgeries. In 2006, Weeks Marine hired Haztek Inc. for project safety supervision and required Haztek to indemnify Weeks for liability and claims for injuries to Haztek’s employees; Weeks also required Haztek to buy coverage for the contractor as an additional insured. Haztek obtained the coverage from Evanston Insurance Co. with a policy that excluded “Workers Compensation & Similar Laws” but endorsed, or included, claims for professional liability. Last month, a judge in federal court in New Jersey ruled for Evanston, saying the endorsement for professional liability didn’t mean Evanston had to pay for Weeks’ worker’s injury.
“Additional insured” provisions are now a fairly standard risk-transfer mechanism and an important asset that should be bargained for in a contract. But watch out: The companies involved in these cases seemed to have carefully crafted the endorsements and exclusions, and Haztek seems to have properly lined up the coverage in its insurance policies.
But “additional insured” clauses can entangle even the most astute lawyers. They also have been the source of claims against independent insurance agents, and a few states, such as Texas and California, have enacted anti-“additional insured” legislation with the support of subcontractors that see them as unfair risk-shifting.
There are a lot of reasons why “additional insured” provisions can land companies on the legal merry-go-round. By now it is clear that they must be entered into with the utmost care over language because, as with most matters of law and insurance, the devil is in the details. There are big differences between being an additional insured or a named insured. Relying on contractually required “additional insured” coverage for liability exposure can be risky, as can reliance on certificates of insurance.
If any further evidence is needed of the care and confusion these provisions have created, just listen to the very well-informed staff of the Independent Insurance Agents & Brokers of America. Last year, the association’s head of education and research gave a lively seminar on the subject, titled “The Additional Insured Illusion.” That about says it all.