A recent Illinois Appellate Court decision in the case of Vivify Construction, LLC, v. Nautilus Insurance Company, shows the need for general contractors to clarify that the insurance is in place when a contract requires indemnification by a subcontractor.

In this instance, the insurance excluded bodily to injuries to workers and the court upheld the insurer's claim that it did not have to provide coverage.

The case involves a welder, Pablo Vieyra, who who was employed by Victoria Metal Processor at work on a building in Chicago in May 2015, when he fell from a two-story-high scaffold, according to the Cook County Record, a legal journal.

Vivify Construction LLC was the general contractor on the project, and Vieyra filed a lawsuit in state court in Cook County, alleging negligence against Vivify, for failing to properly supervise work at the job site. As a result, Vivify filed a third-party complaint against Victoria, claiming that Victoria’s negligence led to Vieyra’s injury.

The trial court decided against Vivify and in favor of Nautilus. Last month, the state appeals court supported the lower court’s ruling that the Nautilus policy excluded bodily injury to Victoria's employees.

The ruling gives more details on the events and contract leading to the legal impasse:

“Vivify and Victoria had executed a written agreement the year before (subcontract). The subcontract required Victoria to indemnify Vivify against claims of bodily injury resulting from Victoria’s work under the subcontract. Additionally, the subcontract required Victoria to procure insurance on Vivify’s behalf:

‘[Victoria] shall cause the commercial liability coverage required by the Subcontract Documents to include: (1) [Vivify] as [an] additional insured, for claims caused in whole or in part by [Victoria’s] operations; and (2) [Vivify] as an additional insured for claims caused in whole or part by [Victoria’s] negligent acts or omissions during [Victoria’s] completed operations.’”

So, Victoria added Vivify as an insured under Victoria’s commercial general liability policy with Nautilus.

Under the policy, an ‘additional insured’ included "any person or organization when [Victoria] and such persons or organizations have agreed in writing in a contract***that such person or organization be added as an additional insured on [Victoria’s] policy. Such ***organization is an additional insured only with respect to liability for ‘bodily injury’ caused in whole or part, by your acts or omissions, or he acts or omissions of those acting on your behalf.”

The policy covered the topic of bodily injury this way: “We will pay those sums that the insured becomes legally obligated to pay as damage because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.”

The body of the policy first excluded coverage for certain bodily injury to “[a]n employee of the insured,” but that exclusion was replaced by an endorsement (employee exclusion) titled “Exclusion-Injury to Employees, Contractors, Volunteers and Other Workers.”

The exclusion covered bodily injury to  "employees, leased workers, temporary workers, volunteer workers, statutory employees, casual workers, seasonal workers, contractors, subcontractors, or independent contractors of any insured; or any insured’s contractors, subcontractors, or independent contractors, employees, leased workers, temporary workers, volunteer workers, statutory employees, casual workers, seasonal workers, contractors, subcontractors or independent contractors.”

Matt Devries, a partner at attorney Burr & Forman LLP, said in a recent blog post that the Vivify case points out the need for care.

"Despite the difficulty in reading and understanding insurance coverages on a project, you are advised to specify in your contracts what types, amounts, and limitations are acceptable for a project. While cumbersome, don’t just rely on a certificate of insurance provided by a party, but ask them to get you a copy of the actual policy to review. Don’t try to figure out what was said after the dispute arises."