Third-Party Coverage Through Supplementary Payments Provision in CGL Policy?

Hargob Realty Associates, Inc. v. Fireman's Fund Ins. Co.--- N.Y.S.2d ----, 2010 WL 1912249
N.Y.A.D. 2 Dept.,2010.

In this recent case, the Second Department reviewed some well worn concepts of insurance coverage law, but with a creative wrinkle thrown in. Here, Hargob Realty entered into a construction contract with a demolition contractor pursuant to a one-page proposal that contained a hold harmless agreement.

The defendant issued a CGL policy to the demolition contractor with an additional insured endorsement providing coverage to “any entity the Named Insured is required in a written contract to name as an insured….”

Plaintiff brought an action against Fireman’s seeking additional insured coverage based on the one page proposal along with a certificate of insurance provided by the demolition contractor. The Second Department hewing closely to the wording of the policy rejected plaintiff’s claim noting that the hold harmless agreement did not contain any requirement that plaintiff be named as an additional insured. With respect to the certificate of insurance, the Court noted it was “insufficient to alter the language of the policy itself, especially since the certificate recited that it was for informational purposes only, that it conferred no rights upon the holder, and that it did not amend, alter, or extend the coverage afforded by the policy ( see School Constr. Consultants, Inc. v. ARA Plumbing & Heating Corp., 63 AD3d 1029; Home Depot U.S.A., Inc. v. National Fire & Mar. Ins. Co., 55 AD3d 671, 673; Metropolitan Heat & Power Co., Inc. v. AIG Claims Servs., Inc., 47 AD3d 621).

The wrinkle in this case was plaintiff’s argument that the supplementary payments provision of the policy, which obligates the defendant insurer to defend an indemnitee of the named insured when certain specified conditions are met, provided it with liability coverage. The Second Department rejected this contention, finding that the “supplementary payments provision did not demonstrate an intent by the defendant insurer to afford the plaintiff coverage solely on the basis that it is an indemnitee of the named insured, in the absence of the plaintiff's addition as “an insured” under Section II of the subject policy pursuant to the additional insured endorsement ( see Stainless, Inc. v. Employers Fire Ins. Co., 69 A.D.2d at 33). Liability coverage under the policy is afforded by Section I, not the supplementary payments provision.”

Thus, the Court found that plaintiff was not entitled to liability coverage under the subject policy pursuant to the supplementary payments provision.