By: Terése Burke Wolff Esq.
On February 13, 2003, the Court of Appeals decided the case of Pecker Iron Works of New York v. Travelers. Pecker Iron Works retained Upfront Enterprises (also referred to herein as “Upfront”) on a construction project. Pursuant to the sub-contract, Upfront agreed to provide Pecker Iron Works with certificates of insurance for liability and agreed to name Pecker Iron Works as an additional insured. Upfront’s insurance contract with Travelers provided Upfront with primary coverage. That policy also “covered such ‘additional insureds’ as Upfront would designate in a written contract,” but also provided that coverage for additional insureds would be excess, unless Upfront “’had agreed in a written contract for this insurance to apply on a primary or contributory basis.’”
An Upfront worker was injured on the construction site and brought suit against the owner and general contractor. The main party defendants instituted a third-party action against Pecker Iron Works. Pecker Iron Works thereafter made a claim under Travelers’ policy and Travelers disclaimed coverage stating that its policy was excess to Pecker Iron Works’ primary insurance in the absence of a written designation that Travelers’ coverage be primary.
Pecker Iron Works brought an action against Travelers requesting a declaration that Travelers was obligated to defend and indemnify Pecker Iron Works in the underlying action. The Supreme Court granted Travelers’ motion to dismiss, but the Appellate Division reversed, holding that “coverage for ‘additional insureds’ was primary coverage unless unambiguously stated otherwise.”
The Court of Appeals stated that the meaning of the term “additional insured” was crucial to its decision and reiterated that the “well-understood meaning” of the term is “an ‘entity enjoying the same protection as the named insured.'” citing Del Bello v General Accident Ins. Co., 185 AD2d 691, 692 , quoting Rubin, Dictionary of Insurance Terms [Barron’s 1987]. The Court of Appeals found that “when Pecker engaged Upfront as a subcontractor and in writing provided that Upfront would name Pecker as an additional insured, Pecker signified, and Upfront agreed, that Upfront’s carrier — not Pecker’s — would provide Pecker with primary coverage on the risk.”
Accordingly, the Court of Appeals affirmed the order of the Appellate Division and held that Pecker Iron Works, as an additional insured, was entitled to primary coverage from Travelers.
We are aware of only one decision that has had the opportunity to review the Pecker Iron Works case to date. The Supreme Court, County of Schenectady, recently applied the Pecker Iron Works decision in the case of Barry, Bette & Led Duke, Inc. v. Travelers. In that matter, Barry, Bette & Led Duke retained Colonie Masonry as a subcontractor. Colonie Masonry had agreed to name Barry, Bette & Led Duke as additional insureds on its policy with Travelers. However, the contract also stated that the coverage to be obtained be not less than $500,000. The policy that Colonie Masonry obtained through Travelers provided coverage amounts of $1,000,000.
Barry, Bette & Led Duke made a claim under the policy. Travelers argued that it was only obligated to provide Barry, Bette & Led Duke, as an additional insured, with the minimum amounts required by the subcontract – which was $500,000. The Supreme Court found that the additional insured, by virtue of the subcontract requirement that they be named as additional insureds, were contractually entitled to the same dollar amount of coverage as the named insured.
How broadly or narrowly the Pecker Iron Works decision will be interpreted at the Appellate Division level remains to be seen.