Indemnity obligations and additional insured coverage were at issue in Strauss Painting, Inc. v. Mt. Hawley Ins. Co., 2014 N.Y. LEXIS 3347 (N.Y. Nov. 24, 2014).
Strauss Painting, Inc. (Strauss) contracted with the Metropolitan Opera Association, Inc. (the Met) to strip and repaint the rooftop steel carriage track for the opera house's automated window-washing equipment. The contract provided that Strauss would indemnify and hold the Met harmless. Exhibit D to the contract set forth three types of insurance that Strauss was to procure: (1) workers' compensation; (2) owners and contractors protective liability (OCP); and (3) comprehensive general liability. The OCP policy was to add the Met as an additional insured. Strauss failed to obtain the OCP policy.
At the time it contracted with the Met, Strauss had a CGL policy issued by Mt. Hawley. The policy's additional insured endorsement (ICO form CG 20 33 07 04) stated that "an insured" included "any organization for whom Strauss is performing operations when Strauss and such organization have agreed in writing that such organization be added as an additional insured."
During the project, an employee of a subcontractor, Manuel Mayo, was injured. Mayo sued the Met. The Met tendered to Strauss, who tendered to Mt. Hawley. Mt. Hawley denied coverage. Eventually, the Met brought a third-party complaint against Strauss in the Mayo lawsuit for indemnification and for breach of contract for failure to purchase the OCP policy required by the contract.
Strauss then sued Mt. Hawley and the Met, seeking a declaration that Mt. Hawley was obligated to defend and indemnify it in the Met's third-party action. The Met cross-claimed against Mt. Hawley, asking for a declaration that it was an additional insured on Strauss' CGL policy, thereby requiring Mt. Hawley to defend and indemnify it in the Mayo litigation.
The lower courts ruled that Mt. Hawley was required to defend the Met in the Mayo lawsuit. The contract directed Strauss to purchase liability insurance naming the Met as an additional insured, and the CGL policy issued by Mt. Hawley to Strauss contained an additional insured endorsement.
On appeal, the Court of Appeals focused on the additional insured requirements in the Mt. Hawley policy: had Strauss and the Met "agreed in writing that the Met be added as an additional insured on Strauss's policy"? The Met argued the contract required Strauss to procure insurance naming the Met as an additional insured, as follows:
b. Owners and contractors protective liability insurance with a combined single limit of $5,000,000.00 Liability should add the Metropolitan Opera Association as an additional insured and should include contractual liability and completed operations coverage.
Mt. Hawley argued the second sentence simply required Strauss to purchase OCP coverage to protect the Met from risks arising out of Strauss' work, rather than mandating that Strauss include the Met as an additional insured on its CGL policy.
The court agreed with Mt. Hawley. The second sentence in paragraph "b" could only refer to the OCP coverage that Strauss promised to purchase for the Met in the first sentence, but never actually acquired. Therefore, the Met was not an additional insured on Strauss' CGL policy with Mt. Hawley.