Insurance Law Hawaii

Care, Custody and Control Exclusion Does Not Bar Coverage For Alleged Construction Defects

    Reversing the lower court, the California Court of Appeal found that the care, custody and control exclusion was not applicable to bar coverage for the general contractor as the additional insured under the subcontractor's policy. McMillin Homes Constr. v. Nat'l Fire & Marine Ins. Co., 2019 Cal. App. LEXIS 514 (Cal. Ct. App. June 5, 2019).

    McMillian was the developer and general contractor on the housing project. It hired Martin Roofing Company, Inc. to do the roofing job for the project. Martin secured a general liability policy from National Fire that named McMillian as an additional insured. By endorsement, the policy excluded coverage for damage to property in McMillin's "care, custody, or control" (CCC exclusion).

    In 2014, homeowners sued McMillin for construction defects. The complaint alleged water intrusion and damage caused by roofing defects. McMillin tendered its defense to National Fire. Coverage was refused. Suit was filed and the trial court entered judgment in favor of National Fire. 

    The Court of Appeal reversed. The policy provided coverage to McMillin as an "additional insured" with respect to liability arising out of:

A. Martin's ongoing operations performed for McMillin and

B. Acts or omissions of McMillin in connection with its general supervision of such operations.

    National Fire argued that the CCC exclusion in the additional insured endorsement barred coverage. The endorsement did not cover:

Property damage to Property in the care, custody, or control of the additional insured(s) or over which the additional insured(s) are for any purpose exercising physical control.

Because McMillin was the general contractor on the project, any damage alleged while the homes were being built would have been to property in McMillin's care, custody, or control. McMillin contended that the CCC exception applied only where the insured had exclusive or complete control over the damaged property. 

    The CCC exclusion had been judicially construed to require exclusive or complete control.  Therefore, the provision was not ambiguous. Here, Martin agreed to furnish all labor, materials, and equipment needed to do the roof job. It was primarily and directly responsible for the activities and conduct of its employees. All materials, equipment and tools remained Martins property until they were integrated into the structure and approved by McMillin. Martin and McMillin shared control over Martins roofing work. Accordingly, National Fire did not prove the CCC exclusion rendered coverage for the claims was an impossibility. 

    Therefore, National Fire owed a defense and the judgment was reversed. 

Non-compliance With Endorsement Means No Indemnity Coverage

    The insured's failure to verify that subcontractors had CGL policies and to provide a contract stating that the subcontractors would indemnify the insured as required by the policy's endorsement meant there was no coverage for the insured. Cincinnati Spec. Underwriters Ins. Co. v. Milionis Constr., Inc., 2018 U.S. Dist. LEXIS 199658 (E.D. Wash. Nov. 26, 2018). 

    The homeowners filed suit against Milionis, the general contractor for construction of a home. The underlying suit alleged that Milionis breached the parties' agreement by leaving the home unfinished. Cincinnati defended Milionis under a reservation of rights.

    Cincinnati filed for a declaratory judgment while the underlying action was still pending, seeking a declaration that it had no duty to defend or indemnify Milionis. Cincinnati's initial motion for summary judgment arguing that it had no duty to defend was rejected by the court. In a renewed motion after the underlying action was concluded, ?Cincinnati sought a determination that there was no duty to indemnify. 

    The policy issued by Cincinnati had an endorsement requiring Milionis to: (1) obtain a formal written contract with subcontractors verifying that they had valid CGL insurance; (2) obtain a formal written contract stating that the subcontractors agreed "to defend, indemnify and hold Milionis harmless from any and all liability;" and (3) verify in the contract that the subcontractors had named Milionis as an additional insured on their CGL policy. 

    On the construction project, Milionis had subcontractors perform all the work. Milionis never sent Cincinnati any subcontractor contracts or proof of Milionis's additional insured status as required by the endorsement. 

    The underlying facts established that there was an occurrence and property damage. But Milionis did not dispute that it did not meet the conditions precedent to coverage - obtaining subcontractor contracts and being named as an additional insured on the subcontractors' liability policies. This was prejudicial to Cincinnati. Milionis's noncompliance with the endorsement left it with no contractual indemnification claims that it would have asserted to compel the subcontractors to contribute to the Milionis's defense or settlement. Moreover, it deprived Milionis of the ability to have direct contractual rights to a defense and coverage from the subcontractors' insurers. Consequently, Cincinnati was left with no other insurers and parties to share in the costs of defending and indemnifying Milionis. 

    Cincinnati was therefore relieved of its duty to indemnify under the policy. 

Certified Question Asks Washington Supreme Court Whether Insurer is Bound by Contradictory Certificate of Insurance

    The Ninth Circuit certified a question to the Washington  Supreme Court as follows:

Under Washington law, is an insurer bound by representations made by its authorized agent in a certificate of insurance with respect to a party's status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?

T-Mobile USA Inc. v. Selective Ins. Co lf Am., 2018 U.S. App. LEXIS 31863 (9th Cir. Nov. 9, 2018). 

    In 2010, T-Mobile entered into a Field Services Agreement (FSA) with Innovative Engineering, Inc. under which Innovative would provide services in connection with the construction of rooftop cellular antennae towers in New York City. The FSA required Innovative to maintain general liability insurance naming T-Mobile as an additional insured, and required that Innovative provide T-Mobile with certificates of insurance documenting the coverage. Innovative obtained coverage from Selective Insurance Company of America. 

    The policy contained an Additional Insured (AI) Endorsement that extended "additional insured" status to any entity with whom Innovative entered into a written contract requiring Innovative to add that entity as an additional insured. In 2012, Selective's authorized agent and insurance broker, the Van Dyke Group, Inc. (VDG) issued a Certificate of Insurance (COI) to T-Mobile. The COI stated that T-Mobile, as the certificate holder, "is included as an additional insured" under the Policy. But it also stated that the COI "is issued as a matter of information only and confers no rights upon the certificate holder," "does not affirmatively or negatively amend, extend or alter the coverage afforded by" the Policy, and "does not constitute a contract between the issuing insurer 's authorized representative or producer and the certificate holder." The COI further warned that "if the certificate holder is an Additional Insured, the policy must be endorsed." This was apparently never done.

    In 2009, the owner of the building on which the cell towers were placed informed T-Mobile and Innovative of alleged property damage that resulted from Innovative's earlier work on the rooftop. Innovative and T-Mobile tendered claims to Selective. In April 2013, the building owner sued T-Mobile and Innovative. 

    Selective agreed to defend Innovative, but denied the tender from T-Mobile because T-Mobile did not appear in the Selective policy named as an insured and did not qualify as an additional insured.

    T-Mobile filed suit and sought partial summary judgment, arguing that the 2012 COI issued by Selective's authorized agent stated that T-Mobile was an additional insured. The district court denied T-Mobile's motion and granted Selective's cross-motion for summary judgment.

    On appeal, the Ninth Circuit noted there were two competing principles under Washington insurance law presented by the case. First, under Washington law, an insurer was bound by all acts of its agent which were within the scope of the agent's real or apparent authority. Second, under Washington law, the purpose of issuing a COI was to inform the recipient that insurance had been obtained. 

    Washington law was therefore conflicted on whether Selective was bound by VDG's representation in the 2012 COI that T-Mobile was an additional insured under the Policy. The Ninth Circuit concluded hat the proper course of action was to certify the issue to the Washington Supreme Court. 

    

Defense Owed To Additional Insured General Contractor

    The Illinois Court of Appeals reversed summary judgment entered for the insurer and found the general contractor, an additional insured under the policy, was entitled to a defense. Hastings Mut. Ins. Co. v. Blinderman Constr. Co., Inc., 2017 Ill. App. LEXIS 661 (Ill. Ct. App. Oct. 24, 2017).

    Blinderman was the general contractor on a construction project for an elementary school. Blinderman hired JM Polcurr, Inc. to do the electrical work on the project. By contract, Polcurr was obligated to purchase a policy naming Blinderman as an additional insured for Polcurr's work on the project. Polcurr purchased the policy.

    Polcurr's employee, Robert Woods, suffered a serious injury at work on the project. A court appointed Wood's daughter to serve as guardian for Woods and his estate.

    The Estate of Woods sued Blinderman, alleging that Woods fell from a ladder while working for Polcurr. The complaint alleged that Blinderman failed to provide a safe platform for the work and failed to properly supervise the work. Blinderman tendered the defense to Polcurr's insurer, Hastings Mutual Insurance Company. Hastings rejected the tender based upon the following language in its policy:

 With respect to the insurance afforded to these additional insureds, the following exclusions apply:

. . . 

Liability arising out of the sole negligence of the additional insured or by those acting on behalf of the additional insured.

    Blinderman filed a third-party complaint against Polcurr, arguing that Polcurr should pay a share of any liability assessed against Blinderman because Polcurr failed to inspect the premises, improperly maintained Woods' work area, failed to warn Woods of dangerous conditions, and permitted Woods to use an unstable ladder without appropriate safety equipment. 

    Hastings then filed suit seeking a declaration that it had no duty to defend or indemnify Blinderman for its potential liability in the underlying case. Blinderman and Hastings both filed motions for summary judgment.

    Blinderman supported its motion with its third-party complaint against Polcurr and depositions of two Polcurr employees. The employees testified that Blinderman gave no directions to Polcurr employee about their work. Polcurr employees, including Woods, used only Polcurr equipment. 

    Nevertheless, the trial court held it could not consider the allegations of the third-party complaint when determining whether Hastings had a duty to defend Blinderman. The court further held that the exclusion for liability arising from Blinderman's sole negligence applied, and Hastings had no duty to defend Blinderman because the underlying complaint did not allege that Polcurr acted negligently. Blinderman appealed. 

    The appellate court noted that Hastings had the burden of showing that Blinderman's liability arose out of the sole negligence of Blinderman or those acting on Blinderman's behalf and not from the negligent acts or omissions of Polcurr. 

    In the underlying case, the Estate of Woods did not specifically allege that Polcurr's acts or omissions cuased the injury. But the estate did not expect to recover damages from Polcurr and had no reason to include allegations about the acts or omissions of Polcurr. The complaint's silence concerning Polcurr's acts or omissions did not suffice to meet Hastings' burden of showing the Polcurr's acts or omissions did not contribute to causing the injury. 

    Further, Blinderman's third-party complaint aginst Polcurr included allegations consistent with the Estate's complaint, showing how Polcurr's acts or omissions might have contributed to causing Woods' injury. However, Blinderman would need to rely on those pleadings only if it bore the burden of proving that Polcurr's acts or omissions might have contributed to causing Woods' injury. Because the Estate's complaint included no allegations about Polcurr's acts or omissions, Hastings did not meet its burden of proving that Blinderman's liability in the underlying case arose out of Blinderman's sole negligence. 

    The summary judgment entered on behalf of Hastings was reversed. 

 

Additional Insured Not Entitled to Cumis Counsel When Pursuing Cross-Claim Against Insurer

   The insured contractor was not entitled to independent Cumis counsel despite suing the insurer in a cross-claim. Centex Homes v. St. Palu Fire & Marine Ins. Co., 2018 Cal. App. LEXIS 45 (Cal. Ct. App. Jan. 22, 2018).

     Homeowners sued Centex Homes for construction defects. Centex tendered defense of the suit to St. Paul, the insurer for one of the subcontractors who included Centex as an additional insured under its policy. St. Paul agreed to defend under a reservation of rights. St. Paul reserved the right to deny indemnity for any claims by the homeowners not covered by the policy. St. Paul also reserved its right to reimbursement of costs incurred defending uncovered claims. St. Paul appointed attorney David Lee to represent Centex and defend against the homeowners' claims. 

    Centex filed a cross-complaint against subcontractors alleging breaches of written, oral and implied contracts to indemnify defend and obtain insurance. The cross-complaint included a seventh cause of action for declaratory relief against St. Paul, seeking a declaration that Centex was entitled to independent counsel under Cumis and California statute because St. Paul's reservation of rights created conflicts of interest.

    St. Paul moved for summary judgment on the seventh cause of action. St. Paul introduced evidence that Lee only represented Centex with respect to its defense of the complaint and did not represent Centex, its insured subcontractor, nor St. Paul in connection with the cross-complaint. At his deposition, Lee explained that St. Paul did not place any limitations on his representation of Centex and never dictated or controlled what he could do regarding the prosecution of Centex's cross-complaint. The trial court granted St. Paul's motion.

     The court of appeals affirmed. Under California case law and statute, Centex had the right to obtain independent counsel paid for by St. Paul, as Centex's insurer, whenever their competing interests created an ethical conflict for counsel. Whether independent counsel was required depended upon the nature of the coverage issue as it related to the issues in the underlying case.

    In support of its argument that Lee could have influenced the outcome of the causation question, Centex provided only citations to its own summary judgment briefing, evidence that the trial court deemed inadmissible, evidence that did not fully support Centex's arguments. Because Centex was strictly liable for construction defects, causation would not necessarily have been litigated in the underlying action. Therefore, Centex failed to establish a triable issue of material fact on the question of whether Lee could have controlled the coverage disputed between St. Paul and Centex.

    Consequently, the judgment of the trial court was affirmed. 

Misread of Other Insurance Clause Becomes Costly for Insurer

    One insurer's refusal to defend based upon its "other insurance" provision ultimately meant the insurer had to pay all of the insured's defense costs. Steadfast Ins. Co. v. Greenwich Ins. Co., 2018 Wis. App. LEXIS 51 (Wis. Ct. App. Jan. 17, 2018). 

    Milwaukee Metropolitan Sewerage District (MMSD) was a government agency that provided water reclamation and flood management services to the city. From March 1, 1998 to February 20, 2008, MMSD contracted with United Water Services Milwaukee LLC to operate the sewerage system. From March 1, 2008 on, MMSD contracted with Veolia Water North America-Central, LLC to operate the system. 

    Through agreements, both companies were obligated to indemnify MMSD for claims arising out of the operations and maintenance of the system and to obtain insurance to cover their indemnity obligations. Both companies complied.

    In June 2008, heavy rain overwhelmed MMSD's sewer system and more than 8,000 homeowners reported basement sewage backups. Four rain event lawsuits were filed against MMSD. The suits alleged that MMSD and Veolia were negligent in the inspection, maintenance, repair and operations of the system. United Water was later named as a defendant in one of the lawsuits. 

    MMSD tendered its defense to Steadfast and Greenwich. Steadfast, the insurer for Veolia, which had named MMSD as an additional insured, accepted the tender and defended MMSD. Greenwich, United Water's insurer, did not accept the tender and did not pay any of the defense costs. The underlying suits eventually settled without MMSD or Steadfast making any contribution to the settlement. However, Steadfast reimbursed MMSD $1.55 million towards defense costs that MMSD incurred.

    Steadfast then sued Greenwich to recoup the monies it paid to MMSD for defense costs. The parties filed cross-motions for summary judgment. The trial court denied Greenwich's motion, finding Greenwich had breached its duty to defend MMSD and thereby waived its rights to raise any coverage defense.  After further motion practice, the court awarded Steadfast judgment against Greenwich in the amounts of $1.55 million as damages and $325,500 as attorney fees for the coverage action. Greenwich appealed. 

    The court first analyzed the other insurance provisions in the Greenwich and Steadfast policies. Other insurance provisions were effective in situations involving concurrent coverage. Here the policies were successive, not concurrent. They did not cover the same time period. The court concluded that the Greenwich policy provided primary coverage for the claims against MMSD for the earlier conduct of United Water in operating and maintaining the MMSD system, not excess coverage for that of the Steadfast policy. 

    Greenwich also argued that MMSD did not exhaust the $250,000 self-insured retention (SIR) in its policy. MMSD had submitted a declaration in the summary judgment proceedings stating that it had paid over $800,000 in defending the underlying cases. The appellate court agreed that the SIR had been met. As a consequence, Greenwich's policy provided primary coverage based on United Water's conduct in operating and maintaining MMSD's system. Further, MMSD was entitled to recover the defense costs, including attorney fees, from Greenwich based upon Greenwich's breach.

    Steadfast, as the non-breaching insurer, had a claim for equitable subrogation against Greenwich, who breached its duty to defend. Upon payment to MMSD of defense costs, Steadfast stepped into MMSD's shoes and was entitled to recover from Greenwich the same damages that MMSD would have been entitled to recover from Greenwich. 

    Finally MMSD was entitled to recover the attorney fees incurred in the coverage action under the Greenwich policy. Under the doctrine of equitable subrogation, Steadfast stepped into MMSD's shoes and was equitably entitled to recover those fees in defending coverage. 

 

No Coverage Defenses After Two-Year Delay to Appear In Declaratory Judgment Action

    The federal district court found that the insurer was estopped from asserting coverage defenses after taking no action for two years before appearing in a declaratory judgment action filed by the insured. Sentinel Ins. Co. v. Walsh Constr. Co., 2018 U.S. Dist. LEXIS 6487 (N.D. Ill. Jan. 16, 2018). 

    Walsh Construction Company was the general contractor on a construction project to alter the streets and train tracks in Chicago. James Quigley, an iron worker for subcontractor S&J Construction Company, was crushed by a steel post. His estate filed suit against Central Contractors Service, Inc., the subcontractor that was operating the crane from which the steel post was suspended at the time of the accident, and Walsh. The complaint alleged that Walsh coordinated the work being done and designated various work methods and schedules for the project. 

    Walsh tendered its defense to Old Republic Insurance Company, claiming coverage as an additional insured under a policy issued to S&J. Walsh later tendered to Sentinel, the insurer for Genesis Structures, Inc., an engineering firm that had been involved in the preparation of the steel truss system. The subcontract with Walsh required Genesis to obtain primary insurance covering Walsh for the project.  

    The Sentinel policy promised to pay sums that the insured became legally obligated to pay as damages and to defend the insured. The term "insured" referred not only to Genesis, but also potentially to other persons or organizations "when [Genesis has] agreed, in a written contract . . . that such person or organization be added as an additional insured on [its] policy." This additional insured was covered "only with respect to liability for bodily injury . . . caused, in whole or in part, by [Genesis's] acts or omissions . . . in the performance of its ongoing operations." 

    Sentinel denied coverage, asserting the policy did not cover "professional errors and omissions" of Genesis. Further since Genesis had not been asked to design a truss post rigging system, the failure of the rigging system was not caused by Genesis.

    In the underlying case, the Quigley estate named Genesis as a defendant in the first amended complaint and asserted a claim for negligence. Walsh filed a declaratory judgment action in state court that was dismissed due to improper service. Sentinel then filed this declaratory judgment action. Walsh and Genesis filed counterclaims, asserting the professional services exclusion did not apply and that Sentinel breached its duty to defend.

    Sentinel moved for summary judgment, arguing that the "any insured" language in the professional errors and omissions exclusion barred coverage for all insureds when one insured committed an act falling within the policy exclusion. The court disagreed. Sentinel did not clearly and specifically exclude all of the conduct Walsh was alleged to have negligently committed. Therefore, the policy at least potentially provided coverage for Walsh, and Sentinel had a duty to defend Walsh.

    Walsh also argued that because Sentinel breached its duty to defend, Sentinel was estopped from asserting its remaining policy defenses, including whether Walsh qualified as an additional insured and whether Sentinel's policy provided only excess insurance over the Old Republic's policy based on its "other insurance" clause. Under Illinois law, an insurer that refused to defend an insured had to seek a declaratory judgment of no coverage promptly or in a timely manner in order to avoid the application of the estoppel doctrine. Walsh tendered its defense to Sentinel in October 2012. This triggered Sentinel's duty to defend because Walsh was at least potentially covered under Sentinel's policy based upon the allegations against it in the Quigley suit.

    Sentinel's first action that might be considered a judicial resolution of the coverage dispute was its appearance in the state court action that Walsh filed in January 2015, even though at the time Sentinel's first action was to move to dismiss the case for improper service. The court found this two-year delay unreasonable and Sentinel was estopped from asserting coverage defenses.

    Sentinel's motion for summary judgment was denied and Walsh's motion for summary judgment was granted in part, establishing Sentinel's duty to defend. 

    

Additional Insured Is Covered Under On-Going Operations Endorsement Despite Subcontractor's Completion of Work

    Although the homeowners did not own their homes when the subcontractors completed their work, the general contractor was still covered as an additional insured for the homeowners' suits based on the ongoing operations endorsement in the subcontractors' policies. McMillin Mgmt. Servs. v. Fin. Pac. Ins. Co., 2017 Cal. App. LEXIS 1000 (Cal. Ct. App. Nov. 14, 2017).

    McMillin was the developer and general contractor for the project. Among the subcontractors were Martinez Construction Concrete Contractor, Inc. and Rozema Corporation. Martinez performed concrete flatwork between 2003 and November 2005. Rozema performed lath and stucco work between March 2003 and October 2005.

    Lexington issued CGL policies to Martinez and Rozema. McMillin was an additional insured under both policies, "but only with respect to liability arising out of your [i.e., Martinez's or Rozema's] ongoing operations performed for [McMillin]." An exclusion provided that the insurance did not apply to property damage occurring after the insured subcontractor had completed operations on behalf of the additional insured.

    McMillin completed construction of the homes in June 2005. In June 2010, several homeowners sued McMillin, alleging defective conditions in their homes arising out of the construction. McMillin tendered its defense to Lexington, who refused to defend. McMillin sued for declaratory relief. Lexington successfully moved for summary judgment. Because there were no homeowners in existence until after the subcontractors' work was completed, any potential liability to the homeowners arising out of the subcontractors' work must have arisen out of the subcontractor's completed operations. 

    On appeal, the appellate court reversed. Even if McMillin did not face any liability to homeowners during the subcontractors' ongoing operations, the endorsement did not state that Lexington would provide coverage solely for liability occurring during the subcontractors' ongoing operations performed for McMillin. Rather, the endorsements stated that Lexington would provide coverage to McMillin for liability "arising out of" such ongoing operations. The term "arising out of" was not synonymous with "during." Instead, the phrase "arising out of" was given a broad interpretation in the context of additional insured endorsements. The fact that there were no homeowners at the time of Martinez's and Rozema's ongoing operations did not establish that McMillin could suffer no liability arising out of such ongoing operations. 

    The court did not decide whether an ongoing operations additional insured endorsement provided coverage to the additional insured only for damages that occurred before the completion of the name insured's ongoing operations. Rather, the court only needed to decide whether Lexington and the trial court were correct that the nonexistence of homeowners at the time Martinez and Rozema ceased ongoing operations established as a matter of law the lack of potential for coverage for McMillin under the policies. 

Insurer's Attempt to Limit Additional Insured Status Fails

    The court disagreed with the insurer's attempt to limit additional insured status based upon the contract between the parties. Mays v. In re All C-Dive LLC, 2017 U.S. Dist. LEXIS 185874 (E.D. La. Nov. 9, 2017). 

    Five employees of C-Dive LLC filed a lawsuit after belng injured in a pipeline explosion aboard a vessel servicing a pipeline owned by Gulf South Pipeline Company. During the work, there was a release of gas that caused an explosion and injured the employees. 

    Gulf South was a subsidiary of Boardwalk Pipelines LP. Boardwalk Pipelines entered into a Master Services Agreement (MSA) with C-Dive. C-Dive and Gulf South also entered into a Scope of Work Agreement (SWA), whereby C-Dive was to decommission the pipeline. The SWA incorporated the MSA. 

    The MSA applied to both Boardwalk Pipelines and its subsidiaries, including Gulf South. The agreement was "by and between Boardwalk Pipelines, LP and C-Dive, LLC." It further stated that "reference to Boardwalk shall also include its subsidiaries, including but not limited to . . . Gulf South Pipeline Company." The MSA required C-Drive to maintain insurance which would include Boardwalk Pipelines, LP as additional insured.

    Gulf South made third-party claims against the insurers as an additional insured under the policies issued to Baordwalk. The insurers moved for summary judgment, arguing that the MSA obligated C-Dive to name only Boardwalk Pipelines as an additional insured and not its subsidiaries. 

    The court disagreed. The insurers argued that the MSA's additional insured provision referred to 'Boardwalk Pipelines LP," rather than the shorthand, "Boardwalk." Therefore, Gulf South was not included as an additional insured. But the plain meaning of the MSA meant that the terms "Boardwalk" and "Boardwalk Pipelines" were interchangeable. The agreement first stated that Boardwalk Pipelines LP was "hereinafter referred to as 'Boardwalk.'" Thus, when the MSA used the phrase "Boardwalk," it was referring to the entity Boardwalk Pipelines.  

    Therefore, Gulf South was an additional insured under the policies. 

    

Insurer Has Duty to Indemnify But No Duty to Defend

    The court found that the insurer was obligated to indemnify, but not to defend the insured. Old Republic Ins. Co. v. Kenny Constr. Co., 2017 U.S. Dist. LEXIS 189412 (N.D. Ill. Oct. 31, 2017).

    Kenny Construction Company was hired by the Army Corp of Engineers to work on the Chicago Deep Tunnel flood control project. Kenny hired Meccon Industries, Inc. as a subcontractor to perform mechanical work and furnish materials for the project. The subcontract required Meccon to provide coverage for the contractor and any other additional insureds as required on the Insurance Requirement Sheet attached to the contract. Neither party was able to produce the Insurance Requirement Sheet.  

    The subcontract also required Meccon to submit to Kenny certificates from Meccon's carriers noting CGL coverage to cover the indemnity agreement in the contract. 

    Meecon procured CGL policies from Old Republic from 2002 to 2010 and provided insurance certificates to Kenny between 2002 and 2007. The certificates each listed Kenny as an additional insured under the policies. The certificates, however, also mentioned that they were issued for information only and did not confer any rights upon the certificated holder. 

    The Old Republic policies did not specifically mention Kenny as an additional insured. Instead, the policies defined "all persons or organizations as required by written contract" to be additional insureds. Although the policies had separate endorsements for ongoing operations and completed operations coverage, the definition of additional insureds was identical in each endorsement.

    During Meecon's work, it requested to substitute an alternative part known as a Smith-Blair clamp for parts called for in the plans. Kenny sent the request to the Corp, which approved the changes. In August 2010, the Corp issued a final inspection and acceptance letter to Kenny. 

    In 2008, however, the Corp had discovered leaks which corroded various mechanical and electrical equipment in the tunnel. It was eventually determined that the Smith-Blair clamps caused the problem because they were not rated to withstand the operating fluid pressures within the tunnel. The Corp issued a Final Decision concluding that Kenny was liable for the damages caused by the negligent approval of the request to use the Smith-Blair clamps. The Final Decision awarded $11 million in property damage to the Corp. Kenny eventually settled by paying the Corp $100,000.

    Old Republic was notified of the Final Decision and filed an action for declaratory judgment. Old Republic argued that Kenny was not an additional insured. Old Republic contended Kenny was not a "person or organization required by written contract" to be an additional insured because the Kenny - Meccon subcontract did not require Meccon to make Kenny an additional insured on its CGL policy. Instead, it required only that Meccon provide Kenny with certificates of insurance listing Kenny as an additional insured. 

    The court disagreed with Old Republic. That the subcontract required Meccon to certify that it had CGL insurance could only be reasonably construed as requirement that Meccon actually have such coverage. Whether the language requiring submittal of Meccon's "evidence of insurance shall include the contractor, the owner and any other additional insureds as required per the Insurance Requirement Sheet," made Kenny an additional insured was ambiguous. Therefore, the court looked to parol evidence.

    The certificates of insurance provided that Kenny was in fact an additional insured. Therefore, the intent of the parties to the subcontract was to require that Kenny be an additional insured on Meccon's policy. Since Kenny was therefore an "organization . . . required by written contract" to be an additional insured, it qualified as an additional insured under Old Republic's policy. 

    Next, Old Republic argued it had neither a duty to defend or nor indemnify because the Final Decision was not a "suit" under the policies. The court agreed that the Final Decision process was not a "suit" under the policy and Old Republic had no duty to defend. But there was nothing in the policy which altered Old Republic's duty to indemnify. They duty to defend was limited to certain types of proceedings ("suits"), but no such restriction existed for the duty to indemnify. 

    Finally Old Republic argued that Kenny was not covered under the ongoing operations or completed operations additional insured endorsements. Old Republic contended that Kenny could not be covered under the ongoing operations endorsements because there was no evidence that any damage occurred while Meccon was still working on the projects. But when the damage occurred was not relevant because Kenny was an additional insured under both the ongoing operations and completed operations endorsements. The two endorsements used identical language to define additional insured contractors: "all persons or organizations as required by contract." Therefore, Kenny was an additional insured under both endorsements.