While the South Carolina Construction Defect Blog focuses legal issues impacting CD litigation, we would not be providing “full treatment” to the topic if we did not, once and a while, discuss case law with subject matter outside the realm of defective construction as these discussions directly affect construction defect litigation.
Additional insured policy endorsements are a powerful weapon, in theory. The concept known as an “additional insured” refers to a person or organization that enjoys the benefits of being insured under an insurance policy, in addition to whoever originally purchased the insurance policy. Typical language within insurance policies seeks to limit the subject matter that can be “additionally insured.” Standard policy language providing for additional insured treatment states something similar to the following: “any person or organization whom you (the named insured) are required to add as an additional insured on this policy under a written contract … that person is only an additional insured with respect to liability arising out of ‘your work’ for that additional insured.” The limits of this coverage is still being tested, defined, and applied within the contract law(s) of individual states.
In New York, the Court of Appeals ruled that a subcontractor had a duty to defend and indemnify an upstream contractor based upon the language of the additional insured endorsement, which provided coverage to the superior contractor for claims “arising out of” the operations of a subcontractor. The court rationalized that the additional insured coverage need not be restricted to actions or omissions limited to the scope of the subcontract duties as the only requirement is that “there be some causal relationship between the injury and the risk for which coverage is provided.”
The scope of coverage “is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained.”
Although this site attempts to address South Carolina precedent, trends, and other events which might impact the construction and insurance industries in South Carolina only, our blog tracks cases in other jurisdictions these are indicative of how the courts in Columbia might treat a similar factual scenario. The impact of the decision is potentially significant in that insurers will have an obligation to provide coverage for additional insured(s) for activities that do not necessarily involve negligence on the part of their named insured, and where there may be negligence on the part of the additional insured. There need only be a logical connection between the work being performed by the named insured and the accident giving rise to a personal injury claim. The potential negligence of the additional insured, even if it contributes to the injury, will not serve as a basis for disclaiming coverage to the additional insured.