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Explicit Insurance and Lease Language Govern Ruling on Primary or Excess Coverage (NJ)

December 21, 2018

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In <a href="">Lopez v. Palin Enterprises, Associated</a>, the New Jersey Appellate Division reversed a trial court’s decision that a tenant’s insurance policy provided coverage to the landlord as an additional insured that was excess over the landlord’s own insurance policy where the lease did not require the coverage to be primary.

Palin Enterprises, Associated, owned a commercial property and leased part of it to Agile Trade-Show Furnishings, Inc. An Agile Trade-Show employee became injured while using a freight elevator inside the leased premises. Palin, the building owner, tendered the defense to the tenant’s insurer: Wausau Insurance (Wausau). The owner argued it was entitled to primary insurance coverage as an additional insured under the tenant’s policy. The trial court agreed and ordered Wausau to provide primary insurance to the property owner.

On appeal, Wausau argued that the “other insurance” language in its policy meant that it provided coverage in excess of the primary insurance policy issued by the property owner’s insurer: Greater New York Mutual Insurance Company. Specifically, the Wausau policy stated that it “shall be excess over any other insurance available to the additional insured whether such insurance is on an excess, contingent, or primary basis, unless [] obligated under a written agreement to provide liability insurance [] on any other basis.” According to Wausau, this policy language supported its position that its policy applied to excess coverage only.

The New Jersey Appellate Division agreed with Wausau and reversed the trial court’s order. After conducting a review of the insurance policy, the appellate court found that Agile Trade-Show did not have a contractual obligation to obtain primary insurance for the property owner. Since the lease agreement was a “written agreement,” it could require its tenant to procure primary liability insurance. The lease agreement here, however, did not specify the type of coverage required under its terms. Because the written lease agreement did not specify that the tenant was required to obtain primary coverage, the property owner was afforded excess coverage.

Thanks to Brent Bouma for his contribution to this post. Please email <a href="">Vito A. Pinto</a> with any questions.

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