An insurance policy might list only one named insured, and no additional insureds, but according to one recent New York Supreme Court decision, that does not necessarily mean the insured’s affiliates are not entitled to coverage.
In <a href="http://blog.wcmlaw.com/wp-content/uploads/2016/04/El-Ad-250-West-LLC-v.-Zurich-American-Ins..pdf" rel="">El-Ad 250 West, LLC v. Zurich American Ins.</a><em>, </em>Zurich issued a builders’ risk policy to a condominium developer. After Hurricane Sandy, the developer and its affiliated companies sought coverage under the policy for additional interest paid on construction loans and lost earnings resulting from delays in selling units in the building. The policy identified only the developer as an insured and did not name any of the affiliates as a named insured or an additional insured. In fact, the policy specifically provided that “[f]or the purpose of Delay in Completion Coverage only, the Named Insured shall be shown as below… There shall be no Additional Named Insureds, unless otherwise endorsed.”
Relying on that language, and the fact that the affiliates were not listed on the policy, Zurich moved for partial summary judgment, arguing that the affiliates were not covered under the policy. The court denied Zurich’s motion. In doing so, the court relied on a long line of authority recognizing that “[t]he name of the insured in the policy is not always important if the intent to cover the risk is clear.” According to the court, if the parties intended to include the affiliates as insureds, there would be coverage, even if the affiliates were not identified in the policy.
Applying that principle to the facts before it, the court held that summary judgment was inappropriate because there was evidence that “Zurich’s underwriting process appears to have accounted for the affiliates, suggesting it understood coverage might extend to them.”
On the surface, it appears that the court was quick to abandon the well-established rule that extrinsic evidence is not be considered in the face of an unambiguous policy provision, but that really was not the case. In <em>El-Ad, </em>the court was not interpreting the scope of the covered risk, but rather the identities of the parties to whom the policy applied. <em>El-Ad </em>should serve as an important reminder to underwriters to understand the identities of their insureds, and whether the insured claims “affiliates” within its embrace. The good news is that <em>El-Ad </em>is not a broad invitation to examine extrinsic evidence to rebut unambiguous policy language.
Thanks to Michael Gauvin for his contribution to this post. For more information, please email Dennis Wade at <a href="mailto:firstname.lastname@example.org"><u>email@example.com</u></a>.