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Multiple Additional Insured Endorsements Create Multiple Avenues to AI Status.

February 23, 2018

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In <em><a href="">Vargas v City of New York, </a></em> the First Department was called to reconsider the Supreme Court’s decision that Liberty Insurance Underwriters had a duty to defend and indemnify the City of New York, NY Transit Authority and the MTA as additional insureds to a CGL policy issued to its insured, L&amp;L, a subcontractor on a construction project.  The underlying action involved personal injury claims arising out of a construction accident.
The City Defendants hired E.E. Cruz as a general contractor.  E.E Cruz subcontracted some of the work to L&amp;L, Liberty’s named insured.  The contract between L&amp;L and E. E. Cruz required L&amp;L to procure additional insured coverage for the City Defendants.  The Liberty Policy included four separate Additional Insured Endorsements, providing some conflicting requirements.  Endorsements 1-3 each defined an additional insured as a party “required by written contract <em>signed by both parties</em> prior to any occurrence in which coverage is sought.”  While Endorsement 4 provided that any party “with whom you [L&amp;L] have agreed to add as an additional insured by written contract” qualified for AI status.
Liberty disclaimed coverage to the NYC Defendants in reliance upon the Endorsement 4’s requirement of an executed, written contract.  But the Court affirmed the lower court’s ruling that this endorsement did not serve to vitiate the laxer requirements in Endorsements 1-3.
The First Department also found that Liberty had waived its right to assert any reliance upon the Lead Exclusion because its disclaimer was untimely, noting that the insurer would not have even needed to undertake an investigation to assert the lead exclusion where the complaint made clear on its face that the injured party alleged he was exposed to harmful lead dust.
The <em>Vargas</em> decision is a reminder and a warning that a later, more stringent endorsement will be entirely without teeth – and ultimately useless - if related endorsements remain a part of the Policy.
Thanks to Vivian Turetsky for her contribution to this post.

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