In a recent decision issued in the Carbon County Court of Common Pleas, and reported in the September 15, 2015 edition of Pennsylvania Law Weekly (Vol. XXXIII, No. 37, p. 38PLW854), it was ruled that a subcontractor’s agreement to obtain liability insurance to protect a general contractor from claims caused [in whole or in part] by the subcontractor does not require the subcontractor’s insurer to defend the general contractor against a claim alleging injuries from negligence caused by the general contractor.
The underlying facts of the case are as follows: an employee of the subcontractor was injured while working on a project in Carbon County. The employee and his wife sued the general contractor, not the subcontractor. The plaintiffs’ complaint contained numerous allegations of negligence, but solely alleged this negligence on the part of the general contractor. Despite being the sole defendant named, the general contractor-defendant tendered the defense of the plaintiff’s claim to the subcontractor’s insurer. The insurer denied coverage, at which time the general contractor filed a third-party complaint against the subcontractor for breach of contract for failing to provide adequate coverage.
In reaching his decision, Common Pleas President Judge Roger N. Nanovic relied on a plain meaning interpretation of the insurance provisions and agreement between the general contractor and subcontractor. In so doing, Judge Nanovic ruled that the subcontractor’s insurer was not responsible for defending a claim alleging negligence solely by the general contractor and that the subcontractor did not breach its contract by failing to protect the general contractor. Although it was true that the general contractor was an additional assured under the subcontractor’s policy, the Court found that the general contractor was essentially a qualified additional assured. The Court ruled, based on the policy, that in order for the general contractor to be recognized as an additional insured under the subcontractor’s policy, the injuries alleged by the plaintiff must have been caused by the subcontractor’s own negligence. Since the only negligence alleged here was on the part of the general contractor, the insurer was correct in denying coverage. Furthermore, the Court ruled the subcontractor did not breach its contract with the general contractor because it complied with the agreement of defending the general contractor for injuries caused by the subcontractor. Requiring the subcontractor to cover for the negligence of the general contractor requires more specificity, absent in that policy and not called for in the agreement between the two parties at issue.
So if you’re a contractor or subcontractor, what does this mean for you? It means the language included (or, if you’re like the general contractor above, not included) can mean the difference between whose insurance is on the hook for claims arising in the general contractor-subcontractor setting. The legal team at Howland Hess O’Connell has extensive experience in transactional and litigation work in the field of Construction Law. If you’re a general contractor or subcontractor in need of legal advice or a review of your current insurance policies, schedule a consultation with Thomas Guinan, Karen Angelucci, or John Howland today to find out how you can best protect yourself in light of this recent court holding.
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