Additional Insured Coverage: Achieving Your Intended Risk Allocation

Transcription

1 Additional Insured Coverage: Achieving Your Intended Risk Allocation Presented to: South Carolina Association of Corporate Counsel June 17, 2016 Jennifer H. Thiem K&L Gates LLP Defining Additional Insured Coverage 1

2 Defining Additional Insured Coverage (BP) Upstream Additional Insured Coverage Insurer Downstream (Transocean Holdings) Examples of Typical Policy Provisions 2

3 Examples of Typical Policy Provisions Example of ISO endorsement expressly identifying additional insured: This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE Name Of Additional Insured Person(s) Or Organization(s) Location(s) Of Covered Operations Information required to complete this Schedule, if not shown above, will be shown in the Declarations. A. Section II Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule[.] Examples of Typical Policy Provisions Example of ISO automatic endorsement that does not expressly identify additional insured: This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART A. Section II Who Is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured. 3

4 The Questions #1 Do I want to be expressly named? #2 Should I request a specific endorsement? Certificate of Liability Insurance 4

5 The Questions #1 Do I want to be expressly named? #2 Should I request a specific endorsement? #3 Have I reviewed a copy of the policy? Indemnification 5

6 Indemnification Upstream Insurer 1. Broad 2. Intermediate 3. Limited/Comparative Downstream Additional Insured Coverage vs. Anti-Indemnification Laws S.C. Code Ann Notwithstanding any other provision of law, a promise or agreement in connection with the design, planning, construction, alteration, repair or maintenance of a building, structure, highway, road, appurtenance or appliance... purporting to indemnify the promisee... against liability for damages arising out of bodily injury or property damage proximately caused by or resulting from the sole negligence of the promisee... is against public policy and unenforceable.... The provisions of this section shall not affect any insurance contract. 6

7 The Questions #1 Do I want to be expressly named? #2 Should I request a specific endorsement? #3 Have I reviewed a copy of the policy? #4 Is my indemnity provision consistent with my risk allocation expectations? The Rest of the Story 7

8 Scope of Coverage In re Deepwater Horizon Indemnity pollution or contamination, including control and removal thereof, originating on or above the surface of the land or water Insurance shall be named as additional insureds in each of Transocean s policies,... for liabilities assumed... under the terms of this Contract any person or entity to whom the Insured is obliged by any oral or written Insured Contract. To provide insurance such as is afforded by th[e] Policy BP Transocean Holdings Insurers Scope of Coverage The District Court agreed with the insurers: Because Transocean did not assume the oil pollution risks pertaining to the Deepwater Horizon Incident BP did Transocean was not required to name BP as an additional insured as to those risks. Because there is no insurance obligation as to those risks, BP is not an Insured (or additional insured ) for those risks. 8

9 Scope of Coverage The Fifth Circuit reversed: [W]here an additional insured provision is separate from and additional to an indemnity provision only the [insurance] policy itself may establish limits upon the extent to which an additional insured is covered[.] The Fifth Circuit withdrew its opinion Scope of Coverage The Texas Supreme Court held: The policies here provide additional-insured coverage automatically where required and as obligated by written contract in which an insured has agreed to assume the tort liability of another party. 9

10 2013 ISO AI Endorsements 2013 ISO AI Endorsements Coverage Will Not Be Broader Than The Contract A. Section II Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above. However: ***** 2. If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured. 10

11 2013 ISO AI Endorsements To The Extent Permitted By Law A. Section II Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above. However: 1. The insurance afforded to such additional insured only applies to the extent permitted by law[.] Closing Thoughts 11

12 The Questions #1 Do I want to be expressly named? #2 Should I request a specific endorsement? #3 Have I reviewed a copy of the policy? #4 Is my indemnity provision consistent with my risk allocation expectations? Jennifer H. Thiem jennifer.thiem@ 23 12