This blog was co-authored by William Hayne, Candidate Attorney.

In April 2024 the New York Supreme Court found that non-contracting parties under a construction subcontract were not entitled to the benefit of the insurance policy taken out by the subcontractor because non-contracting did not fall within the terms of the policy.

A worker was injured whilst working for the subcontractor on a housing project. The worker sought to recover damages for personal injuries against the subcontractor, the general contractor and a number of other parties who were involved in the housing development but were not parties to the construction contracts.

The non-contracting parties alleged that the insurer was obliged to defend and indemnify them as additional insureds under the subcontractor’s commercial general liability policy even though they were not named as insureds on the policy nor were they specifically listed as additional insureds.

Additional insureds under an endorsement to the policy were “additional insured – owners, lessees or contractors – automatic status when required in construction agreement with you – ongoing operations”. The policy continued: “Who is an insured is amended to include as an insured any person or organisation for whom you are performing operations only as specified under a written contract … that requires such person or organisation to be added as an additional insured on your policy”.

The court held that the policy language properly interpreted required a contract between the named insured and the party seeking additional insured status. As only the general contractor contracted directly with the subcontractor, only the general contractor qualified for additional insured status. The non-contracting parties were not covered.

The general contractors policy provided that it was the primary policy unless there is “any other primary insurance available to you covering liability for damage arising out of the premises or operations for which you have been added as an additional insured by attachment or an endorsement”. There was no such endorsement and the subcontractor’s policy coverage would only be triggered if the liability limits of the contractor’s policy were exhausted.

This was a rather optimistic attempt by the non-contracting parties to bring themselves within the scope of coverage of the subcontractor’s policy. The decision emphasises that insurers must stipulate who they are prepared to cover, particularly in construction-related policies where many parties are involved directly and indirectly.

New York City Hous. Auth. V Harleysville Worcester Ins. Co. 2019-13582 No. 512087/17