As we have discussed in prior Litigation & Counseling Alerts, merely including in your contracts a requirement that you be named as an additional insured on the other party's liability insurance policies may not result in you being able to enjoy that status. It all depends on the type of additional insured language used in the other party's insurance policy, and whether the insurer providing that language is willing to stand behind it.

In a recent Illinois Appellate Court case, Pekin Ins. Co. v. Tovar Snow Professionals, Inc., the court was asked to consider whether an additional insured endorsement that included the word "construction" in the title of the endorsement—but not in the text of the endorsement—was meant to cover all written contracts, or only those contracts that were "construction" contracts.

A slip-and-fall case, the injured party in Pekin sued Tovar Snow Professionals, a snow-removal company, and Dunleavy Concrete, a subcontractor on the job site in question. Tovar's subcontract with Dunleavy required that Dunleavy add Tovar as an additional insured to its liability insurance policy issued by Pekin Insurance Company. Dunleavy obtained from Pekin a "blanket automatic additional insured endorsement," which purported to apply to any written contract Dunleavy entered into providing coverage to the other party. The endorsement provided as follows:

Additional Insured—When Required By Written Construction Contract For Ongoing Operations Performed By You For An Additional Insured and/or Your Completed Operations

With respect to coverage afforded under this section of the endorsement, Section II—Who is An Insured is amended to include as an insured any person or organization for whom you are performing operations, when you and such person or organization have agreed in a written contract effective during the policy period…and executed prior to the "bodily injury" or "property damage" for which coverage is sought, that you must add that person or organization as an additional insured on a policy of liability insurance (hereinafter referred to as the "Additional Insured").

The Additional Insured is covered only with respect to vicarious liability for "bodily injury" or "property damage" imputed from You to the Additional Insured as a proximate result of:

(1) Your ongoing operations performed for that Additional Insured during the Policy Period; or

(2) "Your work" performed for the Additional Insured during the Policy Period, but only for "bodily injury" or "property damage" within the "products-completed operations hazard."

Tovar tendered the lawsuit to Pekin for a defense. Pekin denied coverage and filed a Declaratory Judgment action seeking a ruling from the court that Pekin did not owe Tovar a defense. Pekin argued that coverage under the endorsement did not include activities related to snow and ice removal. It claimed that because the title of the endorsement contained the word "construction" before the word "contract," the term "construction" was a "limiting adjective." The trial court rejected this argument, and the appellate court affirmed.

To their credit, both courts read the endorsement with care, and found that the word "construction" appeared nowhere in the text of the endorsement. The courts held that under prior Illinois case law, it is the text of the endorsement that controls, not the title.

Further, the term "construction" was not defined and was, therefore, ambiguous. Again relying on well-settled Illinois law, the courts held that ambiguities and doubts in insurance policies are resolved in favor of the insured, especially those that appear to exclude coverage.

The insurer attempted to argue that the rules of statutory construction should apply and, under such rules, the "title" language was not really a heading or title or caption but, rather, was really a part of the text itself. The appellate court disagreed, stating that "[t]his argument falls flat." As the court explained:

The above-quoted section has all the hallmarks of a caption/heading/title as one would normally use such a device. It appears at the beginning. The lettering is in bold typeface. It utilizes an explanatory phrase rather than a sentence structure. Each word in the phrase begins with a capital letter. That is not to say that nonbolded, noncapitalized phrases or sentences cannot serve as headings or captions or titles, too. However, in this case, the argument must be rejected where we are asked by Pekin to read this section as if the above-quoted words are to precede each subsection as text rather than as a caption/heading/title. There are no indications anywhere in the policy or in the above-quoted section indicated that it is meant to be the beginning phrase or element of each sub-section that follows it. In fact, the many stylistic conventions for a heading/title/caption are utilized to indicate it is not text and to flag it as a heading/title/caption of this section, including that it appears as the introductory statement. Additionally, when attempting to actually read the above-quoted words as the first part of each subsection that follows, we are left with an ungrammatical, poorly punctuated jumble of sentences that would be the antithesis of a clearly written policy of insurance coverage.

Accordingly, judgment was granted in favor of the additional insured and against the insurer.

Although this was a good outcome for the additional insured, the insurer's position nevertheless led to the uncertainty and extra time and expense associated with insurance-coverage litigation. The lesson to be learned from this case, therefore, is that anyone seeking to be added as an additional insured to the insurance policy of a contracting party should request and review a copy of the additional insured endorsement, so that issues like this can be spotted and (hopefully) addressed at the beginning of the project, rather than after an occurrence has taken place. And it always is wise to seek the assistance of you attorney and insurance broker on such matters.