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Re: The Rogak Report: 09 Nov 2009 ** CGL Policies - Additional Insureds **

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  • royamura
    I agree with you Larry that this decision doesn t represent any dramatic departure from the New York appellate courts other decisions on AI coverage and
    Message 1 of 3 , Nov 9, 2009
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      I agree with you Larry that this decision doesn't represent any dramatic  departure from the New York appellate courts' other decisions on AI coverage and endorsements.  It's the Court's broad and coverage-finding interpretation of the lease's "for the mutual benefit of" provision that makes this decision noteworthy.   Little else. 

      I'm going to have to disagree, however, with your unqualified statement that "when a lease requires a landlord to be named as an additional insured, the tenant's CGL policy automatically covers the landlord. "  As I'm sure you know, there must be, as in this case, an automatic or blanket AI endorsement in the tenant's CGL policy to complete the equation.  Absent such an endorsement, a promise to procure and name provision in the lease won't accomplish anything by itself except, perhaps, exposing the unfulfilling tenant to stand-in-the-shoes-of-the-would-be-insurer liability for breaching that provision. 

      Roy A. Mura
      Mura&
      Storm, PLLC
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      14 Lafayette Square

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      , New York   14203
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       In TheRogakReport@yahoogroups.com, "Lawrence" <insurancelawyer@...> wrote:
      >
      > IF LEASE REQUIRES LANDLORD TO BE ADDITIONAL INSURED, CGL POLICY
      > AUTOMATICALLY MAKES IT SO
      > Kassis v Ohio Cas. Ins. Co. 2009 NY Slip Op 05207 [12 NY3d 595] June
      > 25, 2009 Lippman, Ch. J. Court of Appeals Edited by Lawrence N. Rogak
      >
      >
      > This Court of Appeals decision, which came down last August, reversed a
      > Fourth Department decision which I reported in 2008. It has been
      > getting a lot of attention of late, and I am uncharacteristically behind
      > the curve in not commenting on it. However, I am receiving an unusual
      > number of requests to address it, and so here it is.
      > The issue, as framed by the Court of Appeals, was "whether a landlord is
      > an additional insured under an insurance policy obtained by his tenant
      > such that the insurer is obligated to defend and indemnify the landlord
      > in an underlying personal injury lawsuit."
      > Joseph Kassis leased property in Syracuse, New York to Kassis Superior
      > Sign Co., Inc. and Superior Sign obtained a commercial general
      > liability insurance policy on the property from The Ohio Casualty
      > Insurance Company. On February 25, 2004, Andrew Holden, a Superior Sign
      > employee, slipped on an accumulation of snow and/or ice on the leased
      > property and thereafter commenced the underlying action against Kassis.
      > Ohio Casualty disclaimed on the ground that the policy, which names only
      > Superior Sign, did not afford Kassis coverage. Kassis and Superior Sign
      > commenced this action seeking a declaration that Ohio Casualty is
      > obligated to defend and indemnify Kassis in the Holden action. Supreme
      > Court granted plaintiffs' motion for summary judgment in part and
      > declared that Ohio Casualty is obligated to provide a defense in the
      > Holden action. The Appellate Division reversed and found no obligation
      > to defend or indemnify. The Court of Appeals reversed.
      > "Under the lease, Superior Sign is obligated to pay for snow removal
      > services and to 'indemnify, defend, and hold harmless Landlord from any
      > and all damages, costs, expenses, and liabilities for anything arising
      > out of the occupancy of the Premises caused by Tenant or its agents and
      > from any loss or damage arising out of the acts of Tenant or its agents
      > or the failure of Tenant to comply with the terms and conditions' of the
      > lease.
      > "The lease further provides that Superior Sign, 'at its sole cost and
      > expense and for the mutual benefit of Landlord and Tenant, shall
      > maintain a general liability policy . . . providing coverage against
      > claims for bodily injury, personal injury and property damage' with
      > specified aggregate and per occurrence coverage amounts."
      > "Superior Sign obtained a commercial general liability insurance policy
      > from Ohio Casualty. The policy provides bodily injury coverage where
      > 'the insured is obligated to pay damages by reason of the assumption of
      > liability in a contract or agreement' and that contract or agreement
      > falls within the definition of an 'insured contract.'"
      > "The parties do not dispute that Superior Sign's lease is an 'insured
      > contract' as that term is defined in the insurance policy.[FN2]
      > <http://www.courts.state.ny.us/reporter/3dseries/2009/2009_05207.htm#2FN\
      > > Moreover, the policy's blanket additional insured provision extends
      > coverage not simply to the named insured, i.e., Superior Sign, but also
      > to 'any person or organization whom [the named insured is] required to
      > name as an additional insured on this policy under a written contract or
      > agreement.'"
      > "'Additional insured' is a recognized term in insurance contracts, and
      > the well-understood meaning of the term is an entity enjoying the same
      > protection as the named insured (Pecker Iron Works of N.Y. v Traveler's
      > Ins. Co., 99 NY2d 391, 393 [2003]). Notably, the insurance policy does
      > not require Superior Sign to provide Ohio Casualty with notice of those
      > persons or organizations Superior Sign is contractually required to name
      > as an additional insured on the policy. Superior Sign is not required to
      > complete and return to Ohio Casualty any notification forms listing
      > those persons or organizations that it intended to name as additional
      > insureds under the policy, nor does the policy require the submission of
      > any additional insured certificates or the like."
      > "Thus, in deciding the ultimate question—i.e., whether Kassis is an
      > additional insured under the subject policy obligating Ohio Casualty to
      > defend and indemnify him in connection with the underlying personal
      > injury action—we need only determine whether, under the lease,
      > Superior Sign was required to ensure that Kassis received general
      > liability insurance coverage equivalent to the coverage Superior Sign
      > enjoyed."
      > "Pursuant to the general liability insurance provision of the lease in
      > question, Superior Sign was obligated to obtain coverage at specified
      > monetary levels in the aggregate and per occurrence against 'claims for
      > bodily injury, personal injury and property damage' 'at its sole cost
      > and expense and for the mutual benefit of [Kassis] and [Superior Sign].'
      > The natural and intended meaning of the term 'mutual benefit' as used in
      > this provision is that Kassis and Superior Sign are intended to enjoy
      > the same level of coverage."
      > "The intent and meaning of the term 'mutual benefit' in the provision
      > becomes clear when juxtaposed with the language of the other insurance
      > provisions of the lease. The lease expressly contemplates that both
      > Kassis and Superior Sign will enjoy fire insurance, and the lease
      > further provides in an 'Additional Insurance' provision that Superior
      > Sign may obtain certain types of insurance coverage just for itself."
      > "With respect to fire insurance, Kassis, 'at Tenant's sole cost and
      > expense,' is to 'keep the Premises insured for the benefit of the
      > parties against loss or damage by fire,' and fire insurance 'may be
      > written either under separate policies in Landlord's name or combined
      > with other coverages acquired by Tenant.' As for the additional
      > insurance provision, it specifies that Superior Sign, 'at its sole cost
      > and expense, may maintain insurance coverage for its benefit on Tenant's
      > leasehold improvements and Tenant's personal property in such amounts as
      > Tenant deems appropriate with Tenant assuming the risk of any
      > co-insurance.' The additional insurance provision also expressly permits
      > Superior Sign to 'effect for its own account any insurance not required
      > by the provisions of this Lease, including business interruption
      > insurance or insurance covering Tenant's equipment and personal
      > property.' Plainly, where a disparity in coverage as between insureds
      > was contemplated—i.e., where the insurance to be procured was not
      > for the insureds' "mutual benefit"—it was expressly noted."
      > "It is therefore clear that Superior Sign was obligated under the lease
      > to procure the same level of general liability insurance coverage for
      > Kassis as it obtained for itself, and because of that, Kassis falls
      > within the policy's additional insured provision. Because Kassis is
      > considered an additional insured, Ohio Casualty is obligated to defend
      > him in the underlying personal injury action and, if appropriate,
      > indemnify him as an additional insured in accordance with the policy.
      > The parties' remaining contentions are without merit."
      > "Accordingly, the order of the Appellate Division should be reversed,
      > with costs, and the judgment of Supreme Court reinstated."
      > Footnote
      >
      > Footnote 2:
      > <http://www.courts.state.ny.us/reporter/3dseries/2009/2009_05207.htm#2CA\
      > SE> Under the policy, an "insured contract" includes a "contract for a
      > lease of premises" and "[t]hat part of any other contract or agreement
      > pertaining to your business . . . under which you assume the tort
      > liability of another party to pay for 'bodily injury' or 'property
      > damage' to a third person or organization." "[T]ort liability" is
      > further defined as a "liability that would be imposed by law in the
      > absence of any contract or agreement."
      >
      > Comment: The reason I did not give this decision much attention when it
      > came out is that to me, it simply confirmed what I have believed for the
      > past 30 years, based on cases I have handled on the subject: that a
      > lease is an "insured contract," and that when a lease requires a
      > landlord to be named as an additional insured, the tenant's CGL policy
      > automatically covers the landlord. In fact I have never seen an
      > instance where the tenant's insurer refused to cover the landlord,
      > except in instances where the landlord's sole negligence was the cause
      > of the accident (i.e., the accident did not arise out of the tenant's
      > operations).
      >
      > A number of commentators have written up this decision as though it were
      > a sea change in the law. I disagree. I think it is significant that
      > in this ruling, the Court of Appeals does not indicate that it is making
      > new law or overruling any prevailing case law.
      >
      > Insurers who are uncomfortable with the prospect of finding themselves
      > unwitting insurers of landlords would be well-advised to inquire, during
      > the application process, as to whether their potential named insured has
      > any leases or any other contracts requiring defense and indemnity for
      > another party, particularly landlords.
      >
      > Larry Rogak
      >
    • JPerkins@merchantsgroup.com
      Larry, The decision here would most likely be different had the tenant s policy not had the blanket additional insured provision. Without that provision, the
      Message 2 of 3 , Nov 10, 2009
      Larry,

      The decision here would most likely be different had the tenant's
      policy not had the "blanket additional insured" provision.
      Without that provision, the landlord would not have the same
      level of coverage under the tenant's policy that the tenant is
      entitled to. Without that provision, the insured contract would
      have triggered the "hold harmless" coverage but not additional
      insured coverage. I agree with you that the decision doesn't
      change the way most carrier's have handled these coverage
      situations in the past as long as there is an blanket additional
      insured provision or endorsement in the policy.

      Jon

      Jonathan E. Perkins, CPCU, SCLA, AIM
      Merchants Insurance Group
      Branch Claim Manager
      800-462-1077 ext. 3250
      FAX: 716-849-3105



      "Lawrence"
      <insurancelaw
      yer@... To
      > TheRogakReport@...
      Sent by: m
      TheRogakRepor cc
      t@yahoogroups
      .com Subject
      The Rogak Report: The Most
      Useful Publication In The
      11/09/2009 Insurance Claims Industry The
      05:10 PM Rogak Report: 09 Nov 2009 **
      CGL Policies - Additional
      Insureds **
      Please
      respond to
      TheRogakRepor
      t@yahoogroups
      .com









      IF LEASE REQUIRES LANDLORD TO BE ADDITIONAL INSURED, CGL POLICY
      AUTOMATICALLY MAKES IT SO


      |----------------------------------------------------------------|
      | |
      | Kassis v Ohio Cas. Ins. Co. |
      | |
      |----------------------------------------------------------------|
      | |
      | 2009 NY Slip Op 05207 [12 NY3d 595] |
      | |
      |----------------------------------------------------------------|
      | |
      | June 25, 2009 |
      | |
      |----------------------------------------------------------------|
      | |
      | Lippman, Ch. J. |
      | |
      |----------------------------------------------------------------|
      | |
      | Court of Appeals |
      | |
      |----------------------------------------------------------------|
      | |
      | Edited by Lawrence N. Rogak |
      | |
      |----------------------------------------------------------------|
      | |
      | |
      | |
      |----------------------------------------------------------------|






      This Court of Appeals decision, which came down last August,
      reversed a Fourth Department decision which I reported in 2008.
      http://groups.yahoo.com/group/TheRogakReport/message/1548. It has
      been getting a lot of attention of late, and I am
      uncharacteristically behind the curve in not commenting on it.
      However, I am receiving an unusual number of requests to address
      it, and so here it is.


      The issue, as framed by the Court of Appeals, was "whether a
      landlord is an additional insured under an insurance policy
      obtained by his tenant such that the insurer is obligated to
      defend and indemnify the landlord in an underlying personal
      injury lawsuit."


      Joseph Kassis leased property in Syracuse, New York to Kassis
      Superior Sign Co., Inc. and Superior Sign obtained a commercial
      general liability insurance policy on the property from The Ohio
      Casualty Insurance Company. On February 25, 2004, Andrew Holden,
      a Superior Sign employee, slipped on an accumulation of snow
      and/or ice on the leased property and thereafter commenced the
      underlying action against Kassis.


      Ohio Casualty disclaimed on the ground that the policy, which
      names only Superior Sign, did not afford Kassis coverage. Kassis
      and Superior Sign commenced this action seeking a declaration
      that Ohio Casualty is obligated to defend and indemnify Kassis in
      the Holden action. Supreme Court granted plaintiffs' motion for
      summary judgment in part and declared that Ohio Casualty is
      obligated to provide a defense in the Holden action. The
      Appellate Division reversed and found no obligation to defend or
      indemnify. The Court of Appeals reversed.


      "Under the lease, Superior Sign is obligated to pay for snow
      removal services and to
      'indemnify, defend, and hold harmless Landlord from any and
      all damages, costs, expenses, and liabilities for anything
      arising out of the occupancy of the Premises caused by
      Tenant or its agents and from any loss or damage arising
      out of the acts of Tenant or its agents or the failure of
      Tenant to comply with the terms and conditions' of the
      lease.


      "The lease further provides that Superior Sign, 'at its sole cost
      and expense and for the mutual benefit of Landlord and Tenant,
      shall maintain a general liability policy . . . providing
      coverage against claims for bodily injury, personal injury and
      property damage' with specified aggregate and per occurrence
      coverage amounts."


      "Superior Sign obtained a commercial general liability insurance
      policy from Ohio Casualty. The policy provides bodily injury
      coverage where 'the insured is obligated to pay damages by reason
      of the assumption of liability in a contract or agreement' and
      that contract or agreement falls within the definition of an
      'insured contract.'"


      "The parties do not dispute that Superior Sign's lease is an
      'insured contract' as that term is defined in the insurance
      policy.[FN2] Moreover, the policy's blanket additional insured
      provision extends coverage not simply to the named insured, i.e.,
      Superior Sign, but also to 'any person or organization whom [the
      named insured is] required to name as an additional insured on
      this policy under a written contract or agreement.'"


      "'Additional insured' is a recognized term in insurance
      contracts, and the well-understood meaning of the term is an
      entity enjoying the same protection as the named insured (Pecker
      Iron Works of N.Y. v Traveler's Ins. Co., 99 NY2d 391, 393
      [2003]). Notably, the insurance policy does not require Superior
      Sign to provide Ohio Casualty with notice of those persons or
      organizations Superior Sign is contractually required to name as
      an additional insured on the policy. Superior Sign is not
      required to complete and return to Ohio Casualty any notification
      forms listing those persons or organizations that it intended to
      name as additional insureds under the policy, nor does the policy
      require the submission of any additional insured certificates or
      the like."


      "Thus, in deciding the ultimate question—i.e., whether Kassis is
      an additional insured under the subject policy obligating Ohio
      Casualty to defend and indemnify him in connection with the
      underlying personal injury action—we need only determine whether,
      under the lease, Superior Sign was required to ensure that Kassis
      received general liability insurance coverage equivalent to the
      coverage Superior Sign enjoyed."


      "Pursuant to the general liability insurance provision of the
      lease in question, Superior Sign was obligated to obtain coverage
      at specified monetary levels in the aggregate and per occurrence
      against 'claims for bodily injury, personal injury and property
      damage' 'at its sole cost and expense and for the mutual benefit
      of [Kassis] and [Superior Sign].' The natural and intended
      meaning of the term 'mutual benefit' as used in this provision is
      that Kassis and Superior Sign are intended to enjoy the same
      level of coverage."


      "The intent and meaning of the term 'mutual benefit' in the
      provision becomes clear when juxtaposed with the language of the
      other insurance provisions of the lease. The lease expressly
      contemplates that both Kassis and Superior Sign will enjoy fire
      insurance, and the lease further provides in an 'Additional
      Insurance' provision that Superior Sign may obtain certain types
      of insurance coverage just for itself."


      "With respect to fire insurance, Kassis, 'at Tenant's sole cost
      and expense,' is to 'keep the Premises insured for the benefit of
      the parties against loss or damage by fire,' and fire insurance
      'may be written either under separate policies in Landlord's name
      or combined with other coverages acquired by Tenant.' As for the
      additional insurance provision, it specifies that Superior Sign,
      'at its sole cost and expense, may maintain insurance coverage
      for its benefit on Tenant's leasehold improvements and Tenant's
      personal property in such amounts as Tenant deems appropriate
      with Tenant assuming the risk of any co-insurance.' The
      additional insurance provision also expressly permits Superior
      Sign to 'effect for its own account any insurance not required by
      the provisions of this Lease, including business interruption
      insurance or insurance covering Tenant's equipment and personal
      property.' Plainly, where a disparity in coverage as between
      insureds was contemplated—i.e., where the insurance to be
      procured was not for the insureds' "mutual benefit"—it was
      expressly noted."


      "It is therefore clear that Superior Sign was obligated under the
      lease to procure the same level of general liability insurance
      coverage for Kassis as it obtained for itself, and because of
      that, Kassis falls within the policy's additional insured
      provision. Because Kassis is considered an additional insured,
      Ohio Casualty is obligated to defend him in the underlying
      personal injury action and, if appropriate, indemnify him as an
      additional insured in accordance with the policy. The parties'
      remaining contentions are without merit."


      "Accordingly, the order of the Appellate Division should be
      reversed, with costs, and the judgment of Supreme Court
      reinstated."


      Footnote



      Footnote 2: Under the policy, an "insured contract" includes a
      "contract for a lease of premises" and "[t]hat part of any other
      contract or agreement pertaining to your business . . . under
      which you assume the tort liability of another party to pay for
      'bodily injury' or 'property damage' to a third person or
      organization." "[T]ort liability" is further defined as a
      "liability that would be imposed by law in the absence of any
      contract or agreement."

      Comment: The reason I did not give this decision much attention
      when it came out is that to me, it simply confirmed what I have
      believed for the past 30 years, based on cases I have handled on
      the subject: that a lease is an "insured contract," and that when
      a lease requires a landlord to be named as an additional insured,
      the tenant's CGL policy automatically covers the landlord. In
      fact I have never seen an instance where the tenant's insurer
      refused to cover the landlord, except in instances where the
      landlord's sole negligence was the cause of the accident (i.e.,
      the accident did not arise out of the tenant's operations).


      A number of commentators have written up this decision as though
      it were a sea change in the law. I disagree. I think it is
      significant that in this ruling, the Court of Appeals does not
      indicate that it is making new law or overruling any prevailing
      case law.


      Insurers who are uncomfortable with the prospect of finding
      themselves unwitting insurers of landlords would be well-advised
      to inquire, during the application process, as to whether their
      potential named insured has any leases or any other contracts
      requiring defense and indemnity for another party, particularly
      landlords.


      Larry Rogak
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