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Recent Legal Precedents for Sub-contractors

An employee of a subcontractor, injured on a construction project, filed a lawsuit against the general contractor for the development. The latter, holder of a certificate of general liability insurance furnished by the subcontractor, and its insurer tendered defense of the suit to the subcontractor's insurer. That carrier declined on the basis of a policy exclusion for injury or damage arising out of roofing work, in which the subcontractor was engaged at the time.

The general contractor and its insurer initiated legal action, claiming that the subcontractor's insurer should provide defense because of the general contractor's reliance on representations in the certificate that it was an additional insured. The sub-contractor's insurer filed a motion for summary judgment, contending that the claim was excluded from coverage. The motion was granted, and the judgment of the trial court was appealed. The evidence was clear that the subcontractor, by contract, agreed "to indemnify (the general contractor) against all claims, damages, losses or expenses arising out of (its) work on the project." Relative to the contractual provision, the subcontractor arranged for its insurer to issue a certificate of insurance to the general contractor, identifying the sub as named insured and the general and the project as additional insureds under various described policies, including general liability insurance.

The appeal court noted that the certificate included a prominent statement, in large type, as follows: "This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below." Another highlighted statement made clear that ". . . .the insurance afforded by the policies described herein is subject to all of the terms, exclusions, and conditions of such policies."

The appeal court concluded that the certificate served only to inform the general contractor that it had the same coverage as did the subcontractor. The effect of the certificate was that it was up to the general contractor to determine the scope of its protection and policy exclusions from the policy itself. Furthermore, the court said, it was not the policy issuer's responsibility, but rather that of the certificate holder, to determine if the coverage was proper for the situation.

The judgment of the trial court was affirmed in favor of the subcontractor's insurance carrier.

Source: Silverplume Reference Systems