12.12.2017

Insurer’s Duty to Defend Its Additional Insured Limited to Claims Relating to the Named Insured’s Work

In Security National Ins. Co. v. Sunset Presbyterian Church, 289 Or App 193 (2017), the named insured was a subcontractor that performed masonry work on the project in question.  The general contractor was an additional insured on the subcontractor’s insurance policy based on a provision in the subcontract with this requirement.  The Oregon Court of Appeals rejected the insurance company’s contention that the additional insured provision in the subcontract was void under ORS 30.140, which prohibits provisions in construction contracts requiring one party to procure insurance to indemnify another party for the second party’s own negligence.  Instead, the provision was enforceable to the extent it did not contravene the statute.  The appellate court also addressed the extent of the additional insured obligation owed.  The issue was whether the insurer had an obligation to defend all claims asserted against the general contractor or whether its duty to defend was limited to the claims relating to liability arising out of the fault of the subcontractor.  The court reasoned that, under ORS 30.140, the duty to defend was limited to claims arising out of the fault of the subcontractor, and the insurance company did not have to defend all claims that were unrelated to the subcontractor.  Other holdings were as follows.  The court rejected the insurer’s argument that there was no duty to defend because the underlying complaint did not mention the subcontractor.  The court reasoned that the complaint alleged that the general contractor relied on the work of subcontractors and specified defects in the building envelope including problems with stone masonry.  These allegations were sufficient for the purpose of triggering the duty to defend.  In addition, the insurer contended there was no duty to defend because the additional insured obligation was limited to the named insured’s “ongoing operations.”  The court rejected this contention, finding that the underlying complaint did not allege when the damage occurred and was thus sufficient for the purposes of the duty to defend.

 

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Posted by Geoff Bedell