The Seventh Circuit affirmed a decision by the Northern District of Illinois that a subcontractor's insurer must defend the main contractor in negligence costs incurred by a subcontractor employee for work-related injuries.
The subcontractor's general liability protection is extended to "any person or organization for whom [the subcontractor is] performs operations", provided that there was a written agreement requiring the party to be included as additional insured. The coverage for such additional insurance was extended to liability for "bodily injury … caused in whole or in part by [the subcontractor’s work] arising from [the subcontractor’s] ongoing activities performed for the additional insured."
The insurer claimed that the underlying claims did not arise from the subcontractor's activities performed for the turnkey contractor. The Court emphasized that the obligation to defend is broader than the obligation to pay damages and rejected this argument. Although the subcontractor's employee did not expressly assert any claim against the subcontractor, the underlying complaint does not exclude ̵
1; and did in fact support – the possibility of bodily injury caused by the subcontractor's work. In order to reach that conclusion, the Court allowed a third party to lodge a complaint against the subcontractor. This evidence tended to show the potential for the bodily injuries caused by the subcontractor that arose through its activities for the turnkey contractor. Thus, the claims against the turnkey contractor potentially fall within additional insured coverage because they were potentially responsible for bodily injury caused in whole or in part by the subcontractor's work. differences in wording can be decisive for the result when deciding whether there is coverage. Insurance companies often deny incorrect coverage for additional insured persons. As the view of the Seventh Circuit in this case shows, parties who believe that they have coverage as additional insured should not only accept the insurer's denial of coverage. In addition, the parties to the agreement should consult insurance protection agents during the formation of the contract and the insurance investment phase in order to protect against costly exposure and litigation costs in the event that additional insured coverage is denied. Co. v. Columbia Ins. Grp., Inc. No. 19-3315, 2020 WL 5036095 (7th Circ. 26 August 2020).