In Construction Injury Coverage Case, California Appeals Court Affirms Ruling That General Contractor Was Not an Additional Insured on Subcontractor’s Excess Policy

An appellate court in California has affirmed a trial court’s decision that a general contractor was not an additional insured on a subcontractor’s excess insurance policy.

The Case

Advent, Inc., was hired as the general contractor for the Aspen Family Village project in Milpitas, California. Advent subcontracted with Pacific Structures, Inc. In turn, Pacific subcontracted with Johnson Western Gunite.

During construction, a Johnson employee, Jerry Kielty, allegedly fell down an unguarded stairway shaft at the project site and was injured. Kielty sued Advent, and Advent tendered its defense to the insurance company that had issued primary and excess insurance policies to Johnson.

Kielty settled his action for $10 million. Johnson’s insurer contributed to the settlement under its primary policy, but it did not provide coverage under its excess policy.

Advent sued the insurer in a California state court, seeking a declaration that it was an “additional insured” under the excess policy. The insurer argued that, if Kielty’s injuries had not been caused by Johnson, its excess policy did not afford coverage to Advent as an additional insured.

The trial court entered judgment in favor of the insurer, and the dispute reached a California appellate court.

The Appellate Court’s Decision

The appellate court affirmed.

In its decision, the appellate court explained that the insurer’s primary policy provided additional insured coverage only “with respect to liability for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by: 1. Your [Johnson’s] acts or omissions; or 2. The acts or omissions of those acting on your [Johnson’s] behalf; in the performance of your [Johnson’s] ongoing operations for the additional insured(s) at the location(s) designated above.”

The appellate court added that the excess policy applied only to those claims covered by the primary policy.

Thus, it reasoned, the issue was whether Kielty’s injuries had been caused, in whole or in part, by Johnson or by someone acting on behalf of Johnson.

The appellate court found that they had not been. It pointed out that Kielty had alleged that certain named defendants, including Advent, had been negligent and had caused his injuries, but that he had not named Johnson in his lawsuit.

Any “speculation” that Johnson was at fault for Kielty’s fall “was insufficient when construing an insurer’s duty to defend,” the appellate court concluded.

The case is Advent, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 6 Cal. App. 5th 443 (Cal. Ct. App. 2016).