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Extrinsic Evidence Establishes Parties’ Intent to Name Property Owner as Additional Insured Under Contractor’s CGL Policy

On July 2, 2018, Justice Edmead of the New York County Supreme Court issued a decision in M&M Realty of N.Y., LLC v. Burlington Ins. Co., 2018 NY Slip Op 31399(U), holding that a property owner was entitled to coverage under a contractor’s CGL policy because extrinsic evidence demonstrated “the parties’ intent to confer additional insured status” on the property owner. In M&M Realty, a property owner (M&M) sought additional insured coverage under the CGL policy of a contractor (L&M) for a personal injury claim by the contractor’s employee.  L&M’s policy had a standard additional insured endorsement, which provided coverage to “any person or organization for whom you [L&M] are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.” 

Justice Edmead found that the contract between L&M and M&M was ambiguous as to the obligation to name M&M as an additional insured under the CGL policy.  However, the Court found that extrinsic evidence demonstrated that the parties intended to make M&M an additional insured, explaining:

The Burlington Policy indicates that to be considered an additional insured, L&M must enter into a written contract designating M&M an additional insured. A reading of the proposal/contract indicates that there is no requirement that L&M name M&M as an additional insured. Instead, the proposal/contract requires that "insurance" be provided. However, the provision is ambiguous, since the contract fails to define "necessary . . . insurance." Accordingly, the Court must look to the extrinsic evidence to determine the intent of the parties at the time of entering into the agreement.

Here, the deposition testimony demonstrates the parties' intent to confer additional insured status on L&M. Initially, the testimony of M&M's principal, Abraham Mussafi("Mussafi"), demonstrates that M&M intended to be an additional insured under the policy. Mussafi testified that he contacted Costel Mirauti, L&M' s Principal, and requested that M&M be an additional insured on the Burlington Policy.  Mussafi further testified that when he asked Mirauti to designate M&M as an additional insured, Mirauti instructed him to contact L&M's office and that "they'll give you [Mussafi] whatever you want.”  Mussafi indicated that he contacted L&M's office, wherein he requested that he be placed as an additional insured on the Burlington Policy. Mussafi testified that in response L&M sent him a copy of the Certificate of Insurance identifying him as an additional insured. Mussafi additionally testified that he required that M&M was an additional insured under L&M's policy before permitting L&M to perform any work.

Moreover, L&M believed that it was conferring additional insured status when it furnished its customers, including M&M, with a certificate of insurance. L&M's office manager, Melanie Gazer ("Gazer"), testified that whenever a customer requested a certificate of insurance, "it was always implied that [the customer] is to be listed as an additional insured.” Gazer testified that whenever L&M got a certificate of insurance for a job, she would include the customer as an additional insured. Mirauti testified that it produced a certificate of insurance for every job. Importantly, Mirauti testified that he believed that the "necessary insurance" referred to in the proposal/contract is the insurance identified to in the certificate of insurance, in other words, the additional insured status. Mirauti further testified that for every job, L&M would procure a certificate of insurance for its customers identifying the customer as an additional insured. Accordingly, M&M did not have to specifically ask to be added as an additional insured-all it had to ask for was a certificate of insurance, since L&M's understanding was the certificate confirmed additional insured status.

Burlington's argument that the proposal/contract should not be enforced because there was no written acceptance by M&M is unavailing. Mussafi testified that he signed the proposal/contract upon receiving it and before the accident. In any event, there is no requirement in the agreement that its enforceability was conditioned upon L&M' s signature, and it is uncontested that all parties operated under the policy/contract.

This decision illustrates the importance of clearly delineating the parties’ insurance obligations in a construction contract.  The standard additional insured endorsement is triggered where the named insured is required by a written contract to name another party as an additional insured.  Here, the property owner was ultimately able to establish the parties' intend to extend additional insured coverage to it through extrinsic evidence.  Still, it would have been wise to spell that out expressly in the written agreement.

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