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Where Parties “Clearly Intended to Cover a Risk,” Inadvertently Naming Incorrect Entity As Additional Insured Does Not Negate Coverage

On November 20, 2019, Judge Ramos of the SDNY issued a decision in United Specialty Ins. Co. v. Lux Maintenance & Ren. Corp., Case No. 18-cv-3083 (ER), holding that property owners were entitled to additional insured coverage under a subcontractor’s CGL policy even though the subcontractor agreement misidentified the corporate names of the owners.

Lux Maintenance arose from injuries sustained by a worker in the course of performing balcony and façade repairs to a building collectively owned by Cornell and Rockefeller Universities, New York Hospital, Manhattan Eye Ear & Throat Hospital and other parties (referred to in the decision as the “Hospital Defendants”). The subcontractor (Lux) had a CGL policy with a standard additional-insureds clause, providing defense and indemnity coverage to third parties “when required by written contract” with Lux. The subcontractor agreement required Lux to procure insurance for the Owner, but misidentified the corporate name of the owner. Judge Ramos held that the owners were entitled to additional insurance coverage under Lux’s CGL policy notwithstanding this error, explaining:

New York state courts have long held that the name of the insured as stated in the policy is not the sole factor to be considered in determining who was the intended insured. When the parties clearly intended to cover a risk, but one side inadvertently lists a nonentity as the additional insured, New York courts have held that it is appropriate to view that mistake as a “mutual mistake,” and to reform the insurance agreement in accordance with the intent of the parties. On the record, it is undisputed that the Policy provides coverage for additional insureds, “when required by a written contract,” for risks that arise out of the Lux’s work. Further, USIC acknowledges that the Subcontractor Agreement Rider requires Lux to procure insurance for, inter alia, “the Owner.” The Rider also specifically provides that Lux’s insurance shall include contractual liability coverage for the benefit of the Contractor, the Owner and anyone else the Owner is required to name and shall specifically include coverage for completed operations. As such, it is clear that the Policy, at minimum, affords coverage to either “Sutton House Associated” or “Sutton Terrace Associates, Inc” as the Owner, and intends to cover risks associated with the ownership of the Property arising out of Lux’s work.

Additionally, the Hospital Defendants have offered evidence . . . that they have been doing business as “Sutton House Associated” over the years in connection with the Property that is named “Sutton Terrace.” The mistake in naming “Sutton House Associate d” or “Sutton Terrace Associates, Inc” as the Owner of the Property appears innocent, especially in light of the Hospital Defendants’ legal ownership of the Property. For its part, USIC has proffered no evidence that there exists a separate business entity named either “Sutton House Associated” or “Sutton Terrace Associates, Inc.” that could own the Property or claim coverage. Indeed, a search of the New York State Division of Corporations Business Entity database conducted by USIC returned no result for “Sutton Terrace Associates,” “Sutton House Associated” or “Sutton Terrace Associates, Inc.” USIC contends that this shows that these are legal nonentities that cannot have affiliates. Even assuming arguendo that is true, USIC’s contention fails to raise a triable issue of fact as to: (1) whether the Policy clearly covers the risks associated with ownership of the Property arising out of Lux’s work; (2) that the Hospital Defendants have been doing business as “Sutton House Associated” or “Sutton Terrace Associates, Inc.,” which are plainly identified as the owners of the Property in the Contractor and Subcontractor Agreements; or (3) that the mistake in identifying them as the owners of the Property was not innocent. Accordingly, the mistake of listing “Sutton House 11 Associated” or “Sutton Terrace Associates, Inc.” on the Contractor and Subcontractor Agreements should be regarded as mutual. Therefore, USIC must be required to provide coverage to the Hospital Defendants as additional insureds under the Policy.

The New York courts recognize the reality that an insurance company does not insure “a corporate name, but rather a business and its employees.” Rothstein v. Provident Life and Cas. Ins. Co., 177 A.D.2d 93, 95 (1st Dep’t 1992). Thus, it has long been the law that “the name of the insured listed on the policy is not important if the intent to cover the risk is clear.” McCarthy v. Alling Personnel Corp., 39 A.D.2d 782, 783 (3d Dep’t 1972) (dissenting opinion adopted by the Court of Appeals, 33 N.Y.2d 953). This case extends this principle a step further, as the error in question was not in the text of the insurance policy itself, but rather in the underlying subcontract that triggered the additional insured coverage.

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