ACE AMERICAN INS. CO. v. KEYSTONE CONSTRUCTION & MAINTENANCE SERVICES, INC.
United States District Court, D. Connecticut.
September 27, 2012.
Owner shall purchase and maintain . . . property insurance written on a builder's risk "all risk" or equivalent form on a completed value basis. . . . This insurance shall name the Owner as the First Named Insured, and also insure the interests of the Contractor, and Contractor's subcontractor and subcontractors in the facility.
Bluewater's Mot. to Dismiss, Ex. A at 12.3. The subcontractors argue that this provision shows that Kleen was required to maintain insurance for the subcontractors, and thus that the subcontractors were covered under the plaintiffs' policy.
The plaintiffs argue that "insuring the interests" of the subcontractors is not the same as the subcontractor being an "additional insured." Elsewhere in the Kleen/O&G Contract, the parties provide that "Additional insured coverage shall be provided to Owner and the Financing Parties, and their officers and employees." Bluewater's Mot. to Dismiss, Ex. A at 12.1.3. Thus, the plaintiffs argue, if Kleen had wanted the subcontractors to be "additional insureds," it would have specified as much. The plaintiffs conclude that "insure the interests" must have some meaning distinct from being an "additional insured."
Elsewhere, the Kleen/O&G Contract provides that
A loss insured under the Builder's Risk Property insurance described herein shall be adjusted by Owner as fiduciary and made payable to Contractor as fiduciary for the insureds, as their interests may appear, or as required by the Financing Parties. Contractor shall pay each sub-contractor its just shares of insurance proceeds received by Contractor, and by appropriate agreements, written where legally required for validity, shall require its subcontractors to make payments to their sub-subcontractors in similar manner.
Bluewater's Mot. to Dismiss, Ex. A at 12.3. The plaintiffs take from this statement that subcontractors are not additional insureds under the insurance agreement. The plaintiffs conclude that the subcontractors are not entitled to make a direct claim, but may still receive monies paid by the plaintiffs if the claim includes damages to their interests.5
The plaintiffs are mistaken. Although it is true that different sections of the construction contract and the insurance policy use the phrase "additional insureds" and others do not, the meaning of the two agreements is clear. The construction contract, at section 12, defines the scope of coverage required. For example, section 12.1 and its subparts describe insurance that the subcontractors must purchase. The following section, 12.2, describes insurance that the contractor and subcontractors must purchase. The section of the construction contract dealing with All Risk Insurance, section 12.3, provides for insurance purchased by the owner for the benefit of the contractor and subcontractors. Although the language is different in that section, the substance is not. The substance of that section provides that the owner must buy insurance protecting contractors' and subcontractors' interests. The insurance policy, however, determines whether parties are "additional insureds." The section of the insurance policy providing that subcontractors are additional insureds, Part C, Section One, says "[t]o the extent required by any contract or subcontract for the Insured Project . . . subcontractors . . . are recognized as Additional Insureds." Bluewater's Mot. to Dismiss, Ex. B, at 21.