A recent personal injury case demonstrates that commercial property owners simply cannot be too cautious when it comes to ensuring their status as an additional insured on certificates issued to their tenants and contractors. Specifically, owners should not rely on representations made by tenants and contractors as to communications that the latter may have had with their insurance agents and brokers regarding coverage.
In the Superior Court case of Smith v. Roche Bros., et al. v. Perdoni, the Court rejected the claim filed by Roche Bros., supermarket chain and property owner, against the insurance agent of its snowplowing subcontractor, Perdoni, whose failure to perform its plowing services allegedly caused to the plaintiff’s personal injuries. The Court found no evidence to support Roche Bros. contention that Perdoni’s insurance agent had been made aware of Perdoni’s agreement to add Roche Bros. as an additional insured on its general liability policy (in fact, Perdoni disputed his assent to this contractual condition, which both parties admitted had been made orally and not in writing).
Ensuring adequate insurance coverage is of critical importance to commercial property owners, who will usually be named in any suit for personal injuries or property damage caused by one or more of their tenants, employees, contractors and subcontractors. But too often, commercial property owners do not perform the due diligence necessary to confirm their status as an additional insured. Worse yet, owners will sometimes assume that their insurance agents (or those of their tenants or contractors) will perform such “risk management” functions based simply on a generalized knowledge of the parties’ business operations (e.g. knowledge that the client has several commercial tenants, or that the client is performing significant construction renovations on its property).
When a tenant or contractor fails to add the property owner as an additional insured for purposes of coverage or liability, as required under the parties’ lease or contract, it is easy enough for the owner to bring suit for breach of contract. However, the tenant or subcontractor will often be unable to satisfy a full judgment for serious personal injury or property damage. Owners will then sometimes attempt to shift the responsibility for ensuring adequate coverage on to the tenant or contractor’s insurance agency. As the Smith case demonstrates, however, insurance brokers do not owe their clients any special legal or ethical duty in this respect, and have only a duty of care with respect to required insurance coverage of which they have been made aware.
Owners should therefore demand a copy of any amended insurance certificates naming them as an additional insured from their tenants or contractors, and communicate the need for such amendments directly to the insurance agents of their tenants and contractors.