In United National Insurance Co. v. St. Paul Fire & Marine Insurance Company, 2009 WL 2488141 (Mont. Aug. 14, 2009), the court held that a liability insurer owed a general contractor a defense as an additional insured of a subcontractor’s CGL policy.
Swank Enterprises acted as general contractor for the Kalispell Regional Medical Center (“KRMC”) construction project. Swank Enterprises entered into a Subcontract with Advanced Fireproofing & Insulation, which agreed to perform fireproofing work on the project. Pursuant to the General Contract between Swank Enterprises and KRMC, Swank Enterprises assumed “overall responsibility for safety precautions and programs in the performance of the work,” and agreed to take measures to “avoid injury, loss, or damage to persons or property” on the project site. Under the Subcontract, Advanced Fireproofing agreed to defend and indemnify Swank Enterprises:
INDEMNITY To the fullest extent permitted by law, the Subcontractor shall defend, indemnify, and hold harmless the Contractor, the Contractor’s other subcontractors…from and against all claims, damages, loss, and expenses, including but not limited to attorneys’ fees, costs and expenses arising out of or resulting from the performance of the Subcontractor’s Work.
2009 WL 2488141, at *6. Correspondingly, Advanced Fireproofing further agreed to purchase and maintain liability insurance against this obligation. 2009 WL 2488141, at *7.
Advanced Fireproofing obtained CGL insurance from United National. The United National policy named as “additional insureds” entities with whom Advanced Fireproofing had contracts. United National issued a “certificate of liability insurance” that stated that “Swank Enterprises and all other related entities, the owner, and all other parties as required by contract, are named as Additional Insured….” Id. The United National policy included a “Primary Insurance Endorsement” which stated:
Subject to the terms and conditions of this policy, it is understood and agreed that with respect to claims arising out of work performed by the Named Insured, the coverage afforded herein shall be primary in relation to any policies carried by any person or organization to which the Named Insured is obligated by virtue of a written contract, and then only as required by said written contract.
Id.
An employee of Advanced Fireproofing fell from a hydraulic lift and sustained injuries at the project site. Swank Enterprises owned the lift, which it had provided to Advanced Fireproofing for use in the performance of the Subcontract. The employee brought suit against Swank enterprises. Swank Enterprise’s liability insurance carrier, St. Paul, tendered the defense to Advanced Fireproofing and United National. United National rejected the demand.
After St. Paul settled the claim with the employee, St. Paul brought a declaratory judgment action against United National, seeking reimbursement for the settlement and recovery of the attorneys’ fees incurred in defending Swank. The court affirmed judgment in favor of St. Paul.
The court concluded that “it is clear from the plain language of the policy that United National intended to cover Swank for the type of injury that occurred here.” 2009 WL 2488141, at *8. “The policy covered Swank as an additional insured…[and] plainly states that it affords additional coverage to an additional insured for ‘liability arising from (1) premises owned by or occupied by the Named Insured, or, (2) the contract entered into by the Named Insured.’” Id. The court rejected United National’s argument that its policy was excess coverage to St. Paul’s coverage. “The language in the ‘Certificate of Liability Insurance’ issued to Swank under the United National policy plainly states that Swank is ‘named as an Additional Insured on a Primary Non-Contributing basis.’” Id. On this basis, the court held that it is “clear from the plain language of the insurance contract that the United National policy was intended to be primary.” Id.
