How many times, we as insurance agents, process requests to add additional insured to the policy of our client? At least several times a day. Some insurance agencies have dedicated staff that is primarily working on underwriting those requests. It is not complicated, but could a time consuming function, specifically, when such request must be processed by the insurance carrier, to properly endorse it on the policy.
In the same time, many insurance companies have a policy form, that describes who is an insured, and extends the coverage automatically when it is required by a formal contract between insured and another party. Sometimes, when we ask our insured if they have a formal contract they say: “Yes, we have a purchase order!” Well, according to the Federal Appeals Court ruling, the purchase agreement between two parties is not an insured contract under which either party insurer is responsible for third-party tort liability.
A summary judgment in favor of Georgetown, Texas, heavy equipment operator Manitex LLC (M.) was reversed Monday in a federal district appeals court in New Orleans in favor of excess and surplus lines insurer Colony National Insurance Co.
M. purchased and assumed liabilities for a boom truck crane line of products from Powerscreen USC Inc. (P.), who purchased the cranes from JLG Industries Inc. In November 2006, two workers injured when the crane malfunctioned sued JLG for negligence, breach of warranty and strict liability, according to court documents.
M. defended JLG based on its purchase agreement with P. and sought coverage from Colony, from whom a policy was purchased that covered the time period during which the injuries occurred.
Colony sought a declaratory judgment that it had no duty to defend or indemnify M. because of a policy exclusion to the coverage which provides that insurance does not apply to contractual liability, according to court documents.
An exception to the exclusion only applies if liability for damages is assumed in an “insured contract,” for which M. in turn sought declaratory judgment, according to court documents.
The district court determined that Colony was required to defend M. in the underlying lawsuit because M. assumed tort liability of a third-party through an insured contract.
But the three-judge panel of the Fifth Circuit of the United States Court of Appeals ruled that under the plain language of the policy, the purchase agreement did not constitute an insured contract, according to court documents.
The lower court’s summary judgment for M. was reversed and the case remanded for summary judgment in favor of Colony.