Failure to Fulfill an Insurance Policy Condition Requiring Subcontractors to be Insured Defeats Claim

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 Posted on April 29, 2022 by Barry Zalma

Russell Blodgett appealed an order of the Superior Court granting summary judgment in favor of the plaintiff, Cincinnati Specialty Underwriters Insurance Company (CSU). Blodgett argued that the trial court erred by concluding that the terms of a commercial general liability policy issued by CSU clearly and unambiguously excluded coverage for Blodgett’s damages in a separate personal injury action against CSU’s insured resulting from Blodgett’s fall from an alleged negligently constructed staircase.

In Cincinnati Specialty Underwriters Insurance Company v. Best Way Homes, Inc., No. 2021-0280, Supreme Court of New Hampshire (April 27, 2022) the Supreme Court read the full policy and resolved the issues raised by the parties.

CSUmoved for summary judgment, arguing that Best Way did not obtain a formal written contract from the subcontractor and thus did not satisfy the conditions precedent to coverage set forth in the exclusionary provision.

ANALYSIS

Blodgett does not dispute that Best Way failed to satisfy the requirements for coverage set forth in the policy’s exclusionary provision. When considered in the appropriate context, no reasonable person in the position of the insured could have construed the conditions precedent of the exclusionary provision as having a temporal reference.

As the trial court observed, there would be no claims against Best Way but for the alleged negligence of the subcontractor.  All claims against Best Way arose out of the work of the subcontractor and the exclusionary provision precludes coverage in the underlying litigation.

ZALMA OPINION

Liability insurance is a risk spreading device. To limit the premiums charged insurers issuing CGL policies transfer the risk they take by requiring a contractor insured to require that each subcontractor maintain insurance protecting the insured contractor. The subcontractor was not insured and did not protect the risk and as a result the insured contractor breached a material condition of the policy and had no insurance for defense or indemnity.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

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