California court rejects “additional insured” claim
December, 2007
In The Boeing Company v. Continental Casualty, --- Cal. Rptr. 3d ---, 2007 WL 4357464 (Cal. Ct. App. 2007), the California Court of Appeal has strictly enforced a "written request" precondition to additional insured status.
Continental Casualty issued a CGL policy to Christmas In April USA ("CIA"), a nonprofit organization that undertakes home repairs for people in need. CIA draws its workforce largely from other companies that encourage their employees to volunteer with CIA. CIA's CGL policy contained the following "additional insured" provision:
The following are additional insureds: . . .
3. Any person, (other than the named insured, or any employee of the named insured) or an organization while acting as any agent for, or on behalf of the named insured, including but not limited to real estate agents, however, such coverage will be granted only on written request of the insured and for such limits as are afforded by this policy.
Boeing employee and CIA volunteer Todd Black sued CIA, Boeing, and various others for injuries he sustained while working on a CIA construction project for which he had volunteered as a result of Boeing's encouragement. Boeing tendered Mr. Black's lawsuit to Continental for defense and indemnity, arguing it was an "additional insured" under the policy. Continental declined coverage because Boeing was not an "additional insured" since there was neither an allegation nor any facts to support an allegation that CIA had made a "written request" to add Boeing as an additional insured under its policy.
After it financed the defense of the Black action and succeeded in obtaining a summary judgment dismissal in its favor, Boeing sued Continental to recoup the $108,744.41 it spent in successfully defending the case.
Boeing asserted five principal arguments in support of the contention it was an "additional insured" under the Continental policy: (1) it would misinterpret policy language and be unduly burdensome to require CIA to request in writing "additional insured" status of the "hundreds" of CIA volunteers that were Boeing employees; (2) if the CIA policy did not cover CIA's volunteers, then its coverage would be illusory; (3) the "written demand" requirement could be satisfied by a demand coming either from CIA or Boeing because the policy required a demand from "the insured," not "the named insured"; (4) Boeing's post-loss demand for defense and indemnity satisfied the "written request" requirement; and (5) the policy was ambiguous and should be interpreted in Boeing's favor.
The trial court found no ambiguity and held policy language was clear that CIA was the only entity that could have sought "additional insured" status for Boeing. Consequently, Boeing's post-loss request for defense and indemnity did not satisfy the "written request" precondition to "additional insured" status. The trial court upheld Continental's demurrer to Boeing's complaint. Boeing appealed.
On appeal, the court applied general rules of policy interpretation—giving undefined terms in an insurance contract their "ordinary and popular" meaning in the context supplied by the policy "as a whole"—and rejected all of Boeing's arguments. The court observed: (1) CIA did not have to seek "additional insured" status separately for "hundreds" of Boeing employees—it only had to seek it for Boeing, which it did not do; (2) there is nothing "illusory" about coverage under a policy that places conditions precedent on such coverage; (3) because ambiguity can only exist in context and not in the abstract, there was no ambiguity in policy language requiring "the insured" to request in writing that another be given "additional insured" status, so CIA was the only "insured" that could have made such a request; and (4) Boeing had "no standing" under the policy to request "additional insured" status regardless of whether Boeing's request came before or after the event giving rise to potential indemnity. The court therefore affirmed the trial court's dismissal of Boeing's complaint.
The
Boeing case reveals unambiguous policy language will be strictly enforced as written and claimants will not be allowed to create ambiguities where clear policy language does not support their efforts. Although ambiguity may seem easy to establish under a broad definition that encompasses all instances where a term can have more than one meaning, it is encouraging to see the courts uphold clear policy language by undertaking an appropriately
contextual analysis of its meaning.