In 2008, the Metropolitan Opera hired Strauss Painting to strip and repaint the rooftop steel carriage track for the opera house's automated window-washing system. The contract required Strauss to purchase an "owners and contractors protective liability policy" (OCP) which would both protect the Met from bodily injury claims arising out of Strauss' operations, and also insure Strauss for liability arising out of its contractual obligation to indemnify and hold the Met harmless. The contract also required Strauss to purchase and maintain comprehensive general liability ("CGL") insurance.
In pertinent part, the contract provided under "Insurance Requirements":
b. Owners and contractors protective liability insurance with a combined single limit of $5,000,000.00. Liability should add the Metropolitan Opera Association as an additional insured and should include contractual liability and completed operations coverage.
Strauss, however, failed to obtain an OCP policy. When a worker was injured in a 2008 fall during Strauss's operations, and brought an action against the Met for damages, the Met sought liability coverage from Mt. Hawley pursuant to Strauss's CGL policy. The Mt. Hawley policy contained a standard endorsement including as an additional insured "any person or organization for whom [Strauss is] performing operations when [Strauss] and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on [Strauss's] policy."
The Met argued that paragraph "b." of the contract's Insurance Requirements constituted a written agreement which would qualify the Met for additional insured status under the Mt. Hawley CGL policy. Mt. Hawley argued that paragraph "b." addressed only OCP coverage, and did not address additional insured status for the Met under any CGL policy obtained by Strauss. In a lengthy decision the Court of Appeals agreed with the insurer that paragraph "b." addressed only OCP coverage (which, unfortunately for the Met, was non-existent), and noted that the contractual provisions regarding CGL coverage said nothing about additional insured coverage for the Met. Strauss Painting, Inc. v. Mt. Hawley Insurance Co., decided November 24, 2014.
The case is also noteworthy for the Court's holding that an insured's notice to its own insurance broker does not generally satisfy a requirement of notice to an insurer. Strauss notified its own insurance broker of the loss one day after it occurred. Three months later, the Met notified Strauss that it was looking for contractual indemnification for the worker's bodily injury claim; one month later, Strauss's broker alerted Mt. Hawley of the Met's claim, and the Met brought a third-party action against Strauss one month after that. The Court upheld Mt. Hawley's refusal to defend or indemnify Strauss against the Met's third-party action on the grounds of late notice. The Court noted particularly that (1) there was no close relationship between Strauss's broker and Mt. Hawley that would justify Strauss in considering notice to its broker as notice to the insurer (see, e.g., Mighty Midgets v. Centennial Insurance Co., 47 N.Y. 2d 12 (1979)); and (2) Strauss was a sophisticated corporate insured, which should know better than to expect notice of a loss to its own broker to be sufficient.
This decision illustrates the critical importance of carefully drafting and following the requirements for additional insured coverage for owners and contractors in construction contracts.
Should you have questions regarding the information presented in this alert, please contact Anthony J. Piazza, Chair of the firm's Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or apiazza@hblaw.com.