Insurance Question: Who Are You And What Is Yours?

When I speak to “you,” you know who you are. That seems simple enough. But, you might not be entirely correct. Try the word in this sentence: “After a while, you get used to it.”

Who’s “you”? In the sense of “After a while, you get used to it,” “you” means any person in general.

Well, in the most commonly used form of commercial liability insurance, the one promulgated by the Insurance Services Office, Inc. (ISO), knowing who “you” is turns out to be pretty important. The policy form defines “the insured” and that includes the policyholder and a specific list of persons and entities related to the policyholder. The coverage, however, applies only to certain acts or omissions “you” might have done or not done and to certain things that are “yours.” Is it possible that “you” and “your” refer to “any person in general”? [Of course not.]

Those who created the ISO policy form didn’t want anyone to think so. This was so important to them that they didn’t even wait for the definition section of the policy form to say the following (starting with the 24th word of the form):

Throughout this policy the words “you” and “your” refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy. The words “we”, “us” and “our” refer to the company providing this insurance. The word “insured” means any person or organization qualifying as such under Section II – Who Is An Insured.

What does all of this mean to an “Additional Insured”? The endorsement(s) that adds “you” as an Additional Insured to someone’s liability insurance policy reads like this:

Any person(s) or organization(s) shown in the Schedule is also an additional insured, but only with respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by your acts or omissions or the acts or omissions of those acting on your behalf in the performance of your ongoing operations or in connection with your premises owned by or rented to you.

So, as an “Additional Insured,” are “you” covered for liability arising out of “your” acts or omissions?

Now, today’s story (from a May, 2017 decision out of the United States District Court for the Southern District of Georgia). A customer was injured when she slipped and fell at a convenience store. She sued the landlord-property owner and sued the tenant operating the store. The Georgia Court of Appeals found that the landlord had no liability for the injury. The suit continued against the tenant alone. The tenant, an additional insured under its landlord’s liability insurance policy, insisted that the landlord’s insurance company provide a legal defense and cover the tenant’s liability, if any. The insurance company refused. The court agreed with the insurance company, saying that “[t]he policy unambiguously only covers wrongdoing by [the landlord], not by [the tenant].”

Huh? Didn’t the tenant ask to be added as an Additional Insured on its landlord’s liability policy? Yes, and that’s just what the landlord did. So, why wasn’t there coverage for the tenant? Let’s read the Additional Insured endorsement’s language again, this time substituting “the Named Insured” each time the word “you” appears and “the Named Insured’s” each time the word “your” appears:

Any person(s) or organization(s) shown in the Schedule is also an additional insured, but only with respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by the Named Insured’s acts or omissions or the acts or omissions of those acting on the Named Insured’s behalf in the performance of the Named Insured’s ongoing operations or in connection with the  Named Insured’s premises owned by or rented to the Named Insured.

So, the policy only covers the tenant for its landlord’s acts. Keep that in mind when you take comfort that you’ve gotten “free” insurance coverage, actually you’ve gotten it for the benefit of your own insurance carrier.

[Some may point to a case or two thought to come out differently, but we offer two less than supportive thoughts. First, using the Georgia federal court’s own words: “Cases holding otherwise are distinguishable or unconvincing.” Second, the only insurance coverage that might result in “coverage” would be the professional liability coverage of the person who advised you that you didn’t need your own liability insurance.]

This where we will stop today (even though we will continue). Let’s explain. At this point, we’ve made the point we intended to make. Simply stated, carry your own insurance. Being an “Additional Insured” isn’t what it’s cracked up to be. Rely on what you buy. Don’t spend thousands of dollars negotiating for something that adds very little, perhaps nothing, to your insurance coverage. At best, you’ll save your own insurance company money, but you won’t get a premium refund or reduction and you won’t get a thank you card. If you can get that “status” (- an Additional Insured) for little or no effort – go for it, but don’t trade bargaining chips for it.

Only nerds will want to read further.

The tenant’s attorneys asked the court to parse the Additional Insured provision. We’ll show readers how, but, for clarity, we’ll use our own “annotated” version, the one that substitutes “the Named Insured” for “you” and “the Named Insured’s” for “your.” “Parse” means: to “analyze (a sentence) into its parts and describe their syntactic roles.”

The tenant’s attorneys asked the court to parse the coverage description into two parts as follows:

[A] Any person(s) or organization(s) shown in the Schedule is also an additional insured, but only with respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by the Named Insured’s acts or omissions or the acts or omissions of those acting on the Named Insured’s behalf in the performance of the Named Insured’s ongoing operations.

and

[B] Any person(s) or organization(s) shown in the Schedule is also an additional insured, but only with respect to liability for [injury] in connection with the Named Insured’s premises owned by or rented to the Named Insured.

Under that “reading,” its second part would have provided coverage. But, the court did not take the bait, because “[t]his construction leaves [the second part] without a corresponding verb. What could count as an ‘injury in connection with your premises’? The Court has no way of telling. Given that insurance is not meant to insure against any and every occurrence in our interconnected world, this construction must be ruled out.”

Another way to parse the Additional Insured language could result in the second part reading as follows:

Any person(s) or organization(s) shown in the Schedule is also an additional insured, but only with respect to liability injury caused, in whole or in part in connection with the Named Insured’s premises owned by or rented to the Named Insured.

The court rejected that construction, writing: “This leaves [the second part] without any subject. Causation is there, but not allocation of responsibility. What could ‘caused in connection with your premises’ mean without a causer? Nothing of legal significance.”

Here’s how the third (and last) proposed parsing comes out:

Any person(s) or organization(s) shown in the Schedule is also an additional insured, but only with respect to liability for injury caused, in whole or in part, by the acts or omissions of those acting on the Named Insured’s behalf in the performance of the Named Insured’s ongoing operations or in connection with your premises owned by or rented to the Named Insured.

Here’s how the court rejected that parsed reading: “This final construction cannot be adopted, either. Neither party urges it. Nor is there any apparent reason why [the landlord, the tenant, and the insurance company] would have intended for references to operations and premises to relate only to [the landlord’s] collaborators and not to [the landlord] itself.”

Here’s a shout out from Ruminations to the tenant’s attorneys: “Nice try, but no cigar.”

Rely on your own insurance. Save money fighting over being an Additional Insured. Take the status if you can get it, but don’t dig in to get it. Yes, Ruminations knows that many, perhaps most, readers will disagree. And, since we aren’t going to agree on this point, let’s agree to disagree and let’s try to disagree without being disagreeable. By the way, that’s good advice for all negotiations.

[For those who want to read the Georgia federal court’s decision in its original, just click: HERE.]