Redress Risk Management (post until May 31/19)
Personal Injury

Clarifying what it means to be additional insured

By David Hollingsworth

Additional insured coverage

What does it mean to be additional insured? The law, like most things, can sometimes be ambiguous. Where some laws are straightforward and easily understood, others leave a great deal of room for interpretation. In the latter case, it is often left to the courts to interpret the law and set precedent. This has certainly been the case for additional insureds. 

Additional insured coverage occurs when one company engages in a business relationship with another company. Such relationships, while often beneficial, can sometimes create the risk of lawsuits. An example of this would be a landlord hiring a contractor to shovel the snow from the walkways in the winter. Should a tenant of the building slip and fall on ice, that tenant could sue both the landlord and the contractor for damages. 

As an additional insured, the contractor could request protection under the landlord’s general liability policy, but since the law has not been clear, these requests for defense have often been denied by insurance companies. The rationale being that there was a lack of clarity. The insurance company would say that contractor should have independent liability insurance of their own and, when cases like this came to court, the rulings on additional insureds have not been consistent. 

A recent case has done a lot to provide some clarity around additional insureds. In this slip-and-fall-case, the city and a contractor hired to keep the sidewalks clear of snow, both requested defense from the insurance company. The insurance company took the position that the city was not entitled to a defence and was not an additional insured for the purposes of this claim as it had failed to call out the contractor on the date of the incident. The judge ruled that “The mere possibility that a claim falls within the policy triggers the duty to defend,” and that since the plaintiff had alleged negligence on behalf of both the city and the contractor and that the city was a named additional insured, the insurance company could not opt out of defending the city. The judge further ruled that the city was entitled to appoint and instruct a counsel of its choice at the insurance company’s expense, as well as the past costs of defending the main action.

The court was very clear in the insurance company’s responsibility to provide a defense. Meaning that the insurance company would need to pay for separate counsel if the city did not believe that the one lawyer could effectively represent both parties. 

Much of the confusion stems from a series of cases that were decided differently, in particular, this 2009 case. At the time, a guest of a resort slipped on an icy pathway and the insurance company refused to provide a defense to the report as an additional insured. The judge found that since there were different categories of negligence in this action and that only of the categories, snow and ice removal, fell within the coverage, the insurer only had to provide the contractor with a claim. However, the court ruled that the insurance company had to provide the defence in part to the resort, but it was appealed soon after because the parties felt the decision lacked clarity. The cases ended up being resolved before the appeal was heard and the clarity never came to be. Since the decision was not in line with previous decisions, there was confusion as to how to apply the law. 

Although the recent decision has shed some light on how insurance companies must interpret the additional insured’s clauses of their liability policies, we will have to wait for a new Ontario Court of Appeal decision to provide clearer instructions and guidance in this area of litigation law.

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