January 23, 2015
Court Holds Architect Liable for Gaps in Promised Insurance Coverage
By John Parnass
Architect gets hired to design a hospital. After the hospital is put into use, the Owner gets sued – various patients claim they were infected with Legionella due to airborne bacteria. The Owner in turn looks back to the Architect for protection – specifically, to be protected by its “additional insured” status on the Comprehensive General Liability (CGL) policy issued to the Architect.
But the CGL policy had (as is customary) various exclusions from coverage – such as one that barred coverage for injury claims arising from “biological agents”. Based on the exclusion, the Architect and its carrier refused to protect the Owner.
Then things took a twist.
The Owner argued that the exclusion itself was a breach of the Architect’s contract duty to obtain comprehensive coverage – in other words, that the Architect got the wrong policy and was now personally liable to pay for losses that would have been covered by a CGL policy without the exclusion. The Owner’s argument turned on the following clause:
“Comprehensive General Liability—Architect shall maintain a policy of commercial general liability insurance with Policy limits not less than $1,000,000 each occurrence and $2,000,000 aggregate for bodily injury and damage to property. Owner is to be included under such policy as additional insured to the extent of contractual liability assumed by Architect. The policy shall contain a severability of interest provision in favor of the additional insureds.”
On a summary judgment, the trial court held (and the Court of Appeals in Premier Health Partners v. NBBJ LLC affirmed) that this clause required the Architect to obtain CGL coverage without words of limitation – and thus the “biological agents” exclusion broke this promise.
In Washington, we have the Frank Coluccio Const. Co., Inc v. King County case. It came to a similar conclusion. There, it was held that an Owner who promised to obtain Builder’s Risk coverage (but failed to do so) stepped into the shoes of the carrier and became liable for losses that would have been covered by the missing Builder’s Risk policy.