Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Additional Insured is not Entitled to Coverage Until Named Insured Satisfies Self-Insured Retention

In a case of first impression under Indiana law, the Indiana Court of Appeals in Walsh Construction Co. v. Zurich, 72 N.E.3d 957 (Ind. App. 2017) held that a policy's SIR had to be exhausted by the named insured before the insurance company was obligated to defend and indemnify the additional insured under the policy. This case involved a construction site accident. The named insured, Roadsafe Holdings, Inc., was a subcontractor for the project and was required to indemnify the general contractor, Walsh Construction Company, for any liability resulting from Roadsafe's negligence. Under the subcontract, Roadsafe was obligated to procure general liability insurance that named Walsh as an additional insured on a primary and non-contributory basis. In accordance with the subcontract, Roadsafe obtained a CGL policy from Zurich which named Walsh as an AI. The AI endorsement was a blanket form of endorsement which established AI status for any person or organization where required by written contract, but only with respect to the liability for the named insured's (Roadsafe) acts or omissions. Roadsafe also purchased a $500,000 per occurrence SIR which required as an express condition precedent that the SIR be exhausted prior to Zurich having an obligation to defend and indemnify under the policy.

A worker was injured during the project and sued Walsh. Walsh, in turn, filed a third-party complaint against Roadsafe, alleging that Roadsafe had failed to indemnify Walsh and that Roadsafe had breached its subcontract with Walsh. Walsh also notified Zurich under the Roadsafe CGL policy and requested a defense of the injury claim. Zurich denied the request for defense, asserting that the SIR endorsement required the $500,000 per occurrence SIR to be exhausted before giving rise to Zurich's policy obligations. The question before the Indiana Court of Appeals was whether the SIR amount needed to be satisfied before Zurich had any obligation under the policy to defend and indemnify Walsh.

Previously, the Indiana court had recognized that in single insured situations involving SIRS, the insurer's obligations under the policy arose only after the SIR had been satisfied. The question of whether an SIR endorsement applied only to the insurer's relationship to the named insured as opposed to additional insureds had not yet been decided by the Indiana courts. Looking to the language of the Zurich policy, the court found that Zurich had no obligation to Walsh until the $500,000 SIR had been satisfied. Reviewing the SIR endorsement, the court concluded that its provisions were that of a condition precedent to coverage. There was simply no rational basis to apply the SIR endorsement as a condition precedent to Zurich's coverage of the named insured, but not to Zurich's coverage for additional insureds under the same policy.

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