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Seventh Circuit Holds Insurer Must Defend General Contractor in Suit by Subcontractor’s Employee

The Seventh Circuit affirmed a ruling from the Northern District of Illinois that a subcontractor’s insurer must defend the general contractor in a negligence suit brought by an employee of the subcontractor for injuries suffered on the job.

The subcontractor’s general liability coverage extended to “any person or organization for whom [the subcontractor is] performing operations,” provided that there was a written agreement requiring inclusion of the party as an additional insured. Coverage for such an additional insured extended to liability for “bodily injury … caused, in whole, or in part, by [the subcontractor’s work] arising out of the [the subcontractor’s] ongoing operations performed for that additional insured.”

The insurer argued that the underlying claims did not arise out of the subcontractor’s operations performed for the general contractor. Emphasizing that the duty to defend is broader than the duty to indemnify, the court rejected that argument. Although the subcontractor’s employee did not explicitly allege any claims against the subcontractor, the underlying complaint did not foreclose—and instead actually supported—the possibility that bodily injury was caused by the subcontractor’s work. To reach this conclusion, the court was permitted to consider third-party complaints against the subcontractor. This evidence tended to show the potential that the bodily injury was caused by the subcontractor arising out of its operations for the general contractor. Thus, the claims against the general contractor potentially fell within additional insured coverage because they were potentially liable for bodily injury caused, in whole or in part, by the subcontractor’s work.

Policy language regarding additional insured coverage can be nuanced, and small differences in phrasing can be outcome determinative when deciding whether coverage exists. Insurance companies often incorrectly deny coverage for additional insureds. As the Seventh Circuit’s opinion in this case demonstrates, parties believing they have coverage as additional insureds should not simply accept an insurer’s coverage denial. In addition, contracting parties should consult insurance coverage counsel at the contract formation and policy placement stages to protect against costly exposure and litigation costs in the event that additional insured coverage is denied.

The case is Scottsdale Ins. Co. v. Columbia Ins. Grp., Inc., No. 19-3315, 2020 WL 5036095 (7th Cir. Aug. 26, 2020).

Matt Revis contributed to this article. 

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume X, Number 260


About this Author

Sergio F. Oehninger Insurance Coverage Attorney Hunton Andrews Kurth Washington, DC

Sergio represents companies in complex insurance coverage and bad faith disputes nationally and internationally.

Sergio counsels multinational corporations on insurance coverage and risk management issues arising in various industries – including financial services, retail, energy, technology, real estate, construction, and hospitality.

His insurance coverage advice focuses on risks such as: cyber and data breach; commercial general liability; directors and officers; professional liability; employment practices; property and casualty; business interruption;...

Patrick M. McDermott Insurance Attorney Hunton Andrews Kurth Richmond, VA

Patrick counsels clients on all aspects of insurance and reinsurance coverage. He assists clients in obtaining appropriate coverage and represents clients in resolving disputes over coverage, including in litigation and arbitration.

During law school, Patrick served as a judicial intern for the Honorable Michael F. Urbanski in the US District Court for the Western District of Virginia and for the Honorable Ricardo M. Urbina of in US District Court for the District of Columbia.

Relevant Experience

  • Advised on COVID-19 insurance recovery claims under property insurance policies, including for business interruption losses.
  • Litigated billion-dollar dispute under professional liability/errors and omissions (E&O) policies arising from allegations of insurer bad faith failure to settle class action brought under Telephone Consumer Protection Act (TCPA)
  • Represented client in claim under representation and warranty policy involving third-party claim against policyholder and breach of representations in merger agreement concerning compliance with existing contracts
  • Litigated insurance coverage under claims-made policy for settlement of class action alleging defects in over-the-counter medical product and related claims for bad faith
  • Represented client in claim under representation and warranty policy involving breaches of representations in asset purchase agreement related to condition of assets
  • Advised clients in corporate transactions on subrogation provisions in and broadening coverage under buyer’s representation and warranties policies