In Forecast Homes, Inc. v. Steadfast Ins., a homebuilder ("Forecast") retained several subcontractors to perform portions of work at a residential project. As part of the subcontractor agreements, Forecast required the subcontractors to add Forecast as an additional insured on their commercial general liability policies.

After the project was completed, several of the new homeowners sued Forecast for construction defects. The subcontractors were not named in any of the lawsuits.

After initiating its own defense, Forecast tendered the claims to Steadfast - the insurer for the subcontractors working on the project. Steadfast denied coverage because the language of the CGL policies stated that only defense costs paid by the named insured could satisfy the self-insured retention ("SIR"). As such, costs paid by the additional insured (Forecast) did not activate coverage.

Forecast challenged Steadfast’s denial of coverage in court, to no avail. The Court confirmed that the language of the SIR provisions unambiguously required payments from the named insured in order to activate coverage. In its ruling, the Court noted that Forecast had an opportunity to negotiate the terms of the SIR provisions but failed to do so, pointing to the fact that the subcontract agreements "specified in great detail the required insurance policy language and coverage specifications" but that they "did not require any specific language regarding ... SIR provisions."

The lesson of this case is simple: an "additional insured" must specify all terms of a policy, including the SIR provision, that may affect coverage. The attorney’s at Navigato & Battin are qualified to assist your company with its efforts to obtain the policy terms required to provide the fullest protection possible.