Recently, in Westfield Insurance Co. v. FCL Builders, Inc., the Illinois Appellate Court for the First District considered whether a contractor was an additional insured under an insurance policy issued by Westfield.  The case involved the typical situation where a general contractor requires a subcontractor to obtain insurance in order to perform work on one of the general contrator’s projects.  In this case, FCL (the general) subcontracted with Suburban Ironworks, Inc. (the first sub) to fabricate steel needed for a project.  The subcontract between FCL and Suburban required Suburban to obtain insurance that would cover both Suburban and FCL.  Suburban then subcontracted with JAK Ironworks, Inc. (the second sub) to do steel erection work.  The subcontract between Suburban and JAK referenced a master agreement between Suburban and JAK that required JAK to obtain insurance covering JAK, Suburban and FCL.

One of JAK’s employees was injured while working on the project.  Westfield, which issued the insurance policy to JAK, was asked by FCL to defend and indemnify it against claims made by the injured employee in a lawsuit.  Westfield refused to cover FCL, arguing that FCL was not an “additional insured” under the policy issued to JAK.  The JAK policy defined an “additional insured” as an entity: 1) “for whom you [JAK] are performing operations;” and 2) with whom JAK has agreed “in writing in a contract or agreement” to add to the policy as an additional insured. 

Unfortunately for FCL, JAK had no written agreement with FCL naming FCL as an additional insured.  Therefore, the Court found that Westfield had no duty to defend FCL.

This case is a great example of why it is important to carefully read contracts and comply with their specific requirements.  Also, for general contractors, this case  demonstrates the importance of reviewing not only its own contracts and insurance policies, but also the contracts and insurance policies of its subcontractors.

To read the court’s full opinion, click here: