From the desk of Smith Freed Eberhard: Why does a complaint that makes no reference to the timing of damage and no mention of an insured’s/subcontractor’s identity trigger its insurer’s duty to defend a developer under an “ongoing operations” additional insurance endorsement?
Claims Pointer: In the West Hills case, which involved one of the many Arbor Homes projects being litigated in the Portland metropolitan area, the Court of Appeals held that the developer qualified as an additional insured under a subcontractor’s insurance policy in connection with a lawsuit over garden-variety water intrusion issues, even though the additional insurance endorsement in the policy was limited to liability arising out of the subcontractor’s “ongoing operations.” In this game-changing case, the court held that the endorsement applied because the complaint was silent about the timing of damages. Further, it didn’t matter that the complaint did not mention the subcontractor by name, or specifically allege defects in the subcontractor’s work. The insurer is required to look at extrinsic evidence to determine the developer’s status as an additional insured. Threaded together, the extrinsic evidence and the facts that were alleged in the complaint could potentially impose liability on the developer arising out of the subcontractor’s work. The takeaway from this case is that insurers and policy holders need to carefully consider the complaint, the available extrinsic evidence, and the language of the endorsement to determine whether a developer (or any other upstream party) qualifies as an additional insured.
West Hills Development Co. v. Chartis Claims, 273 Or App 155 (August 19, 2015)
West Hills Development Company (West Hills) was the developer/general contractor for the Arbor Terrace townhomes. West Hills hired subcontractor L&T Enterprises (“L&T”) to install porch columns. L&T was insured by Oregon Automobile Insurance Company (Oregon Auto). The...