A recent ruling out of the Middle District of Florida brings into focus the impact of broad and imprecise Wrap Exclusions in CGL policies.
TNT Equip. Inc. v. Amerisure Mut. Ins. Co., arises out of an injury that occurred during construction of an Embassy Suites hotel. 2016 U.S. Dist. LEXIS 128734 (M.D. Fla. Sep. 21, 2016). Stowell Company was the primary subcontractor on the project and subcontracted the stucco work to Magic Stucco (“Magic”). Under the subcontract, Stowell remained ultimately responsible for the stucco work and provided equipment to its subcontractor.
Stowell was enrolled in the Owner controlled insurance program (OCIP) issued to the project owner, Sierra Land. Stowell also obtained a CGL policy from Amerisure which included a standard Wrap Exclusion:
This insurance does not apply to “bodily injury” or “property damage” arising out of either your ongoing operations or operations included within the “products completed operations hazard” if such operations were at any time included within a “controlled insurance program” for a construction project in which you are or were involved.
TNT Equipment leased a mast-climber to Stowell, through a lease contract that mandated TNT be listed as an additional insured on Stowell’s CGL policy. The mast-climber collapsed causing an employee of Magic to fall approximately 40 feet. The injured worker sued various parties, including TNT.
TNT sought coverage under the Stowell’s CGL policy with Amerisure. Amerisure denied TNT coverage, citing to the Wrap exclusion in Stowell’s CGL policy. Amerisure contended that although TNT did not perform any work on the project, there was no coverage for TNT based on the Wrap Exclusion because the injury arose from Stowell’s operations on the project which were covered by the OCIP. TNT argued in response that the terms “you” and “your” in the Wrap Exclusion only applied to Stowell, as the Named Insured. TNT also relied upon the “Separation of Insured” provision and the “CGL Extension” Endorsement in the Amerisure policy to support its position the Wrap Exclusion only applied to Stowell.
The Court found the language of the “Separation of Insured” provision merely indicated the policy applied to each insured separately, and had no bearing on the application of the Wrap Exclusion. The Court ruled TNT’s interpretation and reliance on the “CGL Extension” Endorsement was absurd as such an interpretation would allow TNT to rely on Stowell’s CGL policy for coverage arising from Stowell’s operations, while simultaneously avoiding application of the OCIP Exclusion because it only applied to Stowell’s operations.
The Court analyzed the plain language of the Wrap Exclusion to find it clearly expressed an intention to extend the Wrap Exclusion beyond Stowell to other parties. Specifically, the Court found the Wrap Exclusion applied to Stowell’s “ongoing operations or operations included within the ‘products-completed operations hazard’ [that were] included within a ‘controlled insurance program.’” The Court also relied on language in the Wrap Exclusion which stated it “applies regardless of whether such operations are or were conducted by [Stowell] or on [Stowell’s] behalf.” Accordingly, the Court granted Amerisure’s Motion for Summary Judgment, holding the plain language of the Wrap Exclusion in Stowell’s CGL policy clearly intended for the Wrap Exclusion to apply to parties other than Stowell, including an additional insured such as TNT, even though TNT performed no actual operations on the project.
Based on this recent ruling, broadly worded or imprecise Wrap Exclusions may result in denial of coverage to a subcontractor expecting coverage as an additional insured under an CGL policy.