In Suit Against General Contractor, Sub-Contractor’s Policy Provides Primary Coverage Over General Contractor’s Own Policy

The United States Court of Appeals for the Tenth Circuit, applying New Mexico law, has held that a sub-contractor’s insurer had a duty to defend and indemnify a general contractor named as an additional insured in a wrongful death suit and that the sub-contractor’s insurance policy was primary to the general contractor’s own policy.  First Mercury Ins. Co. v. Cincinnati Ins. Co., 882 F.3d 1289 (10th Cir. Feb. 26, 2018).

A sub-contractor’s contract with a general contractor required the sub-contractor to obtain an insurance policy covering its work on the project, which would be provided on a primary and noncontributing basis and which named the general contractor as an additional insured.  The sub-contractor procured a commercial general liability policy that named the general contractor as an additional insured but only with respect to the sub-contractor’s acts or omissions.  The policy also provided for pro rata contribution with other insurance policies unless the insured sub-contractor was required by prior written contract to provide primary, noncontributory insurance.  The general contractor also obtained its own commercial general liability policy, which contained an excess “other insurance” clause.

The general contractor was sued in a wrongful death action in connection with the relevant project.  The sub-contractor was not named in the action, and the claimant did not allege any negligence on the part of the sub-contractor.  However, the general contractor asserted as a defense that the injuries resulted from the sub-contractor’s negligence.  The sub-contractor’s insurer defended the general contractor but then sought a declaration that it had no duty to defend or indemnify the general contractor or that, if it did, the general contractor’s insurer had a duty to reimburse it for defense costs.  The trial court granted the general contractor’s insurer’s motion for summary judgment.

On appeal, the court held that the sub-contractor’s insurer had a duty to defend the general contractor as an additional insured based on the general contractor’s defense that implicated acts and omissions of the sub-contractor.  Because the lawsuit settled without apportionment of fault between the parties, the sub-contractor’s insurer also had a duty to indemnify the general contractor.  The court held that the sub-contractor’s insurance policy provided primary coverage because the sub-contractor was contractually required to obtain primary and non-contributing insurance.  Because the general contractor’s policy had an excess “other insurance” clause, the sub-contractor’s policy applied as the sole primary policy.  As such, the general contractor’s policy did not apply until the limit of liability in the sub-contractor’s policy was exhausted when it paid its full limits toward settlement, and the general contractor’s insurer had no duty to reimburse the sub-contractor’s insurer.