Completed-Operations Additional Insured Tender on a Construction Defect Injury
Harbor Ridge Construction is the general contractor on a 40-unit apartment project and subcontracted the HVAC package to Kelso Mechanical under a written agreement requiring Kelso to name Harbor Ridge as an additional insured on a primary and non-contributory basis "for ongoing and completed operations" and to indemnify Harbor Ridge for claims arising from Kelso's work. Kelso's CGL policy is an occurrence form with $1,000,000 per occurrence and a $2,000,000 general aggregate and a separate $2,000,000 products-completed operations aggregate. The policy carries a blanket additional insured endorsement that adds entities required by written contract but limits coverage to "ongoing operations." Fourteen months after Kelso completed its work and the units were occupied, a rooftop condensing unit vibrated loose from its curb and fell, injuring a tenant who now seeks $850,000. Kelso's carrier denied additional insured status because the work was complete. Harbor Ridge's own CGL carries a $25,000 self-insured retention and has begun defending under a reservation. Part of Kelso's work was performed by a sub-subcontractor.
1. Is Harbor Ridge entitled to a defense and indemnity as an additional insured under Kelso's policy? Analyze the endorsement language and explain how the tender should be handled.
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Start with the policy, not the contract. A subcontract promising additional insured status does not expand coverage beyond what the endorsement grants. A blanket endorsement restricting status to "ongoing operations" typically ends when the insured's work at the site is complete; that is the dividing line between ongoing operations and the products-completed operations hazard. An injury occurring 14 months after completion, caused by an installed unit coming loose, falls on the completed-operations side, so the tender as an additional insured fails under this endorsement form. The fix would have been a completed-operations additional insured endorsement (the CG 20 37 family) or manuscript wording, plus evidence that the subcontract actually required it.
That does not end the analysis. Harbor Ridge's own carrier owes a defense subject to the $25,000 SIR, and it should preserve recovery rights by tendering to Kelso's carrier on a second theory: Kelso's contractual indemnity is an "insured contract" assumption of liability, and a claim seeking to enforce that indemnity can trigger Kelso's defense obligation to Kelso, with Harbor Ridge named as a claimant. The letter should demand a written coverage position, reserve the additional insured argument, and put Kelso's carrier on notice of the indemnity claim and potential subrogation. Anti-indemnity statutes may limit the indemnity to the extent of Kelso's own negligence, so Harbor Ridge's carrier should not assume full recovery.
2. Assume the injured tenant also sues Kelso directly. Does Kelso's CGL respond, and how do the "your work" and products-completed operations provisions apply?
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The claim against Kelso is for bodily injury, which matters because the core "your work" exclusion in the standard CGL applies only to property damage to the insured's work and to impaired property. A falling unit injuring a person is not damage to Kelso's work, so that exclusion is not the obstacle it appears to be. The injury arises out of Kelso's completed work away from the premises, which places it in the products-completed operations hazard and makes the separate completed-operations aggregate available, subject to the policy's terms.
Two other provisions deserve attention. If property damage had been claimed, the subcontractor exception to the "your work" exclusion would matter because a sub-subcontractor performed part of the work; the exception restores coverage for damage arising out of work performed by a subcontractor. Separately, Kelso's assumption of Harbor Ridge's liability is contractual liability, which is excluded unless the contract qualifies as an insured contract; that is why the indemnity theory in the prior task is a coverage argument, not just a collection tactic. Kelso's carrier should defend Kelso under a reservation while it resolves whether any part of the claim is outside the products-completed operations hazard.
3. What allocation and recovery issues arise between Harbor Ridge's carrier and Kelso's carrier, and how should each respond?
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Harbor Ridge's carrier pays defense costs and any settlement or judgment, with the insured absorbing the $25,000 SIR. That SIR is not transferable to Kelso's carrier; it reflects Harbor Ridge's retained risk and stays with Harbor Ridge. Recovery runs through contractual indemnity and contribution/subrogation, and the measure depends on comparative fault. A typical anti-indemnity statute voids indemnity for the indemnitee's sole negligence and may require the indemnitor to be at least partly at fault, while some states also restrict additional insured endorsements that evade those statutes.
Kelso's carrier owes Kelso a defense and, if the indemnity qualifies as an insured contract, may owe defense of the indemnity claim. Its best response is to accept the defense of Kelso under a reservation, seek consolidation or coordination of defense to avoid duplicate costs, and litigate allocation only when fault evidence exists. Harbor Ridge's carrier should document its tender, demand a coverage position in writing, and avoid waiving subrogation by settling without notice. If Harbor Ridge's own negligence is the sole cause, expect recovery to be limited or barred. A joint defense agreement, with cost-sharing proportionate to evaluated fault, usually resolves these disputes more cheaply than coverage litigation.