Additional Insured or Additional Problem? Scaffold Injury Tender
A general contractor (GC) was building a retail build-out in Henderson. Its subcontractor installed exterior scaffolding. The subcontract required the sub to carry commercial general liability insurance with $1 million per occurrence and to name the GC as an additional insured for ongoing operations. The sub's policy has a standard additional insured endorsement and a notice condition requiring immediate notice of any occurrence or suit. A sub employee fell from the scaffold and sued the GC, alleging the GC negligently supervised the work and failed to enforce fall-protection rules. The GC received the suit on March 1 and tendered it to the sub's insurer on April 15. The sub's insurer denied coverage, citing late notice and arguing the GC's own negligence is not covered by the additional insured endorsement. The GC's own CGL insurer has also issued a reservation of rights and is defending under a full reservation.
1. Analyze whether the GC qualifies as an additional insured and whether the endorsement covers the allegations.
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The GC qualifies as an additional insured only if the subcontract and endorsement requirements are met: the sub was required to name the GC, and the endorsement covers the GC for liability arising out of the sub's ongoing operations. The scaffold was being used during the sub's work, so the 'ongoing operations' requirement is likely satisfied. The critical issue is the scope of the endorsement. Many additional insured endorsements cover the GC only for vicarious liability caused by the sub's acts, not for the GC's own independent negligence. The complaint alleges the GC negligently supervised the work and failed to enforce fall protection. If those allegations are independent of the sub's conduct, the sub's insurer may have no duty to indemnify the GC for its own negligence. However, the duty to defend is broader than the duty to indemnify. If any allegation could fall within the endorsement-for example, that the GC's liability arises out of the sub's operations-the sub's insurer may owe a defense. The adjuster should compare the exact endorsement wording and the complaint's allegations before denying.
2. Evaluate the late-notice denial and the duty to defend.
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The GC received the suit on March 1 and tendered on April 15-about 45 days. That is late under an 'immediate' notice condition, but late notice alone is not always a complete defense. Under Nevada law, the insurer generally must show material prejudice from the delay before denying coverage on that basis. The insurer should investigate whether the delay impaired its ability to inspect the scaffold, interview witnesses, or preserve evidence. If the sub's insurer had actual notice of the accident earlier, or if the GC's own insurer was defending, prejudice may be hard to show. The duty to defend is triggered by potential coverage. Because the complaint includes allegations that could arise out of the sub's operations, the sub's insurer should defend under a reservation of rights while it resolves the additional insured and late-notice issues. A flat denial without a prejudice analysis risks bad faith. The GC's own CGL insurer's reservation does not eliminate the sub's insurer's independent duty if coverage exists.