The Subcontractor's Certificate
Delta Builders is general contractor on a $4,000,000 school renovation. Its subcontract requires Summit Mechanical to carry CGL of $1,000,000 per occurrence, to name Delta as an additional insured on a primary and noncontributory basis, and to indemnify Delta for claims 'arising out of Summit's work.' Summit's certificate of insurance shows all three. A Summit employee carrying ductwork trips over a ladder Delta's crew left in the corridor and breaks his wrist; he sues Delta for negligence. Three weeks later a Summit welder's spark ignites stored insulation, causing $75,000 of damage to the school's existing ceiling. The construction contract contains a mutual waiver of subrogation covering the owner and all subcontractors. Delta's own CGL is $1,000,000 per occurrence with a $5,000 deductible.
1. Will Summit's CGL, with the additional insured endorsement, defend and indemnify Delta against the injured worker's suit?
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Probably not on these facts - and the certificate proves nothing.
- A certificate of insurance is evidence of insurance, not the insurance contract. It cannot expand coverage beyond the endorsement actually attached. Delta's broker must obtain the endorsement form itself and read its wording.
- Under the widely used additional insured endorsement for ongoing operations, coverage for the additional insured is limited to liability for injury caused, in whole or in part, by the named insured's acts or omissions (or those acting on its behalf). Here the hazard - the unattended ladder - was Delta's own. Summit's employee was the victim, not the cause. On that wording, Delta's liability does not arise out of Summit's acts, so the additional insured grant likely fails.
- The contractual indemnity in the subcontract is a separate question. Even where it is broadly drafted, Utah law restricts construction indemnity agreements that purport to indemnify a party for its own negligence, so a promise to cover Delta's sole negligence may be unenforceable; the anti-indemnity statute generally still permits indemnity for the indemnitee's vicarious or comparative liability.
Bottom line: tender the claim to Summit's carrier to preserve rights, but expect Delta's own CGL to be the responding policy, because the claim is about Delta's negligence.
2. How does the injured worker get paid, and which policy or policies respond?
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Two independent tracks:
- Workers' compensation (Summit's policy). The employee's medical bills and lost wages are paid by Summit's workers' compensation coverage regardless of fault. That is his exclusive remedy against his employer.
- Tort claim against Delta. Workers' compensation exclusivity does not shield a third party. The employee may sue Delta, a non-employer, for negligence. If Delta is found comparatively at fault, damages may be reduced by his own comparative fault.
Which policy responds to the tort claim:
- Delta's CGL is the primary responder. Note that the employer's liability exclusion bars coverage for injury to Delta's employees, not to another company's employee, so it does not defeat this claim. Defense costs are outside the limit for this claim and do not erode the $5,000 deductible, which applies to damages.
- Summit's CGL responds only if the additional insured grant applies (see prior analysis) - and even then, only for Delta's liability attributable to Summit.
- Subrogation nuance: Summit's workers' comp carrier may seek recovery from Delta as a third-party tortfeasor in some circumstances; the employer's lien should be tracked.
Practical step: Delta should demand a defense under a reservation of rights from its own carrier while tendering to Summit, so no coverage position is waived.
3. The district's property insurer pays $75,000 for the ceiling fire and seeks recovery from Summit. Does it succeed?
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No - the waiver of subrogation is the controlling fact.
- The construction contract contains a mutual waiver of subrogation running to the owner and all subcontractors. A property insurer that pays a loss stands in its insured's shoes; if the insured (the district) has contractually given up the right to sue Summit, the insurer acquires nothing to enforce. The district's carrier cannot subrogate around a waiver its own insured signed, and most property forms ask whether such a waiver exists at underwriting precisely for this reason.
If there were no waiver, the analysis would be:
- Summit's CGL covers property damage to property of others caused by an occurrence, but two exclusions must be tested: the exclusion for the particular part of real property being worked on (here, the building is occupied and in use, so the "not yet put to its intended use" limitation generally does not bite) and the exclusion for that particular part of property that must be restored because the insured's work was incorrectly performed (a fire is negligent damage to other property, not defective workmanship in the ductwork itself). The $75,000 should fall outside both.
- The property insurer's subrogation would then be limited by Summit's deductible and by any comparative fault of Delta.
Advisory point: waivers of subrogation shift the loss to the property market and should be priced and disclosed at underwriting. Delta should verify the waiver language matches the actual contract, not the broker's summary.