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Understanding the Limits of a General Contractor or Subcontractor’s Liability Policy


It is standard practice in the construction industry for contractors and subcontractors to obtain insurance that protects not only themselves, but also the project owner, from legal legal liability arising from their work. But how far does this indemnity extend? For example, is the contractor’s insurance company responsible for damages caused by the owner’s personal negligence, even if the underlying injury was caused by the contractor?

Judge: Concrete Subcontractor’s Insurer Not Liable for Wal-Mart’s “Direct Negligence”

This issue came up in a recent federal lawsuit, Amerisure Insurance Company v. Seneca Specialty Insurance Company, involving a Miami-area Wal-Mart and two contractors that worked on the store. Wal-Mart hired Case Construction as the general contractor on its project. In turn, Case hired MRK to perform concrete work as a subcontractor.

In October 2011, a family sustained serious injuries when they entered the Wal-Mart and were “struck by large quantities of wet cement that had poured through a gap in the ceiling above them,” according to court records. The family subsequently sued Wal-Mart in Florida state court for negligence. More precisely, the family’s lawsuit alleged “direct negligence” on Wal-Mart’s part by “failing to maintain its store in a reasonably safe condition and failing to warn the plaintiffs of the dangerous condition.”

The family’s lawsuit ended in a judgment of over $1 million against Wal-Mart. Case’s insurer, Amerisure, agreed to pay the judgment. Wal-Mart also assigned to Amerisure its right to pursue separate legal action against both MRK, the latter of whom was responsible for the concrete on the day of the accident.

MRK, of course, was also insured, in this case by Seneca Specialty Insurance. Under MRK’s subcontract with Case, MRK was required not only to purchase insurance coverage, but also to list Wal-Mart as an “additional insured.” But under the terms of the Seneca policy, an additional insured receives coverage “only with respect to liability for ‘bodily injury’ … caused, in whole or in part by” MRK’s acts or omissions.

Amerisure claimed this language required Seneca to indemnify it for the state court judgment. Seneca disagreed. It pointed out that the family’s lawsuit focused on Wal-Mart’s direct negligence, not its vicarious liability for the actions taken by MRK. Since the Seneca policy only covered “direct” actions, neither it nor MRK were responsible for the $1 million judgment.

U.S. District Judge Frederico A. Moreno agreed with Seneca’s interpretation of the insurance policy. Under Florida law, he explained, these types of “additional-insured endorsements” only apply to cases where the original lawsuit expressly alleged vicarious liability. Indeed, the policy language here is clear that it only applies to bodily injury “caused, in whole or in part by” MRK’s actions. The family never made such allegations, and Moreno said such charges could not be read by implication into the lawsuit. Amerisure therefore bared the full brunt of the judgment.

Speak with a Florida Construction Lawyer Today

Insurance policies affecting construction projects are typically quite complex. And as the case above illustrates, a contractor or subcontractor’s policy might not protect them as fully as they think. This is one reason it is important to work with an experienced Florida construction attorney when dealing with insurance companies. Contact Linkhorst Law Firm, P.A., today, to schedule a consultation. Our staff is currently working through the COVID-19 crisis, and we are happy to offer meetings and consultations through remote means.




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