Most businesses, and particularly retailers, require that their suppliers name the retailer as an “additional insured” on the supplier’s general liability policy. This means that if a customer is injured because of the supplier’s product, and the customer sues the retailer, the supplier’s insurance will have to pay to defend the retailer in the lawsuit. Demanding to be added as an “additional insured” is a standard part of contractual risk-transfer in retail, as in most businesses. But two recent rulings demonstrate that “additional insured” coverage may not be worth much – if the supplier’s insurer is outside of the U.S. Companies can try to avoid this problem by revising their contract language.
The first decision, Dick’s Sporting Goods v. PICC, involved a supplier of an inflatable yoga ball to Dick’s, a large sporting-goods retailer. One of the balls burst, injuring a customer, who sued Dick’s. Dick’s demanded that the supplier’s insurer, PICC, defend it, based on Dick’s status as an additional insured. PICC refused. Dick’s sued PICC in Pennsylvania federal court, but PICC moved to dismiss on the basis that the insurance contract required that any disputes be resolved in a court where PICC was located – China. The court agreed. Continue Reading