A new decision from the District of Montana, WBI Energy Transmission v. Colony Insurance, illustrates the dangers of a vaguely-worded additional insured requirement in a contract. In WBI a pipeline worker employed by a mid-tier contractor, “Pro Pipe” was injured; after collecting from worker’s comp, he sued both the owner (WBI) and the sub-contractor. The owner tendered to Pro Pipe’s carriers as an additional insured (“AI”) on Pro Pipe’s general liability policies, which contained a blanket AI endorsement (in other words, the endorsement provided AI coverage to the extent required in any contract that Pro Pipe entered into). The liability carriers contended that WBI was not an additional insured because the underlying contract was ambiguous about whether Pro Pipe was required to add WBI as an AI. The contract stated that Pro Pipe was obligated to “maintain . . . minimum insurance coverage . . . to protect [WBI] against liability in connection with Pro Pipe’s work.” (emphasis added).
The District Court held that that language — in combination with the fact that Pro Pipe believed it was required to provide AI coverage, and had given WBI a certificate to that effect — was not ambiguous, and that WBI was an additional insured. The court’s decision is cleanly-reasoned and worth reviewing. But the larger lesson is that such problems can be avoided by careful contract drafting and occasionally having a lawyer experienced in insurance issues review form contracts and insurance requirements to make sure that the language matches the expectations in then event that something goes wrong.