In KB Home Tucson, Inc. v. Charter Oak Fire Insurance Co., the Arizona Court of Appeals held that a blanket additional insured endorsement held by a contractor extended coverage to a developer because of an unsigned agreement between the two parties (No. 1-CA-CV 12-0681, (Ariz. Ct. App. Nov. 25, 2014)).

Developer KB Home hired GRG Construction to perform work on a residential subdivision. GRG obtained a liability policy from The Charter Oak Fire Insurance Company that contained a blanket additional insured endorsement. That endorsement included any person or organization the insured is "required to include as an additional insured on this policy by a written contract or written agreement in effect during the policy period and executed prior to the occurrence of any loss."

The written contract between KB and GRG required GRG to comply with KB's "rules, regulations, and requirements" but did not specifically address including KB as an additional insured under GRG's liability policy. After the contract was signed, KB sent a letter to GRG regarding its insurance requirements, which included naming KB as an additional insured. GRG complied by having its broker forward to KB a certificate of insurance naming it as an additional insured.

When the City of Tucson and several homeowners filed claims against KB for deficient streets and sidewalks, KB tendered its defense to Charter Oak, assuming they were covered under GRG's policy. Charter Oak disclaimed coverage, arguing that there was no written contract or agreement under which KB could claim additional insured status.

The trial court granted summary judgment to Charter Oak.

On appeal, the Arizona Court of Appeals, in a case of first impression, reversed summary judgment in favor of Charter Oak, holding that there was sufficient evidence for a jury to conclude that KB had a written agreement with GRG that required GRG to name KB as an additional insured even though the requirement was not contained in an agreement signed by both parties.

The court reasoned that additional insured status from the blanket endorsement was conditioned on a written contract or written agreement, and that an agreement was evidenced by both:

Despite the lack of a signed document between KB and GRG explicitly stating that KB be listed as an additional insured, the court found sufficient evidence that KB should be covered as an additional insured.

Developers, owners, contractors and subcontractors should take from this case the importance of carefully examining the language in the additional insured endorsement on a liability policy. Additional insured endorsements typically either:

Parties should always be aware of the exact language of the additional insured endorsement in their policies to ensure that all parties are properly covered in the event of any possible liability.

In addition, construction contracts should clearly define any requirement for the owner or any upper tier construction participant to be named as an additional insured to avoid costly future litigation.