Construction Industry AIEs: Prolems of Contract Interpretation and Solutions
![handle is hein.journals/defcon65 and id is 80 raw text is: Construction Industry AIEs: Problems of
Contract Interpretation and Solutions
There's been a dramatic explosion in additional insured litigation,
suggesting that there should be a better risk allocation
By Lawrence A. Steckman and James J.
Cleary Jr.
THIS article discusses recurring problems
arising in construction industry declaratory
litigation seeking judicial interpretations of
additional insured endorsements (ALEs).'
Its thesis is that endorsement language is
often inadequate to express the risk alloca-
tion and insuring relationships these liti-
gants have attempted to create, or may
have assumed were created, by merely re-
quiring that one party be named an addi-
tional insured on another person's policy.
This article sets forth strategies and pro-
posals that, if adopted, should help to pre-
clude, minimize or simplify declaratory
litigation seeking construction of these en-
dorsements.
Part I introduces general vocabulary,
discusses the construction industry players
and identifies some of the advantages and
disadvantages of using AlEs to allocate
risk.
Part II identifies three recurrent catego-
ries of construction industry additional in-
sured declaratory litigation, focussing pri-
marily on the recent flood of cases in New
York's trial and appellate courts, and iden-
tifies underlying problems in standard en-
dorsement language.
1. An endorsement is a contractual provision
that modifies a policy's terms. CoucH, I CYCLOPEDIA
OF INSURANCE LAW 2d (rev. ed.) § 4:32, at 394 de-
fines endorsements as matter [that] may be
added to, and become a part of a contract of insur-
ance by way of [e]ndorsements or marginal nota-
tions or references made on the policy itself, par-
ticularly when the indorsement or reference is ex-
pressly referred to in the policy.
2. See Kinney v. G.W. Lisk Co., 557 N.Y.S.2d
283 (N.Y. 1990).
Lawence A. Steckman, a principal in
the New York City firm of Hecht &
Steckman, P.C., has published extensively
in the areas of contracts, public contract
and tort law. He is a graduate of Long
Island University (B.A., summa cum laude
1977), Columbia University (M.A. 1983)
and Touro College School of Law (J.D.,
cum laude 1988).
James J. Cleary Jr. concentrates his
practice on insurance defense litigation
involving construction issues. He received
his B.A. in 1971 from The Johns Hopkins
University and his J.D. in 1985 from
Brooklyn Law School.
The authors thank Eric A. Portuguese,
William Kelly, Carol Finocchio and Lois
D. Steckman for the helpful comments on
drafts of this article. The views expressed
in this article are their own and do not
necessarily reflect the views of their re-
spective firms.
Part III discusses negotiating and con-
tractual-based strategies available to con-
struction industry participants and their
counsel to help avoid or minimize the
problems discussed and identified in the
Part II cases.
I. ADVANTAGES AND
DISADVANTAGES OF AIEs
A. Statement of Problem and Basic
Definitions
Agreements to procure insurance (APIs)
are contractual arrangements in which one
party to a contract agrees to procure insur-
ance for another party's benefit. Such
agreements are enforceable in New York.2
In the construction industry, the API is fre-](ViewImageLocal?handle=hein.journals/defcon65&div=17&collection=&method=preview&ext=.png&size=3)
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Construction Industry AIEs: Prolems of Contract Interpretation and Solutions
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