Hunton Insurance Recovery Blog

A recent decision from the District of Maryland underscores a recurring—but often underutilized—opportunity for policyholders: securing and enforcing additional insured coverage under another party’s liability policy. In Charter Oak Fire Insurance Co. v. Builders Premier Insurance Co., the court held that an equipment lessor qualified as an additional insured under the lessee’s policy and was entitled to a primary defense.

The decision is a useful reminder that additional insured coverage can fundamentally shift defense obligations and materially reduce a policyholder’s exposure. We build on the decision to highlight the practical steps policyholders should take to ensure that all potentially available insurance is identified and pursued.

Additional Insured Status Can Be Outcome-Determinative

The case arose from a fatal construction-site accident involving leased equipment. The governing rental agreement required the lessee to procure liability insurance and name the lessor as an additional insured—a standard contractual risk transfer mechanism.

After litigation was filed, the lessor’s insurer tendered the claim to the lessee’s carrier, which denied coverage. The court ultimately rejected that denial and held that the lessor qualified as an additional insured based on endorsement language extending coverage to entities from whom equipment was leased.

In reaching that conclusion, the court applied a broad interpretation of “arising out of,” holding that a “but for” causal connection between the lessee’s use of the equipment and the lessor’s potential liability was sufficient to trigger coverage.

This aspect of the decision reflects a broader principle: additional insured coverage frequently turns on whether the allegations create a potential for coverage. Under Maryland law—and in many jurisdictions—that standard is expansive and generally resolves doubt in favor of the insured.

Coverage Is Not Limited to Vicarious Liability

Insurers often argue that additional insured coverage is limited to vicarious liability—i.e., circumstances where the additional insured is liable solely for the named insured’s conduct. The court rejected that argument here.

The endorsement did not expressly restrict coverage to vicarious liability, and the court declined to impose such a limitation. Instead, the plain language controlled. The court also rejected reliance on a “sole negligence” exclusion, explaining that the underlying complaint alleged negligence by multiple parties. Because the pleadings did not foreclose the possibility of shared fault, coverage could not be eliminated at the duty-to-defend stage.

For policyholders, the takeaway is clear: additional insured coverage can apply even where the policyholder’s own conduct is at issue, so long as the pleadings leave room for liability arising, at least in part, from the named insured’s operations.

The Duty to Defend—and Priority—Can Shift

The court further held that the additional insured carrier owed a duty to defend. That result follows from the well-established rule that the duty to defend is triggered whenever the underlying allegations potentially fall within coverage, regardless of the ultimate merits.

Equally significant, the court held that the additional insured carrier’s policy was primary, while the policy issued to the lessor operated as excess coverage. This allocation of priority had practical consequences: the additional insured carrier—not the policyholder’s own insurer—was responsible for providing the defense in the first instance, thereby potentially preserving the policyholder’s own insurance for future claims.

Practical Steps to Capture All Available Coverage

The decision illustrates several steps policyholders should take in any liability matter to ensure that all available insurance is brought to bear:

1. Review Contracts for Additional Insured Requirements
   Contractual provisions requiring counterparties to procure insurance are commonplace. Those provisions often provide the gateway to additional insured coverage and should be identified early.
2. Obtain and Analyze the Actual Policy Language
   Certificates of insurance are not enough. The operative terms will be found in the policy and endorsements, which must be reviewed carefully for scope, conditions, and limitations.
3. Provide Prompt Notice and Tender to All Potential Carriers
   Notice should not be limited to the policyholder’s own insurers. Any carrier potentially obligated to provide coverage by virtue of additional insured status should receive a timely tender.
4. Evaluate the Pleadings Through a Coverage Lens
   Coverage determinations at the duty-to-defend stage are driven by the allegations in the complaint. Even broadly or inartfully pleaded claims can be sufficient to trigger coverage.
5. Analyze “Other Insurance” Provisions
   Priority of coverage can materially affect defense obligations and costs. Additional insured coverage frequently shifts defense obligations to another insurer on a primary basis.
6. Challenge Denials Where Warranted
   Carriers often take narrow views of additional insured endorsements that are not supported by the policy language. Courts regularly reject those positions where the endorsement does not contain the limitations asserted by the insurer.

Conclusion

Charter Oak v. Builders Premier reinforces the importance of viewing insurance recovery holistically. Additional insured coverage is not ancillary—it is often central to a policyholder’s risk transfer strategy.

When properly identified and pursued, it can trigger a defense, shift primary responsibility to another insurer, and significantly reduce exposure. When overlooked, it can leave substantial insurance assets untapped. The lesson is straightforward: in any liability claim, policyholders should ask not only what insurance they purchased, but also what coverage may be available to them under someone else’s policy—and take the steps necessary to secure it.