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  • Posted on: Mar 18 2022

By Jonathan H. Freiberger

It is common for contracts to require that one party procure, for its own protection and for the protection of the other party, specific types of insurance coverage and the dollar amounts of such coverage.  Insurance procurement provisions are typically found in, among others, construction contracts and real property leases.  Such insurance procurement provisions are material parts of the contracts in which they appear.

On March 15, 2022, the Appellate Division, First Department, in Benedetto v. Hyatt Corp., granted summary judgment to the defendant/third-party plaintiff on its claim for failure to procure contractually required insurance.  The facts of Benedetto, which were obtained from the electronically filed record on appeal and the First Department’s decision, are as follows.  Third-party defendant, Securitas, entered into an agreement with Hyatt pursuant to which Securitas was to, inter alia: provide security services at one of Hyatt’s properties in Manhattan; train and supervise its employees; and, obtain a comprehensive general liability insurance policy naming Hyatt as an additional insured in the minimum amount of $3,000,00.00 per occurrence.  Plaintiff, who was employed by Securitas as a fire safety director and security guard, was injured after a fire broke out in the laundry room.  Plaintiff commenced a personal injury action against Hyatt, which, in turn, brought a third-party action against Securitas for indemnification, contribution and breach of its insurance procurement obligations.  Securitas submitted evidence that it procured a general liability insurance policy in the amount of $2,000,000.00 and an umbrella policy in the amount of $1,000,000.00.

Hyatt moved for summary judgment on plaintiff’s claims as well as on its third-party claims against Securitas. Supreme court denied Hyatt summary judgment dismissing plaintiff’s complaint and as against Securitas on the indemnification and contribution claims.  However, supreme court granted Hyatt’s motion as against Securitas on the claim for failure to procure the requisite insurance.  The First Department unanimously affirmed supreme court’s decision.

The First Department noted that a “party moving for summary judgment on its claim for failure to procure insurance meets its prima facie burden by establishing that a contract provision requiring the procurement of insurance was not complied with.”  (Citation omitted.)  Once movant meets its burden, the “burden then shifts to the opposing party, who may raise an issue of fact by tendering the procured insurance policy in opposition to the motion.”  (Citation omitted.)  

The Court, in explaining why Securitas failed to meet its burden in opposing Hyatt’s motion, stated:

Securitas failed to raise an issue of fact precluding summary judgment in Hyatt’s favor on their third-party claim for failure to procure insurance. The parties’ agreement required Securitas to procure $3 million worth of commercial general liability insurance coverage, but both the certificate of liability insurance and the policy declarations that Securitas submitted in support of its cross motion and in opposition to Hyatt’s motion only indicate $2 million worth of commercial general liability insurance coverage. While the certificate of liability insurance also indicates that Securitas procured an additional $1 million in umbrella liability coverage per occurrence – for a total of $3 million of coverage – this does not raise an issue of fact as to whether Securitas procured the $3 million of commercial general liability insurance coverage it was required to procure by the parties’ agreement.

(Citation omitted.)

Another argument made by Securitas, and rejected by the Court, was that Hyatt waived its rights under the insurance procurement provision by accepting, without objecting to, the annual insurance certificates sent by Securitas to Hyatt.  The Court noted that a “waiver, by definition, is the intentional relinquishment of a known right, it must be clear, unequivocal and deliberate.”  (Citation omitted.)  The Court concluded that the annual acceptance of the certificates of insurance “constituted mere silence or, at most, mistake, negligence, or thoughtlessness, but never amounted to any intentional act to relinquish a known right.”

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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