Michael Lancaster v. Ferrell Paving, Inc. v. Everest Indemnity Insurance Company
2011 Tenn. App. LEXIS 507
Tenn. Ct. App.2011Background
- Ferrell Paving used Imperial Guard’s security services at its Chelsea Avenue warehouse; a guard was shot on duty in 2007, and Lancaster sued Ferrell for negligent protection.
- Ferrell tendered defense to Imperial Guard’s insurer, Everest Indemnity, asserting Ferrell’s status as an additional insured.
- The trial court held Ferrell was an additional insured and awarded summary judgment for the insurer only on negligence of Ferrell, finding no coverage for Ferrell’s own negligence.
- Ferrell argues it was added as an additional insured under Imperial Guard’s policy via oral modification of the contract and broker-issued certificate; insurer contends no valid ‘additional insured’ status existed.
- The appellate court reverses the trial court, concluding Ferrell’s addition as an additional insured was valid and that coverage extended to Ferrell’s own negligence arising from Imperial Guard’s ongoing operations for Ferrell.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ferrell is an additional insured under the policy | Ferrell contends it was added as an additional insured by oral modification and broker certificate. | Insurer argues Ferrell did not qualify as an additional insured under the endorsement because no contract-required modification occurred. | Ferrell is an additional insured under the endorsement |
| Whether the oral modification to add Ferrell was enforceable | Modification was consented to by Ferrell and Imperial Guard, effective despite no written amendment. | Oral modification violated the contract’s writing requirement; statute of frauds/parol rule bars enforcement. | Oral modification was enforceable; not barred by statute of frauds or parol rule |
| Whether the oral modification was supported by sufficient consideration | Beneficial ongoing business relationship created consideration for the modification. | Modification requires reciprocal consideration; no consideration evidence exists. | Sufficient consideration existed to support the modification |
| Scope of coverage for an additional insured | Coverage extends to liability arising out of the named insured’s ongoing operations, including Ferrell’s own negligence. | Coverage is limited to vicarious liability or fault-based linkage to the named insured’s negligence. | Coverage extends to liability arising out of Imperial Guard’s ongoing operations for Ferrell, including Ferrell’s own negligence |
Key Cases Cited
- Travelers Indem. Co. of America v. Moore & Assocs., Inc., 216 S.W.3d 302 (Tenn. 2007) (duty to defend based on underlying facts; contract interpretation guidance)
- Standard Fire Ins. Co. v. Chester-O'Donley & Assocs., Inc., 972 S.W.2d 1 (Tenn. Ct. App. 1998) (contract interpretation guiding policy language analysis)
- Hutchison v. American Justice Ins. Reciprocal, 15 S.W.3d 811 (Tenn. 2000) (interpretation of policy language; plain meaning rule)
- Mikula v. Miller Brewing Co., 701 N.W.2d 613 (Wis. Ct. App. 2005) (broad interpretation of ‘arising out of ongoing operations’)
- Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 930 N.E.2d 259 (N.Y. 2010) (broad reading of ‘arising out of’ in ongoing operations endorsements)
- Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008) (endorsement coverage for operations; not fault-based interpretation)
- Pulte Home Corp. v. American South Ins. Co., 647 S.E.2d 614 (N.C. Ct. App. 2007) (liability arising out of named insured’s operations; coverage scope)
- Meadow Valley Contractors, Inc. v. Transcontinental Ins. Co., 27 P.3d 594 (Utah Ct. App. 2001) (interpretation of ‘liability arising out of named insured’s work’)