Seventh Circuit Addresses Written Contract Requirement for Additional Insured Coverage

In its recent decision in Selective Ins. Co. v. Target Corp., 2016 U.S. App. LEXIS 23370 (7th Cir. Dec. 29, 2016), the United States Court of Appeals for the Seventh Circuit, applying Illinois law, had occasion to consider whether a written contract must remain in effect at the time of an accident in order to trigger coverage for an additional insured.

At issue in Selective was an underlying personal injury suit brought by an individual injured at a Target store when a fitting room door came off its hinges and fell on her.  The fitting rooms had been supplied to Target by Harbor Industries.  Target sought coverage for the suit as an additional insured under Harbor’s general liability policy, which was issued by Selective.  Selective denied the tender and brought a coverage suit against Target seeking a declaration that it had no duty to defend or indemnify.

Relevant to the coverage dispute were two contracts entered into between Target and Harbor.  The first, a supplier agreement, was entered into between the parties in April 2001, and stated that the agreement would be deemed incorporated into all subsequent agreements entered into between the parties.  Among other things, the supplier agreement required that Harbor maintain general liability coverage under which Target would be named as an additional insured.  The supplier agreement also stated that it would remain in effect until terminated.  The second agreement, entered into in April 2009, was a program agreement whereby Harbor was contracted to supply fitting rooms to Target stores.  Notably, the program agreement expired on July 1, 2010.  The underlying accident happened on December 17, 2011 and suit was filed in May 2012.

Selective argued that because the program agreement expired over a year prior to when the underlying injury happened, there was no written contract in effect that would trigger its additional insured obligations to Target.  The Seventh Circuit disagreed, observing that while the program agreement had expired, the supplier agreement remained in force, and this agreement required, among other things, that Harbor maintain products/completed operations coverage for any goods or services later provided to Target.  The court therefore agreed that Selective could not disclaim coverage on the basis that there was no written contract in effect.

Having so concluded the court agreed that Target was entitled to additional insured status for the underlying suit, and that it was entitled to a defense and indemnification under the Selective policy.

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