Defining the Additional Insured — Ambiguity Never Pays

Posted on July 20th, 2015 by sutteroconnell

In writing, whether it is a letter, a motion, or an insurance application or policy, it is better to take the extra time to be precise and clear.  Any ambiguity can unfortunately result in disputes and litigation.  In insurance, you see this issue arise with the identity of the additional insured.  This problem arose in JNJ Logistics, LLC v. Scottsdale Insurance Company.  In JNJ Logistics, the Sixth Circuit had to interpret the meaning of  “Sears, 3456 Meyers, Memphis, TN 38108” to determine whether Sears Logistics Services, Inc. was entitled to defense and indemnification as an additional insured under JNJ’s insurance policy.

JNJ entered into a contract with Sears Logistics in which JNJ agreed to provide “hostling” services for Sears Logistics.  The agreement required JNJ to maintain commercial general liability insurance, naming Sears Logistics as an additional insured.  Between 2000 and 2002, JNJ’s policy with Scottsdale Insurance Company listed Sears Logistics as an additional insured.  However, in 2003, the policy did not specifically identify any additional insured.  Then in 2004, the renewal application and policy listed “Sears-3456 Meyers, Memphis, TN” as one of the additional insureds.

An employee of Sears Logistics struck Darius Grove at a different Sears Logistics site in Mississippi.  Grove sued Sears Logistics, which tendered the lawsuit to Scottsdale.  Scottsdale denied coverage on the basis that Sears Logistics was not an additional insured.  The district court granted Scottsdale summary judgment, concluding that “Sears” is different than “Sears Logistics Services, Inc.”  The Sixth Circuit reversed.

In the Sixth Circuit’s decision, the court distinguished between a patent ambiguity (ambiguous terms on the face of the document) and latent ambiguity (ambiguity created when applying the terms to the facts).  This case involved latent ambiguity, as “Sears, 3456 Meyers, Memphis, TN 38108” is clear, but it becomes ambiguous when it is applied to the facts of this case.  Does it apply to Sears Logistics, which owned and operated the location, Sears Roebuck and Company, its parent, Sears Holdings Corporation, the holding company, or some other entity with the name “Sears” in it?  The Sixth Circuit concluded that there were sufficient facts to establish each party’s argument on whether “Sears, 3456 Meyers, Memphis, TN 38108” applied to Sears Logistics.  As a result, summary judgment was inappropriate and the issue is a question of fact for the jury.

If JNJ, its broker, or Scottsdale paid more attention to ensure that Sears Logistics was specifically identified as an additional insured, this litigation could have been avoided.  To review the entire Sixth Circuit opinion click here.