What’s In A Name? “Your” Coverage Extensions, That’s What.
Category | Announcements
By Matthew G. Nelson
Matt is a member of the firm’s Construction Law Department. He can be reached at 612.359.7611 or mnelson@fwhtlaw.com
Introduction
So, what really is in a name? The tragic protagonist Juliet was not the first to consider this question, nor the last. In June, the United States Court of Appeals for the Eighth Circuit determined that, when it comes to insurance coverage, a whole lot depends on precisely how and where names, and their related pronouns and possessive adjectives, appear in an insurance policy. Essentially, an “Additional Named Insured” is not the same as an “additional ‘Named Insured.’” Subject to other policy provisions, the coverage afforded to the former may be narrower than that afforded to the latter.
The upshot? Following a collapse on a project site, a developer (and its construction lender) did not have access to millions of dollars in builder’s risk coverage for soft costs and loss of rental income, incurred in connection with delayed project completion caused by the collapse.
The reader is invited to decide which might be worse: Pondering with Juliet—from a breezy balcony—a name’s ability to constrain one’s social options; or, being embroiled in insurance coverage claims and litigation for nearly ten years, only to receive a decision of no coverage, because the various insureds were not properly named in the insurance policy.
At the risk of sounding unpoetic, I’d say the latter.
Read further to learn how this unfortunate result materialized, and steps you can take to avoid a similar fate.
BCC Partners
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- Background
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The controversy in BCC Partners, LLC v. Travelers Prop. Cas. Co. of Am.[1] developed from fairly ordinary circumstances. The owner BCC obtained construction financing from a lender and hired the contractor Blanton to build its apartment project in Creve Coeur, Missouri. BCC’s construction loan required that it be included as an insured on a builder’s risk policy covering its interest in the project and that included “coverage for delay in rents associated with a delay to completion of the Project.”
In turn, BCC’s general contract with Blanton obligated Blanton to obtain certain types and limits of insurance, including builder’s risk coverage for the project, and to include BCC as an additional insured on the policy. Blanton obtained a builder’s risk policy from Travelers, insuring against loss to “Covered Property” at the project, which included “Permanent Works” (such as materials or equipment incorporated or to be incorporated into the apartment building) and “Temporary Works” (scaffolding or formwork, for instance). The policy also included a “Construction Pak – Builders’ Risk Special Time Element Coverage Form,” affording coverage for soft costs (such as “general overhead and “interest on money borrowed to finance construction”) as well as loss of business income or lost rental value following the occurrence of an insured peril. While Blanton obtained the builder’s risk policy, the cost was passed on to BCC as a component of the general contract price.
A retaining wall collapsed during the project, leading to damage to covered property and delays to project completion. Blanton sued Travelers and obtained a verdict of $330,000 for the direct cost to remove and replace the collapsed retaining wall. BCC commenced arbitration against Blanton and several of its subcontractors for delays to the project, and obtained an award exceeding $7,200,000. Blanton then filed for bankruptcy.
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- The Claim
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While these disputes were in active litigation or arbitration, BCC advised Travelers that both BCC and its lender were “Additional Named Insureds” under the following policy provision:
The following persons or organization are included as Additional Named Insureds when you have agreed in a written contract or written agreement, executed prior to loss, to name such persons or organizations as an Additional Named Insured, but only to the extent of their financial interest in the Covered Property: *** Owners of Covered Property; *** Mortgagees or loss payees[.]
A Travelers adjuster responded:
[W]e are aware of the additional interest of BCC Partners LLC and Commerce Bank and will protect their financial interest in the claim as named insureds per the builders risk policy.
The following day, BCC submitted a claim to Travelers under the policy’s coverage extension for “Rental Value” and “Soft Costs” included in the “Construction Pak – Builders’ Risk Special Time Element Coverage Form,” which provided, in relevant part:
Throughout this Coverage Form, the words “you” and “your” refer to the Named Insured shown in the Declarations *** We will pay the actual loss of “rental value” you sustain due to *** Delay in start up of your business activities *** We will pay your “soft costs” during the “period of delay in completion”.
Travelers initially advanced $200,000 to BCC toward its rental losses and soft costs. At Travelers’ request, during 2017 and 2018 BCC provided further backup documentation quantifying its mounting rental losses or soft cost outlays. However, in 2019 Travelers denied coverage and reserved the right to recover its advance made under the claim.
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- Lawsuit and Appeal
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BCC eventually issued a demand to Travelers for the policy limits remaining under the Special Time Element Coverage Form. Travelers demurred and reiterated its right to recover the $200,000 it advanced to BCC. BCC then sued Travelers in federal district court and both parties brought cross-motions for summary judgment. The court denied BCC’s motion and granted Travelers’ motion.
BCC argued that the coverage extension must be interpreted broadly to apply to all insureds. The district court rejected this argument as contrary to the plain terms of the coverage extension. Blanton was the only Named Insured shown in the policy declarations. As such, the pronoun “you” and possessive adjective “your” in the Special Time Element Coverage Form could only refer to Blanton, even if, practically speaking, Blanton as the contractor would not (directly) incur lost rents or soft costs. According to the court, this did not render the coverage provided by the Special Time Element Coverage Form illusory, but only meant that the particular facts at issue were not within the Form’s scope.
BCC also argued that it was entitled to coverage as an Additional Named Insured to the same extent as a Named Insured, because the “extent of its interest” in the “Covered Property” included items such as rental losses and soft costs such as “interest on money borrowed to finance construction” of the “Covered Property.” The Court rejected this argument as well, and rejected any notion that the policy definitions at issue were ambiguous. The policy clearly defined “Covered Property” to mean “Permanent Works” and “Temporary Works” and, if an insured’s “financial interest” in these categories were intended to include rents and soft costs, the Special Time Element Coverage Form would be wholly unnecessary.
Finally, the district court rejected BCC’s argument that Travelers’ course of conduct, including payment of the advance, entitled it to coverage. While estoppel may prevent an insurer from relying on a policy defense, it cannot create coverage where none exists in the first place.
BCC then appealed the district court’s decision. In June 2025, nearly ten years after the collapse which set the entire controversy in motion, the Eighth Circuit affirmed the district court’s decision in favor of Travelers.
The Eighth Circuit rejected BCC’s invitation to equate the terms “Additional Named Insured” and “Named Insured,” because to do so would render the policy’s definition of “Additional Named Insured” meaningless. It also rejected BCC’s argument that the policy’s definition of “Additional Named Insured” should be expanded to mean an “additional ‘Named Insured’” based on guidance from the International Risk Management Institute, Inc. (“IRMI”). That guidance provides: “an ‘Additional Named Insured’ ‘would have the same rights and responsibilities as an entity named as an insured in the policy declarations (other than those rights and responsibilities reserved to the first named insured.’” However, IRMI’s guidance goes on to explain that the term “’Additional Named Insured” “has not acquired a uniformly agreed upon meaning within the insurance industry and often does not include those same rights and responsibilities.” The appellate court rejected BCC’s argument that the policy was ambiguous and, even if it were, IRMI’s guidance would not clear it up.
The Eighth Circuit also rejected BCC’s argument that the Builders’ Risk Special Time Element Coverage Form should not be construed to afford coverage only for Blanton, because the Form is tailored to address risks that BCC—and not Blanton—faced in undertaking the project:
We acknowledge the possibility that BCC, and perhaps even Travelers, anticipated that BCC would be covered for lost rental income and soft costs. However, under Missouri law, the Policy “must be enforced as written when its language is clear and unambiguous.” *** And the Policy’s language is clear and unambiguous: BCC is an “Additional Named Insured,” an “Additional Named Insured” is distinct from a “Named Insured,” and an “Additional Named Insured” is not covered for lost rental value and soft costs. As the district court said, we “must enforce the contract before [us], not the contract [BCC] wishes had been signed.”
Takeaways
Builder’s risk insurance is “first-party” coverage that protects against risks of loss of or damage to property. So perhaps it is not surprising that builder’s risk coverage forms often start from the presumption that the owner of the insured property is the one purchasing the coverage, and therefore will be the “Named Insured” to which the policy’s “you”-s and “your”-s will refer. However, in construction contracting, it is not uncommon for contractors to procure builder’s risk coverage, pursuant to contractual obligations to obtain and maintain such insurance, and to receive reimbursement for the cost through the contract price. Often, the question of who procures the coverage comes down to whether the project owner or the contractor can obtain a better deal on policy premiums, rather than on closely parsing the policy’s terms and definitions.
Such cost savings quickly can be dwarfed by the occurrence of an uncovered loss, when a policy’s forms and coverage extensions are not sized-to-fit the distinct risk patterns of the several insureds involved in a project. As the BCC Partners case illustrates, it is crucial for lenders, owners, contractors, and their insurance brokers, to double- and triple-check that the policy offered by an insurer actually affords the coverage intended and required by the construction loan and the general contract. It should go without saying that indemnity rights in a construction loan or general contract may be worth very little in the event an owner or contractor fails to procure the insurance covering those promises. Recall in BCC Partners, BCC obtained a $7,200,000 arbitration award against Blanton, and shortly thereafter Blanton filed for bankruptcy protection. Without adequate insurance, such awards or judgments are often not collectible.
Finally, it should be noted that BCC argued on appeal:
If the District Court’s interpretation is upheld, it will create massive turmoil with respect to on-going Projects currently covered by Builder’s Risk Insurance Policies, and will lead to lenders and developers purchasing these policies rather than reimbursing the builders/contractors for acquiring the builder’s risk insurance.
The Eighth Circuit did not address BCC’s prediction of “massive turmoil,” because it was concerned only with the language of the Travelers policy before it. Lenders, owners, and contractors do have an opportunity to avoid any such bedlam, however. They (and their insurance brokers) should confirm that the scope of their builder’s risk coverages are as intended and contractually required. Correcting any coverage gaps should be relatively straight forward, but it must be done before a loss occurs.
Setting aside Shakespeare to embrace the Kafkaesque, remember this when reviewing your policy: Absent policy language to the contrary, you are not “you” and your coverage is not “your” coverage—unless your name is shown on the policy’s declarations. Expectations for coverage must be reconciled with actual policy language. Contracts may allocate responsibility for procuring insurance, but only the policy itself defines what is covered, and for whom.
Announcements
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