On November 12, 2019, a federal court in Kentucky held that a vendor service agreement (VSA) between Live Nation Worldwide Inc. and its security vendor, ESG Security, extended coverage under an insurance policy issued by Secura Insurance to ESG, for Live Nation’s liability arising from a concert at a Live Nation facility.
The VSA in question identified several coverages that ESG was required to maintain throughout the term of the agreement, each of which was to name Live Nation as an additional insured. Among the listed coverage was commercial general liability insurance. Following the last type of insurance listed in the agreement (comprehensive automobile liability), the agreement stated that “Coverage for the additional insured shall apply on a primary basis irrespective of any other insurance, whether collectible or not.”
Live Nation was sued in the underlying suit by a concertgoer, James Hayes, who allegedly sustained injuries in a fight between several patrons during a concert at a Live Nation-operated venue. Mr. Hays claimed he was assaulted by another attendee that Live Nation and ESG allowed to return after being ejected for hostile behavior toward Hayes.
Live Nation tendered Hayes’ claim and lawsuit to Secura for a defense pursuant to the coverage afforded to Live Nation as an additional insured. Secura denied coverage for Live Nation’s defense and the settlement that Live Nation eventually reached in the underlying lawsuit. Live Nation sued Secura and ESG seeking coverage as an additional insured pursuant to the terms of the VSA.
Live Nation argued that the language of the VSA required ESG to maintain insurance under which Live Nation was an additional insured and that such insurance apply before any other applicable insurance. Secura and ESG argued that the VSA required only that the automobile insurance cover Live Nation on a primary basis because the provision in the VSA stating that “Coverage for the additional insured shall apply on a primary basis irrespective of any other insurance. . .” only modified the clause immediately preceding it, the requirement for automobile insurance.
The court rejected Secura and ESG’s argument, reasoning that Secura’s reading of the VSA “goes against basic grammar principles . . .” The court concluded, therefore, that “[t]he plain and unambiguous meaning of . . . the VSA requires ESG to purchase general commercial liability insurance on behalf of Live Nation on a primary basis.”
Secura also argued that another provision of the VSA limited ESG’s liability to Live Nation to instances of vicarious liability. Secura contended that the phrase “arising from the acts of omissions of Vendor” in the VSA “does not contemplate indemnity for Live Nation’s negligence, so the provision is limited to instance of vicarious liability.” The court rejected this argument, noting that case precedent requires that a limitation to only vicarious liability be clearly stated in the agreement and that “the language of the VSA did not clearly state . . . that [it] is limited to ‘vicarious liability.’”
The Live Nation decision illustrates the value of insurance afforded through vendor service agreements. The decision also underscores the importance of using precise wording in the risk transfer contract – here, the VSA. Companies relying on insurance supplied through a service agreement, supply order or other contract or agreement are reminded to carefully review the insurance and indemnification provisions in those agreements to ensure that the protections afforded are consistent with the protected party’s expectations.