Contractual Liability Coverage and the Meaning of “Execution”

Q

We have a question dealing with the contractual liability coverage offered under a CGL coverage form. The form gives coverage for liability assumed in an insured contract provided the BI or PD occurs subsequent to the execution of the contract. Our question is: what does “the execution of the contract” mean? Does the word “execution” mean the contract has to be signed?

Our situation pertains to a contractor who was performing work under a contract that had not as yet been signed; it is not unusual for parties to a construction contract to commence their performance before a written contract has been signed. After a loss occurred, the insurer denied coverage because the loss happened prior to the signing; the insurer claimed the injury occurred prior to the execution of the contract. We do not believe that the word “execution” necessarily means “signed”, especially since the policy does not define the term and there is no policy provision requiring a signing of a contract to make it binding.

Your opinion, please.

New York Subscriber

A

Definitions from a legal dictionary show that the execution of a contract implies that nothing remains to be done to make the contract complete and effective. A case cited in the definition, Travelers Insurance Company v. Chicago Bridge & Iron Company, 442 S.W.2d 888 (1969), had a Texas appeals court saying that “execute means to finish or make complete; the only thing required is an expression of assent and signatures are not necessary”. On the other hand, in Lynch v. Figge, 192 NYS 873 (1922), a New York appeals court said “the word 'executed' is synonymous with the word 'signed' and this is not open to question; 'executed' meant 'signed'; as used in statutes and decisions, 'executed' has the meaning of 'signed'.”

Now, both cases are old, but neither case has been overruled. This simply means that there is no one unanimously accepted legal opinion around the country when it comes to the meaning of an “executed contract.” However, it is our opinion that the insurer is correct and that an insured contract has to be signed in order for it to be executed; if an injury occurs prior to the signing, there is no “insured contract” liability coverage in force.

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