Commercial General Liability and Naming an Additional Insured (AI)

If your contract doesn’t specify what type of additional insured (AI) coverage is required, it is likely that a more restrictive blanket additional insured endorsement may be provided. This of course depends on your carrier, and the forms that they use. Some carriers use more comprehensive AI forms, however with more comprehensive coverage usually comes higher premiums and endorsement fees.

Once your policy is endorsed to include an AI, depending on the form, and at times, a court’s interpretation, this coverage will pay for damages that the insured becomes legally obligated to pay due to bodily injury, property damage or personal and advertising injury arising from the insureds operations. There is coverage on and off premises, for the limits provided for in your policy. Endorsements are available to adapt coverage to your needs, AIs for landlords, specific projects, or locations as long as there is a clear relationship between the insured and the entity requesting to be named as additional insured. Carriers may or may not include the language required by your additional insured, so prior to signing a commitment to purchase an insurance policy, it is imperative that if you have specific wording/language requirements, you be sure the policy offers the wording and coverage that suits your needs.

When it is requested that you add a landlord, client or contractor as an “additional insured” , after underwriting approval, your policy is endorsed (changed temporarily) to include the named entity as an insured on YOUR policy in the event of an accident for the duration of the project you are completing for them, or on their premises.  These endorsements do not apply to work performed by uninsured independent contractors or subcontractors, nor does it apply to an insured subcontractor who has not named you as an additional insured on THEIR policy. Some insurers have reinforced their intent to exclude coverage for the AI’s own negligence with language stating just that. For more information see www.irmi.com/online/main-folder-landing-pages/commercial-liability-publications and go to Free Expert Commentary on Additional Insured Issues to get prospective from legal professionals.

Difference between CG 2010 11/85 and Equivalent forms and others:

For years, the additional insured—owners, lessees or contractors—scheduled person or organization endorsement (CG 20 10) has been widely viewed as the preferred additional insured endorsement due to the breadth of coverage it provided. Over time, however, that coverage has been significantly narrowed.  “Additional Insured Endorsements,” in Commercial Liability Insurance. Still, absent the ability to obtain prior editions of the endorsement, CG 20 10 provides the broadest additional insured coverage available to owners, contractors, and lessees under a standard ISO endorsement.

The 2004 edition of CG 20 10 (effective July 1, 2004 in most jurisdictions) provides coverage for claims against the additional insured for liability arising out of the named insured’s “ongoing operations” for the additional insured, provided the covered injury or damage was “caused, in whole or in part, by [the named insured’s] acts or omissions or the acts or omissions of those acting on [the named insured’s] behalf” (emphasis added). The effect of the term “ongoing operations” and the phrase “caused in whole or in part by” is the exclusion of coverage for claims arising out of the named insured’s completed operations and claims arising out of the sole negligence of the additional insured.

Completed Operations. In 1993, ISO replaced the CG 20 10 requirement that liability must arise in connection with “your work” to the current requirement that liability must arise in connection with “your ongoing operations.” This change removed coverage that existed in the original CG 20 10 (11/85 edition) for claims against an additional insured arising out of the named insured contractor’s completed operations for the additional insured. Although this change officially occurred more than a fifteen years ago, the reality of it is more recent. For years, many insurers routinely provided the 11/85 version of the endorsement when requested to do so. The hard market of the early twenty-first century combined with escalating construction defect claims caused this practice to largely cease.

Circling back to the beginning of this post, it is very important before entering into contracts with clients, and before purchasing your General Liability policy (also a contract), to know what is required of you, and by you, with regard to your additional insured endorsements. Budgetary constraints may force a contractor to purchase policies with more restrictive coverage and AI endorsements, but whenever possible it is advised that Contractors purchase the most comprehensive coverage afforded by them. In the end, deciding which policy to purchase on price alone may not provide for a potential client that requires special wording on the AI endorsement. It is also important throughout the year that you understand that your work must fall within your carrier’s guidelines, and that your carrier must approve of the AI endorsement request. Be sure to communicate all potential exposures to  your broker in order to help them find coverage that serves you as a business owner, in addition to satisfying your AI needs.

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