Additional Insured – Do You Really Have Coverage?

Additional Insured language is contained in nearly every construction contract. But how many of you are actually reviewing the additional insured endorsement? And, does it provide the coverage that you are required to provide?

Nearly every construction contract requires that general contractors add owners as additional insureds and subcontractors must add the general contractor as an additional insured. Sometimes, the subcontractors must also list the owner as an additional insured. For example, the AIA A201 general conditions require the contractor to list the owner and architect as additional insureds for claims caused by the contractor’s negligent acts or omissions.

Typically, contractors will go to their insurance agent and tell them that they need an additional insured endorsement for a particular project. The agent provides an endorsement that is then turned over to the upstream contractor or owner. This endorsement, however, can be one of several forms that substantially limit coverage. Here are just two:

ISO CG 20 33: This endorsement limits additional insured coverage to those parties that are in privity with the contractor. So, if a subcontractor provides this type of additional insured coverage, it will not cover the owner because the owner is not in contractual privity with the subcontractor.

ISO CG 20 10: This endorsement requires that all additional insureds be listed in a schedule attached to the endorsement. Again, if the owner is not listed in the schedule, there will be no coverage.

Finally, 24 of the 31 ISO endorsements were changed in April, 2013. One of the changes states:

The insurance afforded to such additional insured only applies to the extent permitted by law.

This language raises the question of whether the indemnity provision in the contract is enforceable. If it is not enforceable, the insurer will have no duty to provide insurance coverage to the additional insured.

Take Away: As you can see, the additional insured endorsement is not as easy as you might think. You do need to look at the endorsement and read the contract to make sure that the coverage you think you have really does exist.