We are digging deep again today, dear Readers, into insurance coverage issues about which I think you ought to know. How else am I going to train you to become scintillating cocktail party guests? Everyone will be clamoring for your thoughts on this subject. Trust me. 2 WAYS TO GET CGL INSURANCE COVERAGE – WITHOUT BUYING A POLICY
1. As an additional insured by endorsement. Under the standard ISO endorsement form, a party can be added to a policy as an additional insured (AI) and receive coverage for losses arising out of the operations of the named insured. The AI will not receive the same broad coverage for all CGL losses that the name insured receives. Instead, coverage for the AI is tied only to the work of the named insured. Also the AI is usually provided with defense costs. However, courts have broadly applied that coverage if the loss is connected in any way to the named insured’s operations.
Let’s look at an example to see how courts have found coverage for an AI:
In Federated Serv. Ins. Co. v. Alliance Const., LLC, 282 Neb. 638, 647-48, 805 N.W.2d 468, 476-77 (2011), the Nebraska Sup. Ct. found that an additional insured is entitled to coverage. There, the named insured specifically agreed by contract to add Alliance to its CGL coverage as an additional insured. Federated was then obligated to provide that coverage. The court also found that Federated must indemnify the additional insured for its own negligence if it arose out of the operations of the insured. The court interpreted this phrase very broadly. It found that “it is not necessary for the named insured’s acts to have ‘caused’ the accident; rather, it is sufficient that the named insured’s employee was injured while present at the scene in connection with performing the named insured’s business, even if the cause of the injury was the negligence of the additional insured.” Id.
2. As an indemnitee by contract. An indemnitee is the person receiving indemnity from another party. An indemnitee may enter into an agreement with a named insured (for example a subcontractor) demanding that the named insured indemnify the party for his own negligence in three circumstances: if the contract contains (1) express language to that effect or (2) clear and unequivocal language shows that that is the intention of the parties (3) and if the contract is an “insured contract.”
An “insured contract” is defined in the standard CGL policy. It lists 5 specific types of contracts (such as a lease agreement), and it also provide coverage for “that part of any other contract pertaining the named insured’s business under which you assume the tort liability of another party to pay for bodily injury and property damage to a third person.” I don’t want to get too wonky on you here, but it is important to note that coverage is not absolute and does have some limitations.
It is also important to know that Contractual Liability coverage is for the named insured. It is not for the indemnitee – that party who is to be indemnified by the named insured. Instead, the indemnitee must file a claim for indemnity or contribution against the named insured in order to trigger this coverage.
Let’s look at an example to help you understand this type of coverage:
Clever parties can avoid insurance and transfer risk to another. But beware the limitations of such actions. Coverage may not be provided in all circumstances.