iStock_000015701146XSmallNow a days, nearly every construction subcontract requires upstream contractors be named as an additional insured on the subcontractor’s general liability insurance.  But, simply being named as an additional insured in a certificate of insurance is not enough.  General contractors need to make sure that their subcontractors have obtained the proper additional insured endorsements.

Why isn’t a certificate of insurance enough?

A certificate of insurance, which is a document issued by or on behalf of an insurance company, is used to advise a third party of the existence and amount of insurance issued to the named insured.  The certificate usually indicates that certain parties are named as additional insureds under the named insured’s insurance.  But, it also contains a statement that it is issued as a matter of information only and does not provide coverage.  To get coverage, the insured must also obtain endorsements showing additional insured coverage.

What is an endorsement?

Generally speaking, an endorsement is an attachment to an insurance policy that modifies the policy by changing the coverage afforded under the policy.  In order to provide additional insured coverage, the insured must ask for an endorsement to add that coverage.

There are many Additional Insured endorsements. 

Unfortunately, simply asking for an additional insured endorsement does not end the inquiry.  Contractors must review the endorsements that the subcontractor obtains to figure out what coverage they have.

Years ago, the CG 20 10, was the primary additional insured endorsement.  It provided coverage for liability “arising out of the work” of the named insured.  Litigation ensued over the breadth of the “arising out of” language and the CG 20 10 was amended in 1993, 1997, 2001, 2004 and 2013.  In 2004, the “arising out of” language was changed to “caused in whole or in part by [the named insured’s] acts or omissions” in an effort to limit its scope.  In 2013, language was added to limit coverage “to the extent permitted by law”. It is not entirely clear what was intended by this last phrase, but it may be an attempt to make coverage consistent with state anti-indemnity statutes.

Another issue with the CG 20 10 was whether the named insured’s CGL covered the additional insureds for completed operations.  In 2001, language was added to exclude coverage for complete operations.  To address this potential gap in coverage, CG 20 37 was created to provide complete operations coverage for additional insureds.  CG 20 37 was also amended in 2013 to limit coverage to the amount required by the contract.  It appears that this new language was intended to incorporate any express limits on additional insured coverage the parties included in the contract.

In addition to the endorsements mentioned above, there are additional endorsements, such as the  CG 20 01 and CG 24 26, both of which were modified in 2013, seeking  to clarify the coverage provided to an additional endorsement.  Some read these endorsements as attempting to bar or further limit coverage for additional insureds.

Ultimately, contractors need to find out whether their subcontractors have obtained additional insured endorsements and then look at the actual endorsements to make sure that they provide the broadest coverage possible.