Contractual liability coverage is excluded in a standard CGL policy. However the policy makes an exception – or gives coverage back – to Named Insureds who assume the tort liability of another party in an “insured contract” to pay for damages that occur after the policy is issued. (See, Section I, ¶2. Exclusions, B. 2.) An “insured contract” excludes operations within 50 feet of any railroad operations, but this coverage can be added back by Endorsement CG 24 17 Contractual Liability – Railroads. (See, Section V. Definitions, ¶9. f.) It is important to note 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.
Additional Insured coverage is provided by endorsement to a standard CGL policy. Under this clause, an additional insured can obtain coverage for losses that are associated with or that arise out of the work of the Named Insured. There are many various forms of additional insured coverage, each adding or taking away the extent and breadth of what is or is not covered under the policy. I won’t review all of these here, but there are some commonalities that need to be noted. For example, and unlike the Contractual Liability Coverage discussed above, the additional insured is a policy holder and is afforded all the rights and responsibilities that are given to the Named Insured. This includes the fiduciary duties that the insurance company owes to all policyholders, and the right of the additional insured to bring a direct claim action against the insurer on the policy for coverage.
A summary of the general differences between the two clauses is set forth below. This is, however, a general summary, because each policy clause and endorsement may differ depending upon the language used therein. But the chart will give you a better idea as to how the two clauses are different from each other, and how they also can work together and apart to provide broader coverage.
Broad Form Contractual Liability Add’l Insured Endorsement
Indemnittee is NOT an insured IS an insured on policy
Includes completed ops Excludes completed ops
Incl. sole fault of indemnitee Excl. sole fault of add’l insured
Not tied to Named Insured’s work Tied to Named Insured’s work
Defense costs not covered separately Defense costs covered
Defense costs included in total limits Defense in addition to limits