How does a policyholder enforce a contract in which one party
assumes the risk of another?
Let’s break it down two ways:
- By additional insured (AI) endorsement.
- AI is an insured.
- Insurer owes AI fiduciary duties.
- AI must follow policy terms for coverage.
- AI does not need to have a written contract with Named Insured for coverage to apply.
- In most states, AI coverage will include negligent acts of AI in addition to acts of Named Insured.
- AI can bring a direct action on policy against insurer.
- AI can obtain defense costs.
- Often excludes coverage for losses of AI employee due to Employer Liability exclusion and separation of insureds clause in CGL main form.
2. By contractual liability assumption under Section I., 2. Exclusions
- Indemnitee is not an AI nor an insured under the policy.
- Coverage is provided to Named Insured for losses it agreed to pay to Indemnitee.
- Coverage is dependent upon terms of underlying indemnity contract between Named Insured and Indemnitee.
- No defense costs, unless underlying contract provides them to Indemnitee.
- No fiduciary duty owed to Indemnitee.
- Coverage is limited to certain types of contracts as set forth in policy definitions.
- Coverage can be expanded by endorsement to include other types of contracts.
- Does not exclude coverage for claims made by Indemnitee’s employees.