In honor of the release of the new Star Wars movie, let’s revisit another epic insurance battle:
additional insureds v. contractual insureds.
Who is stronger, more resilient, covered?
Alas Dear Readers you know this is my favorite subject don’t you? Cant you tell? I talk about it all the time! Star Wars? NO!! Additional insured coverage under a standard CGL policy. Sigh……I do need to get a life.
But who isn’t drawn in by the under-dogged-ness of a true additional insured fighting for his right to be treated fairly and covered? Who isn’t captivated by how one little word change in a policy endorsement can add nuance – and coverage – when none might have been intended? Who doesn’t see metaphors between insurance and Star Wars? Of course you do, my Dear Readers, so let’s compare the two again:
BROAD FORM CONTRACTUAL LIABILITY COVERAGE
Indemnittee is NOT an insured
Includes completed ops (generally)
Includes sole fault of indemnitee
Not tied to Named Insured’s work
Defense costs not covered separately
Defense costs included in total limits
ADD’L INSURED ENDORSEMENT COVERAGE
Indemnittee is an insured on policy
Excludes completed ops (generally)
May include sole fault of add’l insured
Tied to Named Insured’s work
Defense costs covered
Defense cost are in addition to total limits
Who wins the battle? It depends upon the type of loss. It is always best to be an insured under a policy because the insurance company owes you a fiduciary duty to act in your interests. You can enforce that duty by bringing a bad faith claim against the insurance company if it denies your claim without adequately investigating or protecting your interests.
As a contractual liability claimant, you are just any old third party. You do not have privity to the insurance contract. Your claim arises out of the underlying contract between you and the named insured wherein you asked the named insured to indemnify you. Thus, you must wait to enforce your claim until after liability and fault is determined on the underlying claim.
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