Construction contracts typically require a subordinate contractor, either the general contractor subordinate to the owner or subcontractor subordinate to the general contractor, to list the upstream party as an additional insured and require the subordinate party to indemnify the upstream party for any claims or damages on the project. The goal of these two provisions is to shift the risk of liability for injuries sustained by a subordinate party’s employees to the subordinate party and its insurer. And, you do need both.
The reason for including both of these provisions is so that the upstream contractor will not be limited to the coverage that the insurer owes for the subordinate party’s contractual liability under an indemnity agreement in the construction contract. If an indemnity agreement is invalid under an anti-indemnity statute, then the insurer will not be liable for the subordinate party’s contractual liability under the indemnity agreement.
But if an indemnity agreement is invalid, its invalidity does not affect the coverage extended to another party under an additional insured endorsement.
Take Away: Include both additional insured and indemnification provisions in your construction contract to fully protect your interest should a claim arise on your project.