Additional insured coverage is one of the most frequently misunderstood areas of construction coverage law. It's important to understand what coverage will apply when naming additional insureds. In this episode, we discuss the details of this type of coverage and how it applies to different parties.
The Issue. Owners and upstream contractors often require lower-tier contractors and subcontractors to name them as additional insureds on their CGL policies. Additional insured status allows direct coverage in the event of a third-party claim, but typically only if the claim derives from the acts or omissions of the named insured.
Why It’s Important. Additional insured coverage is one of the most frequently misunderstood areas of construction coverage law. There are multiple types of additional insured endorsements available on the market, and the coverage has narrowed over the last several decades. Savvy contractors draft their contracts to ensure that they are being provided the broadest coverage possible. In addition, while regularly relied upon as evidence of the coverage provided, certificates of insurance do not create coverage and cannot be used to overcome the terms of the policies described in them.
Short Answer. Naming additional insureds requires a separate endorsement to the basic CGL coverage, which can either specifically name the parties that are additional insureds or designate a general category of persons entitled to such coverage under a blanket endorsement. It is important to make sure that the coverage is as broad as you expect—for example, that you require or obtain additional insured coverage for both ongoing and completed operations. It is also important to confirm whether the coverage will apply to upstream parties, including the project owner, and to understand whether the endorsement permits coverage for claims involving the concurrent negligence of the additional insured. Finally, the additional insured should require that certificates of insurance and copies of required endorsements be provided before any work commences and also as a condition precedent to payment.