Starting a Construction Project: Does it really matter which Additional Insured form you use?If your organization has ever completed a construction project - or is in the midst of planning one - then you know that negotiations with your contractor are an integral, but sometimes exhausting part of the process. So when your insurance broker advises that your entity should be scheduled as an Additional Insured on your contractor's liability policy, (specifically through the ISO Endorsements such as CG 20 26 and CG 20 37), you may wonder how far you really need to go to transfer risk from your organization to the contractor.
After all, your contractor may try to convince you that you already have coverage under his liability policy through a Blanket Additional Insured endorsement - an endorsement which "automatically grants insured status to a person or organization that the named insured is required by contract to add as an insured."1 If that's the case then there's really no need to pursue the Additional Insured endorsements recommended by your broker...right?
As you might have guessed, there can actually be a vast difference in the terms of these two Additional Insured forms, specifically in the degree to which you successfully transfer the burden of risk off of your organization and onto the contractor.
For starters, let's remind ourselves what ISO Endorsements CG 2026 and CG 20 37 are designed to do. Through these endorsements, your organization is specifically scheduled as an Additional Insured on the contractor's policy. You obtain coverage under their policy for bodily injury and property damage caused by their work, both...
- ...while operations are ongoing... (CG 20 26)
- ...and after products and operations have already been completed (CG 20 37).
- Limitation stating that the policy will only respond if a written contract exists requiring the contractor to list your organization as an Additional Insured.
- Limitation stating that your organization is not entitled to any coverage broader than what the written contract stipulates.
- Requirement to notify the carrier as soon as practicable of an “occurrence” which may give rise to a claim under the additional insured endorsement. The above ISO forms do not have this requirement.
- Requirement to notify carrier in writing as soon as practicable if a lawsuit is received.
- Requirement to promptly seek defense and indemnity from any other policy on which you may be an additional insured.
- Stipulation that carrier's form is only “primary and non-contributory” if your contract specifically states that the additional insured coverage must be primary and must not seek contribution from other insurance available to the additional insured. You would need to make sure this language is a part of your written contract.
1 - Blanket Additional Insured Endorsement," Risk & Insurance, Accessed 12-5-2014, http://www.irmi.com/online/insurance-glossary/terms/b/blanket-additional-insured-endorsement.aspx