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Additional Insured  Endorsements in Construction


 

 

 

 

 

 

The “additional insured” provision is arguably one of the most critical provisions in a contract, yet it’s the most misunderstood. By employing a carefully crafted additional-insured clause, you put yourself in a position to secure coverage. Let’s use the following example to take a closer look at the most common additional insured endorsements; the CG 20 10, CG 20 37, CG 20 33, and CG 20 38. 

 

Example: A general contractor signs a written contract to build a house for a property owner. The contract requires the general contractor to have a comprehensive general liability (CGL) policy, naming the owner as an additional insured. The contract also requires all subcontractors to have a CGL policy that name the owner as an additional insured.

 

Sample Ongoing Operations Occurrence: CG 20 10 prior to 1985

The contractor is building a brick wall for the property owner and drops a load of bricks on top of several cars parked in the street. This causes property damage arising out of the contractor’s ongoing operations. The car owners sue the property owner.

 

If the property owner was named an additional insured on the contractor’s CGL policy using the CG 20 10 with an edition date prior to 1985, the property owner would be covered. This is because the CG 20 10 provides coverage for liability arising out of “your [the named insured/contractor’s] work”, and “your work,” which includes both ongoing and completed operations.

 

Sample Completed Operations Occurrence: CG 20 10 after 1985

Two months after the contractor finishes the brick wall, the wall falls onto several cars parked in the street. This is property damage out of the contractor’s completed operations. Once again, the car owners sue the property owner.

 

If the property owner was named an additional insured using the CG 20 10 with an edition date prior to 1985, the property owner would have coverage for the completed operations exposure as “your work.” If the property owner was named as an additional insured using the CG 20 10 with an edition date after 1985, the property owner would not have coverage for the completed operations exposure under the contractor’s CGL policy.

 

Prior to 1985, the CG 20 10 covered contractor’s ongoing and completed operations. After 1985, the CG 20 10 was updated to cover ongoing operations only. To address the CG 20 10’s gap in completed operations coverage, the Insurance Service Office (ISO) created the CG 20 37.

 

Additional Insured Endorsement CG 20 37: Completed Operations

Using our same wall example, if the contractor named the property owner as an additional insured using CG 20 37, there would be no ongoing coverage for the damaged cars during the construction operations (unless CG 20 10 was also attached to the policy). There would only be coverage for the damaged cars after the project was finished (completed operations).

 

Blanket Additional Insured Endorsements

 

In addition to the CG 20 10 and CG 20 37, there are “blanket”, also called “automatic” endorsements. These are additional insured endorsements the insurance companies can provide to “automatically add as additional insureds, those individuals or entities 1) for whom the named insured is performing ongoing operations, and 2) with whom the named insured has agreed in writing to name as an additional insured.” These endorsements are appealing because insurance agencies can often send out these endorsements without requesting permission from the insurance carriers. However, these forms require a written contract to trigger coverage.

 

Blanket Additional Insured Endorsement: CG 20 33 automatic status when required by a construction agreement you enter into

 

The CG 20 33 closely resembles the CG 20 10, with the most significant difference being the CG 20 33, as it requires a written contract or agreement between the additional insured and the named insured.

 

Referring back to our example, the general contractor hires 10 subcontractors to help with the project. The contractor and each subcontractor sign a written contract. The contract requires each subcontractor to name the contractor and owner as additional insureds on the subcontractors CGL policies. Each subcontractor sends the owner an endorsement showing the owner is an additional insured on the subcontractors CGL policies using blanket CG 20 33.

 

The problem with this scenario is that there is no written contract between the owner and the subcontractors. The CG 20 33 requires a written contract between the named insured and the additional insured.

 

Blanket Additional Insured Endorsement: CG 20 38 automatic status for other parties when required in written construction agreement.

 

One way the owner could have avoided this situation would have been for the owner to be named as an additional insured on the subcontractors’ policies using the CG 20 38.

 

The primary distinction between the CG 20 33 and the CG 20 38 is that the CG 20 38 provides coverage for upstream parties. Upstream parties are the entities or individuals above the level where an entity is contracting – the owner to the subcontractors. Whereas the CG 20 33 only provides additional insured status where there is a direct written contract, the CG 20 38 extends coverage to “any other person or organization you are required to add as an additional insured under the contract or agreement.”

 

As always, consult with your Risk Advisor in determining the proper coverage and limits.

 

 

 

Additional Resources:

 

View Additional
Insured Breakdown

 

 

 

 

 

 

 

 

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BCH has a unique approach to advising our clients on how to control their Total Cost of Risk, not simply insurance cost. The Total Cost of Risk (TCOR) includes preventive, direct and indirect costs associated with operating a business. The BCH approach includes collaborating with our clients to create a long range written plan for controlling their TCOR .