BEYOND CERTIFICATES OF INSURANCE

Has your company been included as additional insured on someone else’s General Liability policy?  Are you satisfied with the certificate of insurance you received showing that your company has been included as an Additional Insured?  Before you get too comfortable, you might want to dig a little deeper to see the scope of protection you are really getting!

Most of the older Additional Insured endorsements and policy language (pre-2004) contained “arising out of” language such that, for example, the Additional Insured (e.g., an owner) was protected against claims “arising out of” the operations of the Policyholder (e.g., a contractor).  Without provisions to the contrary, courts increasingly found Additional Insured status with the “arising out of” language to afford coverage for the Additional Insured even in situations where the Additional Insured was solely negligent, because it arose out of the operations of the Policyholder.  To address this unanticipated expansion of the policy’s intent by the courts, insurers have moved (or are moving) to language that affords coverage to the Additional Insured only with respect to bodily injury, property damage or personal and advertising injury caused in whole or in part by acts or omissions of the policyholder.  You will likely only know the scope of coverage being provided by looking at the actual Additional Insured endorsement or policy provision.

When hiring a contractor to build a new building, it is common practice to require the contractor to name the owner as an Additional Insured (so that the owner is covered for claims against the owner resulting from the contractor’s negligence).  Some Additional Insured endorsements used for such situations only apply to ongoing operations of the contractor and often specifically exclude completed operations claims.  Owners must specify that their Additional Insured status is to apply to ongoing and completed operations. Again, you will likely only know the scope of coverage being provided by looking at the Additional endorsement or policy provision.

Insurers today often build into their policy forms, or add endorsements that provide, automatic coverage for Additional Insureds as required in written contracts.  Keep in mind that work sometimes begins before the construction contracts are finalized and executed and that Additional Insured status under such provisions won’t be effective if there is no written contract in place.

There’s yet another way insurers may unwittingly eliminate coverage for Additional Insureds.  Some insurers attempt to grant automatic Additional Insured status using endorsements that call for a specific person or organization to be listed in the schedule of the endorsement in order to be granted additional insured status.  Instead of listing a particular person or organization, however, we have seen some insurers designate “any person or organization as required in an insured contract.”  Such language is unacceptable since “insured contract” is a defined term in the Commercial General Liability policy and if the contract does not meet that definition, no Additional Insured status will be afforded.  Once again, you will likely only know the scope of coverage being provided by looking at the Additional Insured endorsement or policy provision.

Certificates can lead you to a false sense of security, so remember that the insurance policy is the contract and the contract’s language and not the certificate of insurance will likely prevail when finding or not finding coverage for the Additional Insured.  Crafting the appropriate contract language for Additional Insured status is critical, but verifying compliance with that contact language by requiring copies of the Additional Insured endorsement or policy provisions to be attached to certificate of insurance is just as critical.

-- Charles H. Cox

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