Coverage Corner

WHAT DIFFERENCE A DATE MAKES – TO AN ADDITIONAL INSURED

By Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP

Your contractor client sends you a certificate request with insurance requirements for a new job. The general contractor is requiring that it be additional insured on CG 20 10 11 85 or its equivalent. You issue the certificate showing coverage on the CG 20 10 12 19 form your insurer is currently using. Your insured calls and is furious. The general contractor refuses to let him begin work until the proper endorsement is issued and is threatening to cancel the contract.

What went wrong? Isn’t what you provided equivalent?

The short answer is no – it is not equivalent. The long answer requires a bit of an additional insured history lesson.

The CG 20 10 – Additional Insured - Owners, Lessees or Contractors endorsement adds coverage for those for whom a named insured contractor is performing operations. A subcontractor can add a general contractor, for example, while a general contractor might add a project owner.

The CG 20 10 11 85 states that coverage applies with respect to liability arising out of the named insured’s work for the additional insured. This form does two things that more recent editions of the form do not do. The CG 20 10 11 85 covers the additional insured even if the named insured has done nothing to contribute to the loss – for example, when the additional insured is the solely negligent party. It also provides both ongoing and completed operations coverage.

With the 10/01 additional insured revisions, ISO added language to the CG 20 10 that clearly describes when coverage for the additional insured ends. That is also when ISO created the CG 20 37 to provide the completed operations coverage no longer included in the CG 20 10. It became necessary to add both endorsements to provide ongoing and completed operations coverage for the additional insured. These editions still include the desirable arising out of language, and it is common to see requests for CG 20 10 10 01 plus CG 20 37 10 01 instead of CG 20 10 11 85.

One of the biggest changes is in the CG 20 10 07 04 form. The arising out of language was replaced with language stating that the loss must be caused in whole or in part by acts or omissions of the named insured or one acting on its behalf – an employee or subcontractor, for example. With this language, which is still in later forms, there is no coverage unless the named insured has done something to contribute to the loss. ISO added similar language to the CG 20 37 07 04.

Additional changes to both the CG 20 10 and CG 20 37 were made in the 04/13 versions. First, added language states that the coverage afforded the additional insured only applies to the extent permitted by law. In many states, one cannot, in a construction contract, indemnify another party for any of its own wrongdoing. In some of these states, additional insured endorsements cannot be used to circumvent the intent of these anti-indemnity statutes.

Two additional changes in the 04/13 forms attempt to limit the coverage provided to the additional insured to what the named insured agreed to do in a contract or agreement. If there is a contract or agreement, coverage will not be broader in scope than the contract requires or provide limits higher than the contract requires. If the subcontractor with a $2,000,000 CGL agrees to provide only $1,000,000 of coverage for the additional insured and agrees that such coverage will apply only to the extent the subcontractor is negligent, coverage for the additional insured will be less than the endorsement without this language would provide.

Language changes in the CG 20 10 12 19 and CG 20 37 12 19 are mainly to recognize that policy limits on the declarations may have been changed by endorsements.

Many insurers do not offer the CG 20 10 11 85, although some have created their own forms that come close. Whether an insurer offers something that might be considered equivalent is a question that should be addressed before coverage is bound. It is important to discuss with the insured what he is agreeing to do in his contracts and to arrange coverage, where possible, to meet those requirements. It is also important to note that only the additional insured can make the determination as to whether the endorsement used is equivalent to the CG 20 10 11 85. This is subjective, and the insurance agent should avoid expressing this opinion. It is better to provide a copy of the endorsement used and let the additional insured decide whether it is equivalent.

So what difference does a date make? To an additional insured, it makes all the difference. Til next time!

Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP is IA&B’s commercial lines education consultant. She works with our CIC and CISR programs, as well as our live CE webinars. Catch her at one of our upcoming courses: IABforME.com/education