January 2016
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Trends and Hot Topics
The Hot Potato of Indemnification What’s being asked of you and why?
Standard ISO Additional Insured Endorsements 1985 Broad Form
1993 Broad Form
20 10 11 85 Who is an insured is amended to include “the person or organization shown in the Schedule, but only with respect to liability arising out of ‘your work’ for that insured by or for you.” (emphasis added)
by Robert Barresi
Every contractor has been in that position: You’re ready to start a job, everything has been approved, the project manager is scheduled to be onsite first thing in the morning, supplies are being delivered... just send over your insurance certificate. More and more we’re finding property owners/managers, general contractors, construction managers, and others requesting not only your insurance certificate but also copies of the endorsements for their review. We all know the magic language: “additional insured including completed operations,” “primary and noncontributory basis,” “waiver of subrogation.” At the end of the day, though, there are many different additional insured endorsements, and the one you have, and pay good money for, may not be the best or most appropriate for the work you’re doing. Subsequently, it’s unacceptable to your end user. Ultimately, every person you do work for is looking for the CG2010 Additional Insured endorsement; however, there are many different variations of this endorsement, which can differ greatly, affording various types of indemnification to the interested party. The Holy Grail of additional insured endorsements is the CG2010 11/85 edition. Since many insurance carriers will not offer this endorsement, its “equivalent” is also acceptable. In order to achieve said equivalent, one has to include the CG2037, which reinstates coverage for “completed operations” afforded to the additional insured. The statute of repose in Massachusetts for construction defect claims is six years; for that reason, the “completed operations” portion of the additional insured language is paramount. Many contractors, due to the number of people who require this language on a regular basis, elect to purchase the insurance carrier’s “blanket additional insured” endorsement, which will automatically provide additional insured status, usually including completed operations and primary/noncontributory language, any time you sign a contract that requires this level of protection and indemnification. However, these blanket additional
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CG 20 10 10 93 Who is an insured is amended to include “the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.” (emphasis added)
2001 Broad Form
2004 Intermediate Form
CG 20 10 10 01
CG 20 10 07 04
Who is an insured is amended to include “[the identified persons or organizations,] but only with respect to liability arising out of your ongoing operations performed for that insured.” (emphasis added)
Who is an insured is amended to include “the identified persons or organizations, “but only with respect to liability for ‘bodily injury,’ ‘property damage’ or ‘personal advertising injury’ caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) at the locations designated [in the endorsement].” (emphasis added)
Ongoing Operations
2013 Limited Form CG 20 10 04 13 Who is an insured is defined in the same manner as in the 2004 CG 20 10 Form. However, the following language was added to the 2013 CG 20 10 Form: “The insurance afforded to such additional insured only applies to the extent permitted by law.” (emphasis added) “If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you [the insured] are required by the contract or agreement to provide for such additional insured.” (emphasis added) “If coverage to the additional insured is required by a contract or agreement, the most [the insurer] will pay on behalf of the additional insured is the amount of insurance: 1. required by the contract or agreement; or 2. available under the applicable Limits of Insurance shown in the Declarations; whichever is less.” (emphasis added)
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Completed operations coverage was included under the CG 20 10 11 85.
Completed operations coverage was eliminated under the CG 20 10 10 93.
Completed Operations
CG 20 37 10 01 New “CG 20 13” form created to reinstate completed operations. Who is an insured is amended to include “[the identified persons or organizations,] but only with respect to liability arising out of ‘your work’ at the location designated and described in the [endorsement] performed for that insured and included in the products-completed operations hazard.” (emphasis added)
CG 20 37 07 04 Who is an insured is amended to include “the identified persons or organizations, “but only with respect to liability for ‘bodily injury’ or ‘property damage’ caused, in whole or in part, by ‘your work’ at the location designated and described in the schedule of [the endorsement] performed for that additional insured and included in the productscompleted operations hazard.” (emphasis added)
CG 20 37 04 13 Who is an insured is defined in the same manner as in the 2004 CG 20 37 Form. Same limitations as noted above in the CG 20 10 04 13 Form.
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insured endorsements vary greatly from carrier to carrier. Firstly, they may only provide completed operations coverage to the additional insured for a finite period
“...blanket additional insured endorsements vary greatly from carrier to carrier.” of time, in some cases two or three years. With the statute of repose in Massachusetts being six years, this is insufficient and may put you in noncompliance of your contract. Secondly, the individual carriers’ blanket additional insured endorsement may not contain the broadest possible language; namely, covering the additional insured for work “arising out of” your acts or omissions or the acts or omissions of those performing work on your behalf. On occasion, these blanket additional insured endorsements will contain the more restrictive “. . . caused in whole or
in part by. . .” language, which can be unacceptable to your end user. For these reasons, among others, many end users, general contractors, certificate tracking services, and risk managers are asking for copies of endorsements to back up the certificate of insurance provided by your agent. Many agents who do not specialize in servicing the construction industry may overextend themselves by including language on a certificate that does not necessarily match the language of the policy. Furthermore, certificates of insurance are only valid for that moment when they are issued. Coverage can change, policies can be cancelled, and other issues may arise that change the terms and conditions of a policy midterm. Ultimately, the only way to know for sure if your policy, forms, endorsements, and coverages meet or exceed the requirements of your contractual liabilities is to have them reviewed by a specialist. A properly structured policy will have both the CG2010 and CG2037 endorsements covering additional insureds for both ongoing and completed operations on a primary and
noncontributory basis arising out of your work and those acting on your behalf with waiver of subrogation in favor of the certificate holder. You pay a lot of money for your insurance, and ultimately some words can cost more than others. Do what you
“You pay a lot of money for your insurance, and ultimately some words can cost more than others.“ can to minimize your costs, transfer risk, and manage your exposures in a way that affords both your company and those you do business with the proper protection that will allow for seamless completion of your work and long-lasting relationships with those you serve. Robert Barresi, CIC AAI ARM CRIS, is a construction specialist at Starkweather & Shepley Insurance Brokerage, Inc. in Westwood, Mass.