HORIZONTAL OR VERTICAL – NOT JUST A GEOMETRY QUESTION! By Cathy Trischan What do geometry and insurance have in common? The answer is that understanding horizontal vs. vertical is important in both! Imagine that your insured subcontractor has just signed a contract agreeing to provide $5,000,000 commercial general liability (CGL) coverage and to include the general contractor as additional insured. Furthermore, coverage for the general contractor needs to apply on a primary and noncontributory basis. This is easy enough to do on the subcontractor’s CGL policy. Insurance Services Office (ISO) has a number of additional insured endorsements and a 4
Primary And Noncontributory – Other Insurance Condition (CG 20 01 12 19) endorsement that can be added. The problem is getting the $5,000,000 CGL limit. Most insurers do not offer a $5,000,000 policy, and the subcontractor is likely carrying a $1,000,000 or $2,000,000 CGL with an umbrella or excess liability policy to make up the difference. Many contracts allow one to meet the limits requirement with a combination of policies. While primary and noncontributory language has been added to the subcontractor’s CGL, the subcontractor’s umbrella, like most, states that its coverage is excess MAY 2024
over and shall not contribute with any other insurance. To complicate matters, the general contractor’s CGL states it is excess, but only to the subcontractor’s primary insurance to which it has been added as additional insured. The general contractor’s CGL does not make itself excess to the subcontractor’s umbrella because the subcontractor’s umbrella is not primary insurance. So which policy should pay after the subcontractor’s CGL – subcontractor’s umbrella or general contractor’s CGL? Courts in states that have addressed this issue using standard CGL and umbrella/excess liability