One of the most commonly found clauses in any construction contract is the requirement of one party to name another party as an additional insured. It is found in The American Institute of Architects (AIA) documents, the Consensus DOCS, and was inserted in almost all manuscript agreements.
Many insurers, in response to the increase in claims, have come up with their own additional insured proprietary forms, typically, with the intent to restrict coverage. Since the wording is non-standardized, it is, virtually, impossible to really know whether you are being properly covered by the Contractor’s general liability policy without reviewing the actual additional insured endorsement being provided.
Some of the landmines Owners and Developers need to be aware of when dealing with this issue are:
- Many additional insured endorsements, including ISO industry standard forms, contain a requirement that the Insured (Contractor) and the party seeking additional insured status (Owner/Developer) have an agreement in writing, requiring the Insured (Contractor) to add the Owner/Developer as an additional insured. What does this mean? If there is no written contract requirement to add the Owner/Developer, then coverage will not be afforded to the Owner/Developer!
- Many of the carrier proprietary additional insured endorsements do not provide completed operations coverage to the additional insured. This is, obviously, problematic as once the work is done and put to its intended use, general liability coverage ceases to be provided to the Owner/Developer by virtue of the additional insured status.
- It is important to understand that although a certificate of insurance (often an "ACORD" form) may identify a particular party as a certificate holder, a certificate holder is not the same thing as an additional insured. Moreover, the certificate of insurance is generally issued only as a matter of information and confers no actual rights upon the certificate holder. The certificate clearly states that if the certificate holder is an additional insured, the policy must still be endorsed accordingly. "Must be endorsed" means that unless there is an endorsement attached to the certificate received, the additional insured will not know what coverage is actually provided, regardless of the contractual obligations.
If you would like to further discuss how you can be properly protected under Contractors’ insurance policies, please feel free to contact Albert L. Sica, at 732.395-4251 or at firstname.lastname@example.org.