Additional Insured Requirements in Construction Contracts: What Contractors Need to Know
Additional insured requirements appear in almost every construction contract. Most contractors handle them by calling their broker and asking for a certificate. That is the right first step, but there is more to it than a certificate, and the details matter when a claim is filed.
Before you price
What additional insured status means
When you add someone as an additional insured on your commercial general liability policy, they get coverage under your policy for certain liabilities arising from your work. If you are negligent and someone sues the owner, the owner can tender that claim to your insurer for defense and indemnification.
Additional insured status is different from being a certificate holder. A certificate holder just receives a copy of your certificate of insurance. An additional insured actually gets coverage.
The endorsement is what matters, not the certificate
A certificate of insurance is evidence that a policy exists. It is not the policy. Coverage for an additional insured flows from an endorsement to the policy, not from the certificate.
Your policy needs to have an additional insured endorsement. This can be either a blanket endorsement that covers any party you have a contract with, or a scheduled endorsement naming the specific party.
When you submit a certificate showing additional insured status, the owner's risk manager or attorney may ask to see the actual endorsement language. Have it ready.
Completed operations coverage
Many contracts require additional insured status for ongoing operations and completed operations. Completed operations coverage extends to claims that arise after the project is done. For example, a claim that your work caused property damage that was not discovered until a year after completion.
Not all policies automatically include completed operations coverage for additional insureds. Check your policy and your contract requirement. If the contract requires it and you do not have it, you are not in compliance.
Primary and non-contributory language
Many contracts require that your policy be primary and non-contributory with respect to the additional insured's own coverage. This means your policy responds first, and the additional insured's own policy does not contribute to defense or indemnification until yours is exhausted.
Some policies include this language automatically. Others require a specific endorsement. Ask your broker whether your policy is primary and non-contributory and what endorsement is needed if it is not.
Waiver of subrogation
Closely related to additional insured requirements is the waiver of subrogation. After your insurer pays a claim, it normally has the right to sue whoever caused the loss to recover what it paid. A waiver of subrogation prevents your insurer from pursuing the additional insured for recovery.
Contracts that require a waiver of subrogation need an endorsement to the policy confirming it. A certificate that just lists 'waiver of subrogation: yes' without a policy endorsement may not be honored by the insurer at claim time.