Author: Chris Boggs
Lawyers and risk managers love to see their clients' names in lights (specifically listed on a piece of paper). For some reason this makes them feel like they have accomplished something. Further, they incorrectly assume that the solution for one exposure applies equally well to another exposure. These misplaced needs and mistaken beliefs pushed Insurance Services Office (ISO) into creating two overwhelmingly useless business auto policy (BAP)endorsements:
- CA 20 48 - Designated Insured for Covered Autos Liability Coverage; and
- CA 04 44 - Waiver of Transfer of Rights of Recovery Against Others To Us (Waiver Of Subrogation)
CA 20 48 – Designated Insured for Covered Autos Liability Coverage
Upper tier contractors generally require status as an additional insureds (AIs) in the lower tier's commercial general liability (CGL) policy. This requirement exists because the upper tier has a vicarious liability exposure arising from the actions of the lower tier contractor. In short, the upper tier could be held legally liable for injury or damage caused in whole or in part by the lower tier, thus it expects some level of liability protection be extended to it from the lower tier's CGL. This is a reasonable expectation.
Well, if this is a coverage solution for the CGL, the lawyers and risk managers assumed it would be an equally effective solution for the business auto exposure. Over time, contracts began requiring the upper tier be added as an additional insured on the BAP. The problem, there wasn't, and still isn't, an AI endorsement for the BAP. The ultimate result was the creation of the CA 20 48.
The problem with and the reason why the CA 20 48 is USELESS is because it is wholly unnecessary. It's non-necessity flows from the fact that the upper tier is already extended protection as an insured within the BAP wording. The relevant language provides:
- Who Is An Insured
The following are "insureds":
c. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.
Additional insured status is not necessary because “1.c." already makes the upper tier an insured in the policy. But try to explain that to a lawyer or risk manager who wants their client's name on a useless piece of paper. Eventually the industry got tired of fighting and the CA 20 48 was born.
My favorite part of the endorsement is where it basically tells the entity named in the endorsement that they are an idiot for requesting it. OK, so that's not what it says; the endorsement tells the named entity that they don't get any coverage they didn't already have:
Each person or organization shown in the Schedule is an "insured" for Covered Autos Liability Coverage, but only to the extent that person or organization qualifies as an "insured" under the Who Is An Insured provision….
Basically, if you had coverage before, this just proves you have coverage now. If you didn't have coverage before, guess what, you don't have coverage now just because you are named on the endorsement.
The endorsement might just as well state, “Hey, you just wasted your time and ours."
CA 04 44 - Waiver of Transfer of Rights of Recovery Against Others To Us (Waiver Of Subrogation)
ISO's BAP, and most ISO property and casualty (P&C) coverage forms, allows the insurance carrier to recover payments made to or on behalf of an insured from the at-fault party causing the damage. Although the form refers to this as the Transfer Of Rights Of Recovery Against Others To Us, it is generically referred to as an insurance carrier's right of subrogation.
Applicable policy wording in the BAP reads:
5. Transfer Of Rights Of Recovery Against Others To Us
If any person or organization to or for whom we make payment under this Coverage Form has rights to recover damages from another, those rights are transferred to us. That person or organization must do everything necessary to secure our rights and must do nothing after "accident" or "loss" to impair them.
This is a typical example of subrogation wording in most P&C contracts. Notice that this wording precludes the insured from doing anything after an accident or loss to impair the carrier's right of recovery. This means the insured can waive such sights prior to the loss.
Contract wording generally requires the lower tier to waive any right of recovery against the upper tier. When an insured contractually waives its rights of recovery before a loss, it also waives the insurance carrier's right of recovery (subrogation and contribution). Remember, the insurance carrier's rights flow from its insured's rights; and when the insured doesn't have the right to seek subrogate or contribution, neither does the insurance carrier.
Although the right to recover is contractually waived, the upper tier often continues to require the lower tier to attach a “waiver of subrogation" endorsement (which is a misnomer because no such endorsement exists, but that's a conversation for a different day) in the upper tier's favor. This is a “belt and suspenders" approach that is practically unnecessary because of the contract; but again, you try telling a lawyer anything.
But consider this, if the contract does not address the waiver of subrogation (or recovery), the CGL policy can still be endorsed to preclude the insurance carrier's right to subrogate against the named party. This is where the CGL and BAP versions of the “waiver of subrogation" endorsement part ways. Following is the BAP version of the “waiver' endorsement:
The Transfer Of Rights Of Recovery Against Others To Us condition does not apply to the person(s) or organization(s) shown in the Schedule, but only to the extent that subrogation is waived prior to the "accident" or the "loss" under a contract with that person or organization.
Did you notice this interesting phrase: but only to the extent that subrogation is waived prior to the "accident" or the "loss" under a contract with that person or organization. The CGL version of this endorsement does not have this “under a contract" requirement.
So, for this endorsement to be applicable, the insured must have already contractually waived its right of recovery against the named party. That's why ISO is willing to throw around the parenthetical phrase “(Waiver of Subrogation)" within the endorsement name (even though it is inappropriate).
Basically, like the CA 20 48, this endorsement was created just to shut some people up. It's useless. The contract between the parties took away the right to recover; and if there was no contract or the waiver was not addressed in the contract, this endorsement is not applicable. This endorsement is never a stand-alone option as it is for the CGL.
Conclusion
Lawyers exist for one reason: to make work for other lawyers. But sometimes their hijinks and lack of common sense result in unnecessary work for unintended groups along with the creation of useless paper. Such is the case with these two BAP endorsements.
Neither endorsement accomplishes anything that isn't already done. The CA 20 48 gives insured status to an entity that already had insured status. The CA 04 44 waives a right that was already contractually waived; and if it wasn't contractually waived, the endorsement grants nothing.
Long live lawyers, they give us so much to argue and write about (not to mention being the punchlines for so many jokes).
Last Updated: June 19, 2023