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Blanket Additional Insured Coverage...A HUGE Exposure Gap

Author: VU Faculty

A written construction agreement exists between the insured contractor and a project owner that clearly requires additional insured (AI) status be extended to the owner, architect, construction manager, etc. The AI endorsement we're using appears to extend AI status ONLY to the party with which our insured directly contracted with.

 

Question"Coverage scenario ... a written construction agreement exists between the insured and one entity (owner) that clearly requires additional insured status be extended to multiple entities (i.e., the construction manager and architect). Does the attached blanket additional insured form extend additional insured status to ALL PARTIES NAMED in the agreement or ONLY to the party they have contracted directly with? Appreciate your thoughts."

Answer?The language in the attached additional insured endorsement, with regard to the issue at hand, is identical to that in the current ISO CG 20 33 07 04. There is at least one court case that has interpreted AI status to extend ONLY to the party with whom the insured has directly contracted. Our national Technical Affairs committee plans on pursuing this issue with ISO next year. In the meantime, here are some VU faculty thoughts.

Faculty Response
The way I read it, it applies only to the person or entity with whom a contract has been directly signed.

Faculty Response
The endorsement includes as an insured “any person or organization when you and such person or organization have agreed in writing in a contract, agreement or permit that such person or organization be added.”  I believe it only covers the person or organization who entered into the contract. If other parties require additional insured status it would be best to use a CG 20 10 or its equivalent and list the various parties.

Faculty Response
The way I read it, the AI status extends only to the person or organization with whom the insured has the written agreement. The secondary parties would not be included. The real answer, however, must come from the underwriter. Ask him or her and be guided accordingly

Faculty Response
This is the same language as the ISO CG 20 33 which says that the automatic status is extended to the party with whom the NI has made the contract and not any other party that the contract also requires to be an AI. A recent case in point was a CG 20 33 where the contract between the GC and Sub said that the sub had to name the GC and owner and provide certificates. A third party was injured and sued all three. The Sub and GC were defended but defense was denied to the owner as the owner’s status as an AI was not granted by the endorsement.

1. Paragraph 2. under SECTION II - WHO IS AN INSURED is amended to include as an insured anyperson or organization when you (NI) and such person or organization (the party to the contract with the NI) have agreed in writing in a contract, agreement or permit that such person or organization be added as an additional insured on your policy to provide insurance such as is afforded under this Coverage Part.

Faculty Response
IRMI has a discussion of this issue and they cite the case of Brooklyn Hosp. Ctr. v. One Beacon Ins., 5 Misc. 3d 1029(A), 2004 WL 2913774 (N.Y. Sup.) as one court that has followed the restrictive interpretation that AI status is extended only to the party with which the insured has directly contracted. Clearly, this makes any blanket AI endorsement with similar wording virtually worthless to upstream parties. The Big "I" Technical Affairs committee discussed this with ISO at our May meeting and they're pursuing it through that channel.

Faculty Response
The endorsement clearly limits protection to only the individual/entity that the insured has contracted with.

Faculty Response
Ask the insurer to specifically name all the required parties as additional insureds. Do not rely on opinions of other people. Post loss attorneys could argue the language either way. A layperson might read it as applying only to the actual contracting party.

Faculty Response
The issue is similar to the discussion regarding the CG 20 33​ which refers to “any person or organization for whom you are performing operations.” Some claim this limits coverage only to the immediate upstream party. My belief is that few if any courts would read it in such a restrictive manner. 
 
If, for example, your  insured is a sub-sub, is it not performing operations not only for the subcontractor that engaged its services but also for the GC and owner?

Last Updated: August 27, 2010

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