Additional Insured Endorsements

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Alan York
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1 Additional Insured Endorsements The topic of additional insured status is a difficult one at best. Many misconceptions result when adding contracting parties to one another s insurance policies as additional insureds. There is also the tug-of-war between insurers and indemnitors that want to limit the scope of additional insured coverage under their policies and the indemnitees who want to maximize coverage under the policies of the indemnitors. Added to this, the interaction of additional insured status with indemnity clauses, insurance requirements, and other contract provisions is unique and complex. This session will examine the reasons for requiring, methods of achieving, and problems associated with additional insured status under various policies. Copyright 2016 International Risk Management Institute, Inc. 1

2 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 2

3 Additional Insured Endorsements WHY MUST THEY TORTURE ME? How One Little Piece of Paper Changed an Industry 2 3

4 E&O The ultimate additional insured endorsement 3 What Is(n t) A Certificate Of Insurance? Informational snapshot only Cannot modify a policy Is not a contract (or is it?) 4 4

5 Three Types Of Certificate Desires I have a dream Here s what I ll settle for Deal-breaker 5 Four Types Of Certificate Requests Uninsurable Any Acts, errors, omissions Any and all liabilities Claims, costs, expenses, liabilities, penalties, fines Primary and Non-contributory What does non-contributory mean? Non-CGL policies Equivalent or comparable 6 5

6 Four Types Of Certificate Requests Illegal Non-existent coverage Withdrawn endorsements Transfer of sole negligence Certificate modifications Striking through / amending language / disclaimers ACORD copyright violation Statute, regulation or DOI directive violation 7 Four Types Of Certificate Requests Inappropriate Cancellation notice No longer provided Endeavor to was a pipe dream Non-ACORD Certificates Usually require company approval Improper request or copyright infringement 8 6

7 Four Types Of Certificate Requests Inappropriate Comprehensive General Liability Comprehensive Automobile Liability Agent attestation ( in the opinion of the agent, the policy contains the required insurance coverages/indemnifications required by the contract with the insured ) 9 Four Types Of Certificate Requests Impractical Unavailable or expensive Completed operations, EIFS, pollution, subsidence, mold, etc. No time to search market before certificate is due 10 7

8 Weird Requests Ongoing operations XYZ Corporation and its officers, directors, partners, members, and employees coverage to continue for (5) (10) years x, c and u exclusions removed Blanket contractual liability Broad form property damage 11 Other Issues Certificate limit v. policy limit Impaired aggregates Deductibles and SIRs Defense within limits Known loss or damage Umbrella and excess policies Copyright issues Carrier agreements Your authority extends to issuance of standard, unaltered Certificates of Insurance (ACORD 24 or 25) 12 8

9 Use The Proper Form ACORD Certificates 20 Certificate of Aviation Liability Insurance 21 Certificate of Aircraft Insurance 22 Intermodal Interchange Certificate of Insurance 23 Vehicle or Equipment Certificate of Insurance 24 Certificate of Property Insurance 25 Certificate of Liability Insurance 27 Evidence of Property Insurance 28 Evidence of Commercial Property Insurance 29 Evidence of Flood Insurance 30 Certificate of Garage Insurance 31 Certificate of Marine/Energy Insurance 13 What You Should (and Should Not) Do DO provide a disclaimer to the insured and certificateholder DO NOT exceed your legal or contractual authority DO work with the insured s attorney or minimize contract review DO NOT modify an ACORD certificate DO proof-read all certificates and perform periodic audits DO establish a procedure for handling certificates DO always send the entire certificate (both pages) DO be judicious with the big white box the FIG indicates you should put any exclusion endorsement or special policy condition 14 9

10 What You Should (and Should Not) Do DO send copies of certificates to all insurers/mgas/wholesalers DO use the correct form DO NOT use proprietary or non-acord forms without company approval DO NOT certify coverages that don t exist DO NOT indicate limits on a certificate that satisfy the request when actual policy limits are higher DO NOT sign any certification or attestation without management approval 15 10

11 Additional Insured Changes Changes 24 revised forms Many changes are due to state anti-indemnity statutes Coverage for AI is only to the extent provided by law Coverage for the AI cannot be more broad than that provided to the Named Insured New forms CG Primary and Non-Contributory Other Insurance Endorsement Requires AI to be an NI on other available insurance Written contract must state that our insured s policy be primary and not seek contribution from other insurance of the AI CG Additional Insured Owners, Lessees or Contractors Automatic Status for Other Parties When Required in Written Construction Contract Agreement 17 11

12 2013 Changes Basic attempt to tie (and therefore limit) the coverage provided to an Additional Insured to the underlying contract provisions New wording: However: 1. The insurance afforded to such additional insured only applies to the extent permitted by law; and 2. If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured. CG Insurance Services Office, Inc., Changes 45 states have anti-indemnification statutes that restrict, modify, or invalidate indemnification agreements in construction and other contracts These statutes frequently prohibit the transfer of an indemnitee s sole (or concurrent) negligence through an indemnification agreement ISO may be attempting to genericize the endorsement to conform to the various state laws without the need to create state-specific endorsements The ultimate impact of this change will remain unknown until ISO issues clarification or there are judicial decisions 19 12

13 2013 Changes However: 1.The insurance afforded to such additional insured only applies to the extent permitted by law; and 2.If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured. This change could result in significant disagreements between the contracting parties Requires careful review of underlying contracts CG Insurance Services Office, Inc., Changes If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance: 1. Required by the contract or agreement; or 2. Available under the applicable Limits of Insurance shown in the Declarations; whichever is less. CG Insurance Services Office, Inc.,

14 Other Issues Contractual Liability That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement. CG Contractual Liability Limitation Endorsement Eliminates this paragraph completely CG Amendment of Insured Contract Definition That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization, provided the "bodily injury" or "property damage" is caused, in whole or in part, by you or by those acting on your behalf. However, such part of a contract or agreement shall only be considered an "insured contract" to the extent your assumption of the tort liability is permitted by law. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement. CG Insurance Services Office, Inc., Blanket Additional Insured Endorsements The use of blanket AI endorsements restricts the ability to provide notice of cancellation. When blanket endorsements are used, the insurer does not have a list of additional insureds or addresses. They are not aware of additional insureds' identities until a claim is made. Obviously insurers can't provide notice of cancellation to unidentified parties

15 Blanket Additional Insured Endorsements New CG (replaces CG 20 33) Any other person or organization you are required to add as an additional insured under the contractor agreement described in Paragraph 1. above. Extends AI status to an upstream party that is NOT a party to the underlying contract, where required Prior version only extended to parties who shared a contractual relationship Clarifies that other parties are covered when the NI is obligated in a written contract to name them even when they are not in contractual privity with the NI CG Insurance Services Office, Inc., Resources Statutes and Regulation Court Cases

16 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 16

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