Overlooked Obtaining an Additional Insured Endorsement? You Might be Saved by the Automatic Additional Insured Endorsement – or Might Not.

Many CGL policies typically include an endorsement that contains a clause providing for automatic additional insured status without a project specific schedule listing names of additional insureds. (See, for example, form CG 2033 0704, “Additional Insured-Owners, Lessees or Contractors – Automatic Status When Required in Construction Agreement With You”). By this endorsement the “Who is An Insured” provision is amended “to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.” That can be a fail-safe mechanism when upstream contracting parties neglect to obtain necessary written endorsements naming specific parties. However, it only goes so far.

In a recent decision [1] , a court concluded this endorsement means exactly what it says when a construction manager and owner sought additional insured status from a general contractor’s plumbing subcontractor.[2] The construction manager and owner relied on the automatic additional insured endorsement as there was no specific naming endorsement reflecting those parties as additional insureds. The court found it was undisputed that there was no written agreement between the subcontractor and the construction manager or owner. Thus, there was no coverage for them. Even considering arguments that the subcontract incorporated by reference the general contractor’s contract with the construction manager, which required the general contractor – and thus arguably the subcontractor – to name the owner and construction manager as additional insureds, those organizations simply did not qualify under the terms of the endorsement (viz. “when you and such person or organization have agreed in writing”). It is the terms of the policy that controls the insurers obligation, not the terms of the contract. Only the general contractor had a written agreement with the subcontractor and thus qualified, and the coverage clams by the others were accordingly dismissed.

Getting a specific naming endorsement – and one without the limiting language of the automatic clause noted above – is the only way to proceed. The contract terms themselves will not suffice, nor will a certificate of insurance, as we all know.

As an alternate, the Insurance Services Office has recently published a series of modified additional insured endorsement forms including a new one, CG 2038 0413, which adds the following to A. Section II – Who is an Insured: “any other person or organization you are required to add as an additional insured under the contract or agreement described in Paragraph I above.”

That should address that problem. Not solved, however, is the problem with that form’s – as well as its alternate CG 2033 0413 – exclusive application to on-going operations with no coverage to additional insureds for completed operations of the named insured.

[1] Turner Construction Co. v. The Harleysville Worchester Insurance Co., 2013 N.Y. Misc. LEXIS 4183, 2013 N.Y. Slip Op 32209(U), Supreme Court, New York County, September 13, 2013.

[2] The endorsement is quoted by the court but not identified by form number but likely was the 0704 edition of CG 2033 because the policy was issued for 2007

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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