If you own, occupy, or manage property, or if you hire contractors or subcontractors to do work for you, then you should know about additional insured endorsements. An additional insured endorsement adds your name as a person insured under the contractor’s general liability policy. Depending upon its specific wording, the endorsements can provide broad protection against claims and lawsuits from persons who may be injured as a result of the contractor’s work.
The facts of a recent California case illustrate the point.
Syufy owned a theater. C&C Building Automation was hired to perform electrical work for Syufy. Syufy was named as an additional insured on C&C’s commercial general liability policy. Due to Syufy’s negligence, one of C&C’s employees was severely injured while performing the work at the theater. The employee sued Syufy who was self insured for the first $150,000. Syufy tendered the case to C&C’s commercial general liability carrier (AIC) for defense and indemnification. AIC settled the case for $400,000, but claimed that both Syufy and Syufy’s insurance carrier (Reliance) should also contribute to paying the settlement.
The Court of Appeal held that neither Syufy nor Reliance were responsible to pay the claim because of the specific language of the additional insured endorsement. Syufy saved $150,000 (the amount of its self-insured retention), Syufy’s insurance company (Reliance) did not have to pay, and Syufy saved an increase in its own insurance costs.
Two points to remember:
1. Your written contract should require the contractor to defend and indemnify you against all claims arising out of or in any manner related to the contractor’s work.
2. The contract should require the contractor to maintain a specified level of commercial general liability insurance and name you as an additional insured by specific endorsement to the policy.
Note that not all additional insured endorsements are the same. Many insurance companies have limited their endorsements to only apply to liability resulting from the named insured’s negligence, not the negligence of the additional insured. If you are asking for an additional insured endorsement, you should confirm that both your own insurance policy, and the endorsement that the contractor’s insurance company provides, fully protect your interest. If you are a contractor who is being asked to provide an additional insured endorsement, you should confirm that your insurance company provides an endorsement sufficient to comply with your contractual obligations.
If you have any questions regarding the applicability of the above case to a particular situation, you should contact counsel.