07 Jan Additional Insured Per Written Contract: Really?
Over the years, “automatic status” additional insured endorsements have increased. In these endorsements, additional insured status is triggered by a written contract. Agents will indicate on a certificate of insurance that “additional insured status is added per written contract.” Sometimes, this wording is mandated by insurance requirements. The question is: Is everyone required to be an additional insured provided that status?
Consider this wording from a construction contract:
“General Contractor (including its parent and affiliate companies), and their respective officers, directors, members, managers, shareholders, employees, representatives, and agents collectively are included as additional insureds on general liability policies.”
This wording must be in the “descriptions of operations/locations/vehicles” section of the ACORD 25 form.
Let’s say you use the standard “ISO CG 20 33 Additional Insured – Owners, Lessees of Contractors – Automatic Status When Required in Construction Agreement with You” endorsement. Does this endorsement provide additional insured status for all the parties listed in the wording indicated above?
This endorsement changes the “who is an insured” provision of the CGL with the following wording:
“Who Is An Insured” is amended to include as an 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 (bolding and underlining added).
Using this endorsement, the only party added as an additional insured is the person or organization for whom your insured is performing operations and with whom they have a written contract or agreement to add that person or organization as an additional insured. In other words, only the general contractor is an additional insured, not the other parties listed in the wording required on the certificate of insurance. Your insured is not performing operations for, nor does it have a written contract with, “the parent and affiliate companies, and their respective officers, directors, members, managers, shareholders, employees, representatives, and agents collectively.”
Does adding the required wording imply that everyone who is supposed to be an additional insured is an additional insured? I certainly think it does. While we know that a certificate of insurance does not “amend, extend, or alter coverage,” it can create an expectation of coverage. Many E&O suits involving additional insured status are based on “promissory estoppel” or detrimental reliance. In other words, the certificate promises additional insured status on which the certificate holder relies.
Is there a way to cover all the parties required to be additional insureds? Yes, using the “CG 20 38 Additional Insured – Owners, Lessees or Contractors – Automatic Status for Other Parties When Required in Written Construction Agreement” endorsement. This endorsement changes “who is an insured.” It uses the wording already cited in the CG 20 33 and adds an additional paragraph:
“Any other person or organization you are required to add as an additional insured under the contract or agreement described in Paragraph 1 above.“
This endorsement would cover the general contractor and the other parties required to be additional insureds.
Many construction contracts also require that additional insured status be applied to completed and ongoing operations. CG 20 33 and CG 20 38 state, “This endorsement ends when your operations for the person or organization described in Paragraph 1 above are completed.”
In 2019, ISO added two additional endorsements:
“CG 20 39 12 19 Additional insured – Owners, Lessees or Contractors – Automatic Status When Required in Written Construction Agreement with You (Completed Operations).”
“CG 20 40 12 19 Additional insured – Owners, Lessees or Contractors – Automatic Status for Other Parties When Required in Written Construction Agreement (Completed Operations).”
So, I think the best option is to add CG 20 38 and CG 20 40, so all parties required to be additional insureds are additional insureds.
Another issue: since a written contract triggers additional insured status, ensure a written contract exists. It is not unusual for a construction project to begin before the contract is signed. Should a loss occur before the execution of the contract, none of the automatic status endorsements would provide protection for the additional insureds.