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Liability issues and subcontractors

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Let's start with a discussion on Additional Insured status. If you receive a certificate of insurance and it states that you are an add'l insured – is that sufficient? NO
Asking the sub to provide you with Add'l Insured status is the same as asking the sub to provide you a white refrigerator. More than likely without any direction as to the specifications of the refrigerator you want, you will likely end up with the most economical white refrigerator available. Same will happen with their insurance. There are so many options available that it is logical to assume that subcontractors will provide the easiest and least expensive option, not because the subs are trying to get by with something, but because the additional insured topic in insurance is very confusing, so most people tend to find the path of least resistance.
The standard ISO Add'l Insured endorsement has changed several times since 1985. In the 1985 version, courts took the position that this form provided Add'l Insured status for "ongoing" AND "completed operations". However in 1993, this form was amended so that it no longer provided Add'l Insured status for "completed operations".
  • So in order to have Add'l Insured status for "ongoing" and "completed operations" the insured will need to endorse their policy to include two (2) Add'l Insured endorsements – CG 2010 and CG 2037 and include a copy of each along with the certificate of insurance they send to you. CG 2037 – AI for Completed Operations is the more expensive of these two options.
  • To complicate matters, not all insurance carriers use standard ISO endorsement forms so some carriers will use their own proprietary forms. Potentially you could see hundreds of different forms. Look for "ongoing operations" or coverage ends when work is completed and "included in the Products/Completed Operations hazard"
  • Blanket add'l insured forms are very popular these days. Must make sure contract is in place as the written contract is the trigger for Add'l Insured status on these forms.
If a sub's insurance program does not meet your expectations, I can guarantee you that their carrier will not be very helpful to you after a claim. Their carrier will only respond based on their sub's "legal" liability and based on their current policy language. Paying very close attention to their policy coverage is the only way to assure that your subcontractor's carrier will respond as expected when there is a claim. For more information or questions on this subject, please contact me.

Chuck Thompson, CRIS - Agency Manager/Partner of Thompson & Smith, LLC. An independent insurance agency and risk management firm specializing in the insurance and bonding needs of contractors. Contact: cthompson@thompsonandsmith.com. 731-664-4750 phone