Liability issues and subcontractors


Over the past 20 years I have been involved with construction insurance and studied the General
Liability policy and how it relates to construction. One thing I have learned is that there is a
misconception of the coverage provided by the General Liability policy in regards to Additional Insureds.
Many contractors have said to me: I have the sub’s certificate and it states that I am an additional
insured, so I should be good, right? Quite simply, the answers is –  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 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
  • Make sure your subcontractors are providing you copies of their actual Add’l Insured
    endorsements along with their certificates. With the actual endorsement form available you
    can determine if the add’l insured status includes “completed operations”. Look for “ongoing
    operations” or coverage ends when work is completed and “included in the
    Products/Completed Operations hazard” to determine if you have the correct forms or not.
  • Blanket add’l insured forms are very popular these days.  If your subcontractor has provided you
    add’l status via a blanket endorsement, you must make sure a 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.  Making sure you have subcontract agreements in
place with all you subs and 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.