Additional Insured Explained

When you think of an “additional insured,” you probably think of someone being added to your insurance—like putting your children on your auto policy, for instance. But this is not the case. When you add someone to your insurance, that person will be protected in the same way you are under the policy. An “additional insured” on the other hand is only protected for incidents arising out of your acts for which you are insured. To say it another way, an “additional insured” is someone who would likely be sued along side you if you were responsible for a loss.

That distinction may seem confusing, so let’s look at a couple examples. First, consider a restaurant located in a strip mall. If that restaurant had a kitchen fire that damaged other businesses, the landlord would likely be sued for premise liability in addition to the restaurant. Because of this, the landlord will probably require that it be named as an “additional insured” on the restaurant’s policy as a condition of the lease. In the world of contracting, general contractors will certainly be sued in addition to sub-contractors for any damage or injury that a sub-contractor causes. As a result, general contractors will almost always require being named as an “additional insured” on a sub-contractor’s general liability policy.

It is also important to understand that there are different “additional insured” endorsements for general liability policies. Originally, the endorsement—called a CG 2010—provided coverage for an additional insured for any claim arising from the work of the policyholder. This allowed coverage for an additional insured on any claim arising from the policyholder’s work, even after the work was completed. For instance, if a plumber handled all the plumbing for the construction of a new office building, and shoddy work resulted in a major leak two years later, the endorsement still covered the general contractor as an additional insured.

In 1993, Insurance Services Office (ISO) revised the CG 2010 endorsement to only provide coverage for claims arising out of the “ongoing operations” of the policyholder. Although insurers intended to reduce their exposure to lawsuits years after a project was completed, the language change created additional ambiguities and disputes between policyholders and insurers. In 2001, ISO addressed these ambiguities in the CG 2010 endorsement by completely excluding coverage for claims arising from completed work, but also creating a new endorsement—the CG 2037—to provide coverage specifically for claims arising from completed work.

Revisions came to these endorsements twice more in the following twelve years. First, in 2004, ISO revised the endorsements to provide coverage to an additional insured only when the policyholder causes liability in whole or in part. This removed the “arising out of” language from the endorsement, which conceivably would provide coverage to an additional insured for its own acts or omissions with regard to the policyholder’s “ongoing operations.”

In 2013, ISO revised the endorsements again to say that, if additional insured coverage is required by a contract, the coverage will not exceed the contract requirements. This revision served the purpose of limiting the scope of coverage. The 2013 revision also dictated that additional insured coverage is only provided to the extent permitted by law. This is because several states have created laws that prohibit contracting parties to use additional insured provisions as a work-around of anti-indemnification statutes. These statutes state that additional insureds cannot receive more coverage than they would be allowed to receive by indemnification.

Presently, these two additional insured endorsements—CG 2010 and CG 2037—work hand-in-hand to protect an additional insured for any liability arising from a policyholder’s act or omission during ongoing or completed work.