How to Optimize Additional Insured Coverage in Construction Contracts

An article by Noelle McCall, CIC, CRM, CCIP, ACRA, CISR

Understanding insurance coverage for construction projects is crucial, especially when it comes to additional insured coverage. Are you making the most informed choices when it comes to additional insured coverage requirements in construction contracts with your downstream subcontractors? Here are some pro tips to help you navigate the complexities and ensure robust protection.

Some Issues with the Latest Editions of Commonly Required ISO Additional Insured Forms

The most commonly required ISO Additional Insured forms in construction contracts today are:

• ISO CG 20 10 – Additional Insured – Owners, Lessees or Contractors – Scheduled Person or Organization
• ISO CG 20 37 – Additional Insured – Owners, Lessees or Contractors – Completed Operations

Unfortunately, these forms have a problematic limitation that can result in no coverage for the additional insureds. This is because both forms require that the named insured’s work (i.e., the subcontractor’s work) be done for each additional insured in order to trigger coverage. This can be a big problem if a subcontractor’s contract requires upstream parties (such as a general contractor or owner) to be included as additional insureds.    

Some ISO Additional Insured form recommendations:

Instead of requiring ISO forms CG 20 10 (for on-going operations) and CG 20 37 (for completed operations), consider requiring ISO forms CG 20 38, CG 20 26, or CG 20 43 (for ongoing operations), and CG 20 40 (for completed operations) in your contracts. Below are some benefits associated with the use of the recommended forms.

Flexibility with ISO CG 20 26 Additional Insured - Designated Person or Organization:

If CG 20 26 form is used and additional insureds are scheduled (specifically named) on the form, then additional insured coverage can be provided regardless of if a contract requires the coverage or not. This offers a level of flexibility that can prove invaluable in situations where the named insured may want to provide additional insured coverage to another party, but there is no contractual requirement to do so. I’ve seen this situation occur when another party is insisting on receiving evidence of additional insured coverage on a certificate of insurance before the party agrees to pay the named insured for some work, but the other party forgot to require additional insured coverage in their contract with the named insured.  

Automatic Coverage with ISO CG 20 43 Additional Insured – Automatic Status When Required in Written Contract or Agreement:

Utilize CG 20 43 for automatic additional insured coverage, when such coverage is required in a written contract or agreement. Use of this automatic endorsement means that you won’t need to request an entity-specific additional insured endorsement be issued, which helps to streamline the additional insured process by eliminating the need to request an endorsement each time additional insured coverage is needed in contracts.

Another benefit for the use of CG 20 26 or CG 20 43 forms is that these forms don't require the named insured's work be done for the additional insureds before coverage can be triggered.

Automatic Coverage for Upstream Parties:

• CG 20 38 Additional Insured – Owners, Lessees or Contractors – Automatic Status for Other Parties When Required in Written Construction Agreement
• CG 20 40 Additional Insured – Owners, Lessees or Contractors – Automatic Status for Other Parties When Required in Written Construction Agreement (Completed Operations)

If additional insured coverage for upstream parties is a concern, then I would recommend requiring CG 20 38 (for ongoing operations) and CG 20 40 (for completed operations) as these can be used to provide automatic coverage for upstream parties. These forms extend protection to additional insureds required by in a subcontractor’s written contract, even when the subcontractor isn't specifically performing work for those upstream parties.

Explore the Additional Insured Finder Tool:

Check out our Additional Insured Finder Tool (included in our FREE Starter Pack for a limited time) on our Contract Risk Academy website (www.contractriskacademy.com) for a comprehensive list of all current ISO Commercial General Liability Additional Insured forms and detailed insights into each. Choose forms aligned with your subcontractor's scope of work for maximum effectiveness.

In conclusion, ensuring proper additional insured coverage is being provided for construction contracts is critical. By using these tips to require appropriate Additional Insured forms and requesting copies of the endorsements to confirm coverage when your subcontractors send you their certificates of insurance, you can enhance your contract risk management strategy and reduce contractual risk for all relevant parties.

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