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Additional Insured Issues for Connecticut General Contractors

  
  
  
  

bridge resized 600Most general contractors worth their salt require all of their subcontractors to list them as additional insured (AI).  But not all additional insured endorsements are created equal, in both coverage and time elements.  Just because a sub sends you a certificate of insurance listing you(the GC) as additional insured does not mean that you are additionally insured for the types of coverage or timeframes you are requiring in your contracts. Some additional insured endorsements provide automatic coverage when a written contract is signed, some need to be separately added to their policy, some cover completed operations, some cover the owner, some cover engineers/architects...and some don't.  Having the phrase "ABC Construction is listed as additional insured" on a cert can be a completely worthless statement if the sub's actual endorsement will not respond in the ways it is required to in your contract.

This can be a problem for both the general contractor and the subcontractor.  For the sub, if they don't have the proper AI endorsement as required by contract and a claim arises naming them as wholly or partially responsible, they will be both in breach of contract as well as uninsured for the claim.  You, the GC, will not have access to the sub's limits because their insurance policy doesn't have the correct coverage to respond to that claim because the GC was never actually an additional insured.  Long story short, they could potentially pay their portion of the claim out of pocket, and the GC will have to use their own insurance limits instead of the responsible partys'.  This is a hypothetical scenario, but one that will become more prevalent as the complexity of contracts increase and lawyers become more adept at deciphering contract language.

What can you do to ensure the subs working on your jobs are in compliance with your contracts?

  1. Work with your insurance broker and lawyer to rewrite your standard contract with wording that reflects current language used in insurance policies
  2. Decide on which additional insured endorsement you will require your subs to have.  Preferably one that affords coverage for ongoing AND completed operations
  3. REQUIRE all subs to attach a copy of their additional insured endorsement to their certificates of insurance
  4. Ask your agent which other AI endorsements afford equal or better coverage to the one you are requiring, because someone at your company will have to crosscheck the endorsements from subs against the endorsement you require in your contract

Will this add more paperwork for your staff? Yes and No.  (unplug the fax machine and embrace technology. Computers can make this process much, much, much faster and easier)

Does this make recordkeeping more time consuming? Yes. (make a file on your computer for each job and each sub that works for you, and start mandating that all certs be emailed in PDF form)

Does this help strengthen your risk management program to guard your construction company against uninsured claims and lawsuits? YES.

 

And if you're a general contractor that isn't requiring your subs to list you as additional insured, please call as ASAP.


Comments

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Posted @ Tuesday, March 01, 2011 1:52 PM by Dan Phelan
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Posted @ Tuesday, October 04, 2011 9:34 PM by Canada Goose Parka
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