One of the biggest questions I get from new contractors or artisan contractors (plumbers, electricians, painters, and roofers) is “why is the project owner or general contractor asking to be added to my general liability policy”. This is a very common request in the construction industry and a typical requirement you’ll find in a majority of construction contracts. The project owner/general contractor is looking for extra protection from any bodily injury or property damage you may cause on the job site in the course of the project or once your work is completed. The “additional insured” is protected from judgments and legal cost filed against them due to claims you are primarily negligent in. Your policy becomes primary for the additional insured in these situations as their own policy becomes excess to them.
Consider this… You (a plumber) are hired by a contractor to install a fire sprinkler system. One day, you have some heavy pipes leaning up against the building that fall over and hit a pedestrian walking by. The pedestrian files a claim against you as well as the general contractor for the injuries they received from the falling pipes. If the general contractor is named as an additional insured under your general liability insurance, then your insurance would provide the general contractor with a defense and any payments to the pedestrian, up to the policy limits of the general liability policy. This means that the general contractor is essentially sharing your policy limits, reducing the amount available to you. If the general contractor caused bodily injury or property damage that you had no negligence in, then the general contractor would need to turn to their own general liability, as they would have no coverage under your policy.
Additional Insured endorsements come in many different shapes and sizes that vary from the exclusions found in them. Before signing a construction contract it is always best to check with your insurance agent and be sure that your carrier will write the endorsement that is being asked of you.
Additional Insured endorsements can be difficult to understand so feel free to contact me with any questions or concerns you may have.
By DJ McKenna, CLCS, CRIS
Construction Risk Insurance Specialist