In the dynamic world of construction, safeguarding your interests is crucial, especially when hiring contractors. One of the primary ways to ensure protection is through additional insured endorsements (AIEs) on contractors' general liability (CGL) policies. This blog post delves into the intricacies of AIEs, exploring their benefits and the importance of understanding the specific coverages they offer.
The Power of Additional Insured Endorsements
Imagine you're planning to build a fence around your property. You hire a contractor, but to shield yourself from potential liabilities, you request to be named as an additional insured on their CGL policy. This means that if someone gets injured or property is damaged due to the contractor's work, you could have some protection against lawsuits.
What is an Additional Insured Endorsement?
An additional insured endorsement (AIE) extends the contractor's CGL policy to cover another party, typically the one hiring the contractor. This endorsement provides the additional insured with coverage for claims arising from the contractor's work, offering a layer of protection against liabilities.
The CG 20 10 Endorsement: A Shift in Coverage
One of the most common AIEs in the construction industry is the CG 20 10 endorsement. However, it’s essential to understand the significant changes it has undergone over time:
Pre-1985 Versions
Before 1985, the CG 20 10 endorsement covered both the contractor's ongoing operations (work currently being done) and completed operations (work already finished). This comprehensive coverage meant that even after the contractor finished the job, the additional insured could still be protected if something went wrong with the work.
Post-1985 Versions
Post-1985, the CG 20 10 endorsement was revised to only cover ongoing operations. This means that if an issue arises after the contractor completes the work, such as your fence collapsing a year later due to faulty installation, the post-1985 CG 20 10 might not provide the necessary protection.
Addressing the Gap: CG 20 37 for Completed Operations
The revision of the CG 20 10 endorsement left a significant gap in coverage. To address this, the CG 20 37 endorsement was introduced. The CG 20 37 specifically provides coverage for additional insureds in cases of claims arising from completed operations. This endorsement is crucial for those hiring contractors, as it ensures continued protection even after the job is finished.
Why CG 2037 Matters
Without the CG 20 37 endorsement, once the contractor completes the work and leaves the site, the additional insured could be left vulnerable to claims. By including the CG 20 37, you can rest assured that you have coverage for any issues that arise after the project’s completion, providing peace of mind and financial protection.
Going Upstream and Downstream with Additional Insureds
Construction projects often involve multiple contractors and subcontractors, creating a complex web of relationships. This is where additional insured endorsements become even more critical, offering protection up and down the contractual chain. It's worth noting that both the CG 20 33 and CG 20 38 endorsements specifically provide coverage for ongoing operations.
CG 20 33: Automatic Status
The CG 20 33 endorsement, known as the “Automatic Status When Required in Construction Agreement with You,” provides coverage for parties hiring subcontractors (e.g., general contractors or project owners) for ongoing operations. This means that if a subcontractor's work causes damage or injury, the hiring party is protected.
CG 20 38: Broadening the Protection
The CG 20 38 endorsement, similar to the CG 20 33, extends coverage to upstream parties, such as the project owner, the city, their employees, and attorneys, for ongoing operations. This broad protection is crucial in large construction projects where multiple stakeholders are involved.
Blanket Endorsements: Convenience with a Catch
Blanket endorsements offer a convenient solution by automatically adding additional insureds as required by contracts. However, they come with a significant requirement: a written contract. CG 20 10 and CG 20 37 have to have the AI be scheduled on the endorsement.
The Role of Written Contracts
For both the CG 20 33 and CG 20 38 endorsements, a written contract between the additional insured and the named insured is essential for the coverage to apply. This requirement ensures that there is a clear agreement outlining the responsibilities and coverage expectations.
The Bottom Line: Ask Questions, Get Clarity
When dealing with additional insured endorsements, it’s crucial to ask the right questions and understand the specifics of the coverage. Here are some key questions to consider:
Does the Endorsement Cover Ongoing or Completed Operations?
Understanding whether the endorsement covers ongoing or completed operations is vital. The type of coverage you need depends on the nature of the project and the potential risks involved. For ongoing projects, ensuring that the CG 20 10 endorsement covers ongoing operations is crucial. For completed projects, the CG 20 37 endorsement is essential to cover any post-completion claims.
Is There a Written Contract in Place?
A written contract is a fundamental requirement for the coverage to apply. Ensure that there is a clear, written agreement between you (the additional insured) and the contractor (the named insured) outlining the terms and responsibilities. This contract serves as the basis for the additional insured status and ensures that both parties understand their obligations.
Conclusion
Understanding contractor additional insured endorsements is crucial for anyone involved in construction projects. These endorsements offer valuable protection, but it's essential to grasp the specific coverages they provide. Whether dealing with the CG 20 10, CG 20 37, CG 20 33, or CG 20 38 endorsements, asking the right questions and ensuring that all contractual requirements are met can help you avoid potential pitfalls.
By being informed and proactive, you can ensure that you’re properly protected in the complex world of construction projects. Don't get fenced in by unexpected liabilities—understand your coverage and take the necessary steps to safeguard your interests.
