Owners frequently require their contractors to name them as additional insureds. Owners and contractors often include requirements seeking to have the obligation to name them as additional insureds “flow down” to parties with whom they lack a direct contractual relationship (e.g., subconsultants, subcontractors, and suppliers).  Despite the simplicity and appeal of this arrangement, contractual additional insured requirements can be worthless without the appropriate insurance endorsements.

The standard additional insured endorsement, ISO form CG 20 33, requires a direct contractual relationship between the named insured and the additional insured.  The problem is apparent.  Although CG 20 33 allows an owner to assert a claim as an additional insured under its contractor’s insurance policies, it does not allow an owner to assert a claim as an additional insured under subconsultants’, subcontractors’, or suppliers’ insurance policies.  This could undermine the benefits of additional insured coverage and expose a contractor or designer to a breach of contract claim based on its failure to procure, or require the procurement of, the required insurance coverage.

Insurance companies do offer a wide variety of additional insured endorsements, and endorsement CG 20 38 provides a solution for owners, designers, and contractors seeking to avoid the problem identified above. That endorsement provides broad contractual additional insured coverage to “any other person or organization you are required to add as an additional insured under the [same] contract or agreement.”  Owners should require use of CG 20 38 and confirm that the subcontractors have provided the endorsement.  Contractors should likewise require their subcontractors to use this endorsement to fulfill these contractual requirements or they may be in breach of their contractual duties to provide insurance.