Special Insurance Endorsements 101


Your insurance policies are in place to protect you against liability exposures. It's important to understand that endorsements are available and designed to change a policy's terms and conditions. Often, these policy endorsements are requested before starting a project. Let's review specific endorsements typically requested of contractors.

Primary Wording

"Primary" wording in a policy means that the policy will be the first to respond in the event of a loss. This basically stipulates the order of whose policy will be triggered first to pay a claim. If the language also includes "non-contributory," it means the policy will respond without contribution from another policy. Basically, the policy with the primary and non-contributory wording will pay the claim to the extent of its limits. Only if the policy's limits are exhausted can the remainder of the claim be paid from another party's policy.

For example, let's say that during construction a subcontractor injures a bystander while using a crane. The subcontractor had not adequately rigged the materials, so they fell to the ground and created flying debris, injuring the passerby. The injured party sues the property owner, the general contractor (GC), and the subcontractor who caused the injury due to improper rigging. When the owner receives the claim, he or she tenders it to the general contractor, who then tenders it to the subcontractor. The subcontractor's insurance, which names the owner and the GC as primary and non-contributory insureds, responds to the claim on behalf of all parties. The subcontractor's insurance responds first without seeking reimbursement from the owner's or GC's insurance policies. If the subcontractor's insurance limits are completely exhausted by the claim, the GC and owner's policies will respond in accordance with the contract requirements.

Additional Insured

An additional insured is a party other than the primary insured covered on the primary insured's insurance policy. Project owners frequently request that they be named as an "additional insured" on a general contractor's General Liability policy. Furthermore, general contractors often require subcontractors to name the GC as an additional insured on the subcontractor's general liability, auto, and umbrella policies. Additional insured status must be made by endorsement.

When the additional insured status is properly obtained, the additional insured becomes the beneficiary of a number of important rights. An additional insured, for example, has the right to file a claim directly with the primary named insured's insurance company. This right includes the right to legal defense against third-party claims, coverage for damage caused, or both.

Waiver of Subrogation

Many construction contracts and subcontracts include a "waiver of subrogation" provision in the "insurance requirements" section of the contract. This type of provision is included to prevent an insurance company from suing another party involved in the project who may have caused the loss. Whenever a contract requires you to waive subrogation rights, check with your insurance broker and attorney before signing the agreement.