Why Additional Insured Coverage Fails in Construction Contracts—and How to Fix It-Why Additional Insured Fails FINAL- Handout

Why Additional Insured Fails FINAL- Handout

Pdf Summary

The presentation explains why additional insured (AI) coverage often fails in construction contracts and how to improve it. It begins by distinguishing named insureds, automatic insureds, and additional insureds, and emphasizes that AI coverage is a contract-based risk transfer tool that typically provides defense and indemnity.  <br /><br />A key theme is that AI requirements, contract indemnity language, policy endorsements, and state law must all align. The session outlines three common AI coverage levels: limited, partial, and broad, noting that many states restrict overly broad construction-related AI language. It also highlights newer ISO forms that limit coverage to what the law allows, what the contract requires, and available policy limits.  <br /><br />Four case studies show frequent breakdowns:  <br />1. AI coverage can be broader than indemnity, creating mismatches between contract obligations and policy protection.  <br />2. AI coverage may fail for completed operations if the contract only requires ongoing operations coverage.  <br />3. AI coverage may not be primary and noncontributory unless the contract expressly requires it, leaving the upstream party’s insurance to pay first.  <br />4. Coverage may not trigger at all if the endorsement requires the named insured to be performing work “for” each additional insured; automatic AI forms like CG 20 38 and CG 20 40 can avoid that gap.  <br /><br />The presentation closes with practical checklists for both upstream parties and subcontractors. These include reviewing state law, matching indemnity to AI scope, requiring ongoing and completed operations coverage, requiring primary and noncontributory status, obtaining copies of endorsements, and verifying that the forms actually provide the requested protection.

Keywords

additional insured

construction contracts

insurance endorsements

indemnity

defense coverage

completed operations

primary and noncontributory

state law

ISO forms

risk transfer