by

Robert J. Marshburn, CRM, CIC, ARM, CRIS, CISC

Founder & CEO | Certified Risk Managers LLC

CertifiedRiskManagers.com 

In the past these endorsements have responded to the additional insured's "liability arising out of" operations performed by the named insured.  This led to court decisions that applied the coverage even when not the result of the named insured’s negligence or scope of operations performed for the additional insured.  For example, More Light Invs. v. Morgan Stanley DW Inc., 2009 U.S. Dist. LEXIS 112927 (D. Ariz. Nov. 17, 2009) defined the term "arising out of a contract" as “a claim that would not exist "but for" a contract.” It does not have to be “caused by” any negligence or liability.

The 07 04 editions of these endorsements now specifically require that, in order for there to be coverage for the additional insured, the injury or damage be “caused, in whole or in part, by your acts or omissions” of either the named insured or those acting on behalf of the named insured “in the performance of their ongoing operations”.  The forms have a format of striking through deletions, underlining additions and inserting a revision bar in the left margin to indicate changes from the earlier editions of these forms.  The new forms are as follows:

1.      A new Amendment Of Insured Contract Definition that narrows the definition of an “Insured Contract” for tort liability of another party by including the phrase “provided the bodily injury or property damage is caused, in whole or in part, by you or by those acting on your behalf.”

2.      Revision of commonly used Additional Insured endorsements to limit coverage for the additional insured to damage for bodily injury or property damage or personal and advertising injury “caused, in whole or in part, by your acts or omissions” of either the named insured or those acting on behalf of the named insured “in the performance of their ongoing operations”.   The “liability arising out of’ language is gone due to its broader application and coverage for additional insureds.  

      In addition, the forms limit the additional insured coverage to specific "Location(s) of Covered Operations" or "Location and Description of Completed Operations".

3.      Withdrawal of endorsement CG 20 09 03 97 - Additional Insured—Owners, Lessees Or Contractors—Scheduled Person Or Organization (For Use When Contractual Liability Coverage Is Not Provided To You In This Policy)  This endorsement was originally intended to provide Contractual liability coverage under the old Comprehensive General Liability policy as an alternative to an Owner's and Contractor's Protective (OCP) policy, but has recently been used by some carriers who are excluding (or redefining) contractual coverage under the newer Commercial General Liability policy which usually includes OCP.

ISO’s explanation of the intent and impact of these changes is that they represent a reduction in coverage only in those states that contractually allow hold harmless agreements and additional insured coverage for the sole negligence of the additional insured.  

From a Risk Management perspective, we believe a closer analysis reveals the changes may have wider implications.  They may also reduce coverage in states that allow partial negligence to be indemnified and need to be carefully integrated with the contractual and liability exposures of the insured.

The ISO 10/01 CGL Policy & Endorsements had a significant effect on coverage by introducing separate forms for “your ongoing operations” and "completed operations" liability; exclusions for portions of “your work” liability; and preventing coverage for known Injury or Damage.  The changes in these 10 01 forms are carried over and should be analyzed in connection with the 07 04 forms above.

The ISO 04 13 Additional Insured Endorsements contain SIGNIFICANT changes dramatically narrowing or deleting potential coverage and must be understood to obtain coverage by updating your Contract Requirements!  Otherwise, NO COVERAGE!

Many contractors and carriers are using Wrap Policies (OCIPs, CCIPs, etc.) to cover these exposures, but they contain many dangers and gaps of their own.  

Our Proprietary Automated Insurance Verification^® Risk Management System has Enhanced Verification Provisions that helps Automatically Develop, Verify, Expose, Correct, and Activate Coverage Compliance with your Contract Insurance Coverage Requirements.

We do a considerable amount of client consulting, training workshops, and seminars on these and related issues and would be happy to consult with you or any of your clients.  If you would like information on how our services can benefit your business, please contact us. 

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