BUYER BEWARE: CURRENT TRAPS AND
PITFALLS OF ADDITIONAL INSURED
ENDORSEMENTS
Melissa A. Anderson, Partner, Cassiday Schade LLP
Jamie L. Hull, Partner, Cassiday Schade LLP
John D. Hackett, Managing Partner, Cassiday Schade LLP
Carrie L. Graziani, Esq., Unit Manager, Specialty Claims, The
Hanover Insurance Group W W W . C H I C A G O L A N D R I S K F O R U M . O R G
INTRODUCTION
1. History Of Additional Insured Endorsements
2. Current ISO A/I Endorsements (April 2013)
3. Case Law
• Vicarious Liability
• Act Or Omission vs. Negligence
• Caused In Whole Or In Part
• Direct Written Contract
2
INTRODUCTION
4. Contract Drafting
5. Trends and Tips
6. Questions
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THE RISK MANAGEMENT PROCESS
1. Identify and Analyze the Risks
2. Examine Alternative Risk Management Techniques
3. Select Risk Management Techniques to Address Risks
4. Implement the Risk Management Techniques
5. Monitor the Results
THE RISK MANAGEMENT PROCESS
1. Contractual Transfer for Risk Control
2. Contractual Transfer for Risk Financing
- Transfer Financial Burden of Particular Losses to Another
Entity (Not a Commercial Insurer) Who Preps Losses on
Behalf of the Transferee = Indemnity/Hold Harmless
PROBLEMS WITH CONTRACTUAL INDEMNITY
• Does it Protect Against Indemnitor’s Own
Negligence
• Is it Enforceable?
• Does Indemnitor Have Contractual Liability
Coverage for its Indemnity Obligation?
• Does Indemnitor Have Funds to Pat its Indemnity
Obligation?
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CONTRACTUAL RISK TRANSFER
Commercial Insurance/Additional
Insured Endorsement
ADDITIONAL INSURED ENDORSEMENTS
•
•
•
Grant Direct Access to Named Insured’s Commercial General
Liability Policy
Additional Insured and Named Insured Must “Share” the Each
Occurrence Liability Limit
Most Developments Have Occurred in the Construction Industry
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History Of Earlier Additional Insured Endorsements
CG 20 10 11 85
(Broad Form
Coverage “Any
Liability”/“Arising
Out of”) – Ongoing
Operations and
Completed
Operations
CG 20 10 10 01/CG
20 37 10 01 (Broad
Form Coverage
“Any
Liability”/“Arising
Out of”) – Ongoing
Operations,
Reinstatement of
Completed
Operations through
Creation of New
Form
CG 20 10 10 93
(Broad Form
Coverage “Any
Liability”/“Arising
Out of”) –
Narrowed to
Ongoing
Operations,
Removal of
Completed
Operations
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CG 20 10 07 04
(Intermediate Form
Coverage “Personal
Injury and Property
Damage”/“Caused
In Whole or In
Part”) – Ongoing
Operations and
Completed
Operations
The April 2013 Editions
CG 20 10 04 13
(Additional Insured
– Owners, Lessees
or Contractors –
Scheduled Person
or Organization)
CG 20 38 04 13
(Additional Insured
– Owners, Lessees
or Contractors –
Automatic Status
for Other Parties
When Required in
Written
Construction
Agreement)
CG 20 37 04 13
(Additional Insured
– Owners, Lessees
or Contractors –
Completed
Operations)
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CG 20 33 04 13
(Additional Insured
– Owners, Lessees
or Contractors –
Automatic Status
When Required in
Construction
Agreement With
You)
The April 2013 Editions
•
•
•
Bottom Line: Unless your contract contains the correct insurance
requirements language you will not have coverage
Coverage under the insurance is directly determined by the contract
language between the parties
Your own (wrongly worded) contract language may deny you
insurance coverage
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CASE LAW ANALYZING THE RESTRICTIVE ENDORSEMENTS
•
•
•
•
VICARIOUS LIABILITY
ACT OR OMISSION VS. NEGLIGENCE
IN WHOLE OR IN PART
DIRECT WRITTEN CONTRACT
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VICARIOUS LIABILITY – Pleading Requirements
•
•
•
L.J. Dodd Constr., Inc. v. Federated Mut. Ins. Co., 848 N.E.2d 656 (2nd
Dist. 2006)(pleading requirements to trigger duty to defend);
Illinois Emcasco Ins. Co. v. Northwestern Nat’l Cas. Co., 785 N.E.2d 905
(1st Dist. 2003)(further discusses pleading standards to trigger
coverage);
West Bend Mut’l Ins. Co. v. Sundance Homes, Inc., 606 N.E.2d 326 (1st
Dist. 1992)(consideration of third party pleadings).
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VICARIOUS LIABILITY – Limited Language
•
•
American Country Ins. Co. v Kraemer Bros., Inc., 699 N.E.2d 1056 (1st
Dist. 1998) (further limiting language in the additional insured
endorsement);
Norman Pelletier, et al. v. Sordoni/Skansa Construction Co., SC 16743
& SC 16747 (July 2003) (discussion of torts of independent
subcontractors).
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VICARIOUS LIABILITY – Illusory Coverage
•
•
National Union Fire Ins. Co. of Pittsburgh,
Pa. v Glenview Park District, 632 N.E.2d
1039 (1994).
American Country Ins. Co. v Cline, 722
N.E.2d 755 (1st Dist 1999).
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ACT OR OMISSION VS. NEGLIGENCE
•
•
Maryland Casualty Company v. Regis Insurance
Company and Ran Holding Corporation, No. 96CV-1790, (E.D. Penn. 1997)(ruled on the
difference between “act or omission” and
“negligence”);
Engineering & Constr. Innovations, Inc. v. L.H.
Bolduc, Inc., 825 N.W.2d 695 (Minn. 2013)(“act or
omissions” indicates that there must be some
fault by Bolduc before coverage can apply).
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IN WHOLE OR IN PART
Illinois Cases
•
•
•
Lincoln Gen. Ins. Co. v. Federal Construction, Inc., 2010 U.S. Dist. LEXIS
128239 (N.D Ill. 2010)(policy language means vicarious liability
imputed to additional insured);
General Cas. Co. v. Prof’l Mfrs. Representatives, Inc., 2011 Ill. App.
Unpub. LEXIS 1158 (2d Dist. May 25, 2011)(indemnity means proximate
cause);
Selective Ins. Co. v. South Carolina v. Target Corp., 169 F. Supp. 3d
820 (N.D. Ill. 2015)(distinguished Lincoln General).
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IN WHOLE OR IN PART
Other States
•
•
•
•
•
•
Schafer v. Paragano Custom Building, Inc., 2010 N.J. Super. Unpub. LEXIS 356 (N.J.
App. 2010)(policy language means vicarious liability);
Gilbane Building Co. v. Admiral Ins. Co., 664 F.3d 589 (5th Cir. 2011)(policy
language means proximate cause);
Pro Con, Inc. v. Interstate Fire & Cas. Co., 794 F.Supp.2d 242 (D. Me. 2011)(rejected
policy language means vicarious liability);
National Union Fire Ins. Co. of Pittsburgh, PA v. NGM Ins. Co., 2011 U.S. Dist. Lexis
147266 (D. N.H. 2011)(policy language applicable where named insured could
have been a cause of the claimant’s alleged injury);
Empire Surplus Lines Ins. Co. v. Crum & Forster Specialty Ins. Co., 2006 U.S. Dist. LEXIS
33556 (S.D. Tex. 2006)(policy language focuses on whether named insured partially
or wholly responsible);
QBE Ins. Corp. v. ADJO Contracting Corporation, 2011 N.Y. Misc. LEXIS 3973 (N.Y.
2011)(policy language requires a causal nexus).
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DIRECT WRITTEN CONTRACT
•
•
•
Westfield Ins. Co. v. FCL Builders, Inc.,
948 N.E.2d 115 (1st Dist. 2011)(direct
written contract requirement);
J.A. Jones Constr. Co. v. Hartford Fire
Ins. Co., 645 N.E.2d 980 (1st Dist. 1995).
Navigating direct written contract
requirement.
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Tips for Navigating A/I Endorsements
•
•
•
•
Case Law is Constantly Evolving
Conflicting and Inconsistent Court Rulings
Law Varies State-by-State
Many Different Version of Additional Insured
Endorsements in Use.
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Tips for Navigating A/I Endorsements
•
Contract Drafting is Key
– Know What You Want
– Ask for What You Want
– Make Sure You Get What You’ve Asked For
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Tips for Navigating A/I Endorsements
•
Know What You Want
– Which A/I Endorsement Fills Your Needs?
– CG 20 10 11 85 is “Broadest”
– CG 20 38 04 13 Fills “Gaps” Created by Case Law
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Tips for Navigating A/I Endorsements
•
Ask for What You Want
– Clear Contract Terms Are Essential!
– “Primary and Non-Contributory”
– Require the Same of All Down-Stream
Subcontracts
– Require “Full Limit of Liability”
– “Coverage at Least as Broad”
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Tips for Navigating A/I Endorsements
•
Make Sure You Get What You Ask For
– Certificates of Insurance
– Copy of A/I Endorsement
– Copy of Policy’s Declarations Page
Showing the A/I Endorsement
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Future Trends In A/I Endorsements
•
What Does the Future Hold?
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Future Trends In A/I Endorsements
•
•
•
Constant Evolution and Creative Arguments
Manuscript Endorsements
ISO Will Continue to React to Evolving Case Law
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Future Trends In A/I Endorsements
•
•
More Specific and Narrower A/I Endorsements to Address and
Balance Contracting Parties’ Intent or Changes in the Law
More Emphasis on the Underlying Contract Provisions (Outside the
Four Corners of the Insurance Policy)
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Future Trends In A/I Endorsements
•
•
Careful Drafting of Insurance Requirements in Underlying Contract
Will Become Even More Critical
Manuscript Endorsements
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QUESTIONS?
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