What is the Scope of Your Additional Insured Coverage?
by Amanda K. Anderson, Esquire
Boyle, Gentile, Leonard & Crockett, P.A.
There are many variations when it comes to additional insured endorsements, but there are a couple main categories of additional insured endorsements. Additional insured endorsements can be separated into two main categories, scheduled and blanket. The most common scheduled endorsement is the 20 10 11 85, which commonly states “WHO IS AN INSURED is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of “your work” for that insured by or for you.” On the other hand, blanket additional insured endorsements are typically dependent on the existence of a written contract which has been executed prior to the loss. Blanket language typically consists of some iteration of the following: “Who is an insured is amended to include any person or organization that the insured has agreed or is required by contract to add as an additional insured.”
An examination of the particular language in the endorsement is vital. There are three phrases which are typically used: (1) “arising out of”; (2) “caused, in whole or in part”; and (3) “because of”. Additional insured endorsements which cover damages “arising out of” the subcontractor’s work are the broadest of all the endorsements. See Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528 (Fla. 2005). In Florida, courts have universally ruled that the additional insured is insured for its own liability under the “arising out of” language. See Koala Miami Realty v. Valiant Ins. Co., 913 So. 2d 25 (Fla. 3d DCA 2005); Monticello Ins. Co. v. City of Miami Beach, 2008 WL 906537 (S.D. Fla. April 3, 2008). Thus, the additional insured has coverage for its own negligence and not just the additional insured’s vicarious liability. The “in whole or in part” language gives coverage to the additional insured so long as there was any fault on the part of the named insured. See Zep Construction v. Interstate Fire & Cas. Co., 18 Fla. L. Weekly Supp. 65a (Fla. 12th Cir. 2010); Am. Empire Surplus Lines Ins. Co. v. Crum & Forster Specialty Ins. Co., 2006 WL 1441854 (S.D. Tex. May 23, 2006); and Penn Nat’l Mut. Cas. Ins. Co. v. Ipsco Steel (Alabama), Inc., 2008 WL 4183345 (S.D. Ala. Mar. 10, 2008). As such, additional insured coverage under this language is not limited to vicarious liability. Lastly, additional insured status providing coverage to additional insured “because of” named insured liability has been held to be limited to mere vicarious liability. See Garcia v. Federal Ins. Co., 969 So. 2d 288 (Fla. 2007).
II. Ongoing Operations Limitation
Many additional insured endorsements contain language which limits coverage to damages arising out of the named insured’s “ongoing operations.” Whether that phrase is intended to remove coverage for damages included in the “products completed operations hazard” is unclear. However, most of the courts interpreting this language have found that without more limitation in the endorsement to make clear that there is no coverage for completed operations, the “ongoing operations” limitation is insufficient to removed completed operations coverage. See Tri-Star Theme Builders, Inc. v. OneBeacon Ins. Co., 426 Fed.Appx. 506 (9th Cir. 2011); McMillin Constr. Servs.,L.P. v. Arch Specialty Ins. Co., 2012 WL 243321 (S.D. Cal. Jan. 25, 2012); and Jaynes Corp. v. American Safety Indem. Co., 925 F.Supp.2d 1095 (D. Nev. 2012). But see Colorado Cas. Ins. Co. v. Safety Control Co., Inc., 288 P.3d 764 (Az. Ct. App. 2012).
III. 2013 ISO Amendments
In April 2013, the Insurance Services Office, Inc. (“ISO”) revised its standard CGL forms and endorsements, including 24 of its 31 standard additional insured endorsements. The revised ISO endorsements contain three significant modifications of particular concern to contracting parties: coverage is provided “to the extent permitted by law”; coverage “will not be broader than” the contract; and limits are the lesser of the contract requirement or the policy declarations.
One of the revised additional insured endorsements now states that the insurance afforded to the additional insured “only applies to the extent permitted by law.” This provision was presumably inserted to address state anti-indemnification statutes. Another additional insured endorsement option, which could be added to a policy, states: that if the coverage is required by a contract or agreement, the insurance afforded to the additional insured “will not be broader than” the coverage that the insured is “required by the contract or agreement to provide.” It seems likely that the new language is intended to incorporate into the insurance policy any express limits on additional insured coverage that the parties have specified in the contract; for example, where the contract specifies that additional insured coverage will only extend to vicarious liability. The last major change reflected in some endorsements states: that the most the insurer will pay on behalf of the additional insured is either the amount “[r]equired by the contract or agreement”; or the applicable Limits of Insurance shown in the Declarations, whichever is less. The intent of this language is to limit the insurer’s exposure to the lesser of the policy limits or the amount agreed to by the contracting parties.
Certainly, all general contractors and subcontractors should be aware of these changes and adjust their contracts accordingly.