One of the most notable aspects of the 2013 Insurance Services Office, Inc.
(ISO), changes concerns revisions to the additional insured endorsements.
This article provides a history of the changes to these endorsements and
places the most recent changes into this historical context.
by Mark M. Bell and Christopher S. Dunn
Waller Lansden Dortch & Davis LLP
The April 2013 ISO changes to the occurrence (CG 00 01) and claims-made
(CG 00 02) commercial general liability (CGL) insurance forms have generated
a host of comments and critiques. Many of the major changes concern liquor
liability, which obviously falls outside the interest of most
construction-risk personnel. This is not to say that these changes should be
ignored, but the changes do not have significant impact on the construction
industry. There are a few changes that directly impact the construction
industry, and the biggest impact occurs in the additional insured
These changes have not occurred in
a vacuum; nor are these changes the first to the additional insured
endorsements. Thus, it is important to understand the history of the
additional insured endorsement and the changes that have occurred in the
context of ISO's previous changes to these forms.
As a reminder,
additional insured provisions grant direct access to the additional insured
on the named insured's policy.2 In the
owner/contractor context, this means that the owner can look to the
contractor's CGL policy for a defense of a claim that potentially could be
covered by the policy. Section 11 of the American Institute of Architects
A201 agreement states that contractors must include the owner, architect,
and others as additional insureds, but it leaves the coverage and
requirements vague as to how the endorsements will apply or what endorsement
the contractor needs to obtain.
The CG 20 10 endorsement is perhaps the most widely
used additional insured endorsement, and its history is consistent with the
history of the other additional insured endorsements.
The 1985 CG 20 10
additional insured endorsement was the first additional insured endorsement
to the overhauled CGL policy. The 1985 endorsement provided as follows:
WHO IS AN INSURED (Section II) 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.
original additional insured endorsement did not have many limitations.
Rather, the endorsement stipulated simply that the liability must arise out
of the named insured's work. The endorsement did not make any distinction
between ongoing operations and
operations. But in 1993, ISO began making this distinction. ISO revised the
CG 20 10 endorsement in 1993 to exclude completed operations coverage.
Insurers sought this change to reduce exposure to lawsuits filed long after
construction projects ended. The 1993 endorsement stated:
WHO IS AN
INSURED (Section II) 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 ongoing operations performed for that
The "arising out of your ongoing operations" language proved
somewhat ambiguous. Insurers and insureds debated the meaning of "ongoing
operations," which was not defined in the CGL policy. They also disputed
whether the 1993 endorsement was specifically intended to remove completed
ISO addressed these
ambiguities in the 2001 revisions to the additional insured endorsements.
The endorsement did not change the language in the 1993 endorsement, but it
added exclusions to the 20 10 endorsement. The endorsement specifically
excluded bodily injury and property damage occurring after "(1) All work,
including materials, parts or equipment furnished in connection with such
work, on the project (other than service, maintenance or repairs) to be
performed by or on behalf of the additional insured(s) at the site of the
coverage operations has been completed; or (2) That portion of 'your work'
out of which the injury or damage arises has been put to its intended use by
any person or organization other than another contractor or subcontractor
engaged in performing operations for a principal as a part of the same
These 2001 revisions also brought a new additional insured
endorsement (CG 20 37), which restored the completed operations coverage for
the additional insured that was deleted by the 2001 amendments.
revisions created the greatest change. The 2004 revisions deleted the
favorable (from the insured's perspective) "arising out of" language from
the policy and inserted in its place the phrase "caused in whole or in part"
by the acts or omissions of the named insured or those acting on the named
insured's behalf at designated locations. The 2004 endorsements also
contained the same exclusions for completed operations contained in the 2001
The main purpose of the 2004 endorsements was to avoid
providing coverage for losses that arose out of the operations that were
caused solely by the additional insured's acts or omissions. The 2004
endorsements demonstrate that coverage is only provided to the extent that
the named insured had a hand in the liability.
The 2013 revisions maintain the same language used in the 2004 endorsements,
with the exception of two important caveats. The 2013 endorsements begin
with a broad "HOWEVER," narrowing coverage such that insurance afforded to
an additional insured (1) only applies as permitted by law, and (2) if such
coverage is required by contract, the coverage afforded "will not be broader
than that which you are required by the contract or agreement to provide for
such additional insured."
The endorsement also contains an additional
restriction on the limits of insurance such that if coverage for the
additional insured is required by contract, such insurance is limited to the
lesser of the amount (1) required by contract or agreement or (2) available
under the limits of insurance listed in the declarations.
The first change
(limiting the coverage to the maximum extent permitted by law) does not
reduce coverage. A court would not enforce an endorsement that violates a
statute, so, in many ways, this clause is a clarifying statement. The second
and third changes, however, do reduce the scope of coverage for additional insureds.
For many years, the
construction industry has been able to avoid some of the effects of
anti-indemnification statutes that prohibited the transfer of indemnitees'
concurrent negligence through contractual indemnity provisions. The
construction industry did so by using the additional insured requirements to
insure against losses that could potentially violate states'
But states have begun prohibiting
construction entities from obtaining additional insured status for risks
prohibited by the state's anti-indemnification statutes. For example,
California, Colorado, Kansas, Montana, New Mexico, Oregon, and Texas all
prohibit additional insureds from receiving greater coverage than they would
be able to obtain by indemnification. The new 20 10 endorsement seeks to
address these states.
Over the past several years, new breeds of
endorsements have arisen in these states. Though there are some differences,
the state-specific additional insured endorsements appeared generally as
SECTION II - Who is An Insured is amended to
include as an additional insured the person(s) or organization(s) shown in
the Schedule, but only with respect to liability for "bodily injury",
"property damage" or "personal advertising injury" caused by your ongoing
operations for the additional insured(s) at the location(s) designated above
and only to the extent that such "bodily injury", "property damage" or
"personal and advertising injury" is caused by your acts or omissions or the
acts or omissions of those performing operations on your behalf.4
It is not clear whether these state-specific endorsements will remain or
whether the endorsements will be deleted in light of the 2013 changes.
This clause in the
endorsement ensures that insurers do not provide greater coverage than
required by the contract. For example, if the contract states that the named
insured only provides coverage to an additional insured for the named
insured's vicarious liability, then the CG 20 10 endorsement only provides
coverage for the named insured's vicarious liability, even though the policy
would ordinarily provide broader coverage.
Thus, it is essential for
contracting parties to dictate the terms of the coverage in the construction
This clause essentially means that insurers can deny the additional
insured coverage even when the named insured has broader coverage. For
example, if the contract documents require the contractor to maintain CGL
limits of $1 million per occurrence, but the contractor obtains coverage for
$2 million per occurrence, the owner would only receive the benefit of the
$1 million in coverage.
Additional gaps in coverage could also occur when
excess policies are implicated. In the above example, any excess coverage
could generate coverage gaps of $1 million in the coverage band between $1
million and $2 million.
The 2013 additional insured
changes fit in context with previous ISO changes to the additional insured
endorsements. The most recent round of changes clarifies three key points:
(1) coverage will not exceed that permitted by law;
(2) coverage is restricted to the amount required by contract; and
(3) coverage is limited to that which is required by contract.
Because of the emphasis on the contract documents, it is imperative to
ensure that the parties clearly state the coverage they intend to provide on
the front end and clearly define the coverage limits.
1See Craig F. Stanovich, "The
2013 Edition of the CGL Policy" (March 2013).
Mark M. Bell, "Indemnity
and Additional Insured Requirements: Why Am I Demanding Them, Why Do Others
Want Them, and What Does It All Mean?" (May 2013).
3ISO made some minor stylistic tweaks to the endorsements in 1997,
but the substance of the endorsements remained the same.
4See, e.g., ISO CG 33 29.
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