Product Update

Endorsement CG 20 38 and Additional Insured Case Law Updated in Contractual Risk Transfer


This release of Contractual Risk Transfer (CRT) contains updated discussions of additional insured endorsement CG 20 38 and other additional insured case law.

Additional Insured—Owners, Lessees or Contractors—Automatic Status for Other Parties When Required in Written Construction Agreement (CG 20 38) Endorsement

The CRT discussion of CG 20 38 is updated to reflect a 2019 revision by Insurance Services Office, Inc., that addresses a section of the endorsement that could potentially be misinterpreted by courts as imposing an additional requirement that could preclude certain persons or organizations from attaining additional insured status. The revised language makes clear that the endorsement applies to a person or organization described in Paragraph 2. (any other person or organization you are required to add as an additional insured) even if the named insured's ongoing operations are being performed solely for a person or organization described in Paragraph 1. (any person or organization for whom you are performing operations and have agreed in a contract to add as an additional insured).

Other Additional Insured Case Law

A number of recent appellate court decisions address important aspects of additional insured coverage. The degree to which a commercial general liability (CGL) additional insured may be subject to unexpected policy modifications and optional conditions is a frequent source of confusion (and disappointment, and litigation). This release reports on a recent court decision that held an additional insured subject to an arbitration condition that had been endorsed onto the named insured's policy. The case—Philadelphia Indem. Ins. v. SMG Holdings, Inc.—and its resulting negative effect on the additional insured underscore the importance of contract insurance requirements specifying no coverage modifications to a standard CGL without notice to the additional insured.

Litigation over additional insured coverage under standard endorsements with respect to third-party-over actions continues to be a growth industry. One of the most recent cases—Precision Underground Pipe Servs. v. Penn Nat'l Mut. Cas. Ins. Co.—reflects one court's acknowledgement of conventional risk transfer practices within the construction industry and the feasibility of reading lawsuit allegations and insurance policy language in a way that gives effect to those practices.