You are an “Additional Insured” – What Coverage Are You Getting?

By: Stephen Mysliwiec, Esq., National Association of Home Builders

Builders routinely require their subcontractors to name the builder as an additional insured on the subcontractor’s comprehensive general liability (“CGL”) insurance policy. Prudent builders go further. They specify the scope of coverage the builder must receive as an additional insured, and they check the certificate of insurance supplied by the subcontractor to make sure that they get the required coverage. The builder who does not do so may be surprised by what little coverage the builder has actually gotten as an additional insured. This is because the forms of coverage for additional insureds vary widely, and some of the forms in fact provide very little coverage to the additional insured.

To receive the broadest coverage, builders should specify in the subcontract that the builder must be named as an additional insured on the subcontractor’s CGL policy “for liability arising out of the subcontractor’s work.” Such coverage is provided by Insurance Services Office form CG 20 10 11 85, among others. The key words are “arising out of.” The courts have construed this phrase very broadly. For example, in a recent case two employees of an excavation subcontractor were injured by a cave-in at a construction site. The employees sued not their employer (the subcontractor) but rather the contractor, alleging that the contractor failed to provide a safe workplace. The court held that the contractor was covered for the suit as an additional insured on the subcontractor’s CGL policy, even though the subcontractor itself was not sued. The court held that the contractor’s alleged liability “arose out of” the subcontractor’s work.

But a builder might be an additional insured on a subcontractor’s CGL policy and not get the coverage the builder expects. For example, some insurance policies cover additional insureds “with respect to liability arising out of [the subcontractor’s] ongoing operations performed for the [the additional insured]” (emphasis added). A builder who expects to be covered as an additional insured for a construction defect suit alleging property damage occurring after construction was substantially completed could be disappointed by such coverage. Some courts have held that such a suit does not arise out of the subcontractor’s “ongoing operations.”

Another very common additional insured endorsement covers the builder only for liability “caused, in whole or in part,” by the subcontractor’s acts or omissions. Many courts have construed the phrase “caused, in whole or in part” much more narrowly than the phrase “arising out of.” In the view of such courts, the builder as an additional insured would not be covered if the lawsuit against the builder alleged that the injury or damage were caused only by the builder. For example, such courts would likely rule that the builder in the excavation cave-in example discussed above was not covered as an additional insured on the subcontractor’s policy because the suit did not allege that the builder’s liability was caused, even in part, by the subcontractor.

In addition to specifying in the subcontract the mandatory scope of coverage for the builder as an additional insured, the builder should confirm that it has actually received the required coverage. The subcontract should provide that the subcontractor must furnish a certificate of insurance and that the certificate must be sufficiently detailed to show that all the insurance requirements of the subcontract have been met. The certificate should show that the builder has been added as an additional insured on the subcontractor’s CGL policy and should describe the terms of coverage provided to the additional insured and/or attach the actual additional insured endorsement.

In addition, the builder needs to take the time to read the certificate and to follow up with the subcontractor if the additional insured coverage does not meet the requirements in the contract, or if the certificate is not sufficiently detailed to make that determination. A builder who does not assure that its subcontractors have provided the required scope of additional insured coverage could be in for a rude awakening after a suit is filed and the builder seeks coverage as an additional insured on its subcontractor’s insurance policy.

This article summarizes a presentation made by Stephen Mysliwiec, Esq., to NAHB’s Building Product Issues Committee at the 2013 NAHB Spring Board of Directors Meeting held in Washington, D.C.

Have a legal question?  Contact your Home Builders Association's Gallivan, White & Boyd Legal Hotline.

Volunteers needed for Spring Southern Home and Garden Show.

Your HBA of Greenville is looking for volunteers to help out at the Spring Southern Home and Garden show. The show will start Friday March 7th and run through Sunday March 9th. We will need help with registration /will call as well as shuttle drivers for the exhibitors. If you would like to help please register online by clicking the link below.
http://doodle.com/g2andkntnrgpfe37

 For more information you can also contact Crystal Yanes at the HBA office 864-254-0133.

Dan Rawls: Updated

Dan Rawls

Update: Funeral arrangements for Dan Rawls have been announced. The family will receive friends at Thomas McAfee in Berea on Wednesday from 6 p.m. until 8 p.m. A funeral service will be held at Thomas McAfee at 12 noon Thursday, followed after by a graveside service at Greenville Memorial Gardens.

Read the obituary at Thomas McAfee, and sign the guestbook, but clicking here.

Greenville County Councilman Dan Rawls died unexpectedly Monday, February 17.

Rawls, 72, retired as a home builder, mortgage lender, and rental property owner several years ago but continued to be active in his community and industry. He served as President of the Home Builders Association of Greenville in 2007 and the Home Builders Association of South Carolina in 2002.

Rawls was South Carolina's State Representative to NAHB's Executive Committee in 2003 and 2004 and served on the State and Local Government Affairs Committee, Legal Action Committee, Rural Housing Committee, Education Committee, Senior Housing Committee, Small Volume Builders Committee, and the NAHB Research Center Board of Directors. He was elected a Life Director of the National Association of Home Builders in 2009.

Rawls was named Builder of the Year by the HBA of Greenville in 1997 and 2002 and was inducted into the South Carolina Housing Hall of Fame in 2004. In 2009 he was honored by the National Housing Endowment for Outstanding Community Service by a Home Builder.

In addition to his service to his industry, Rawls was a strong supporter of Ronald McDonald House and served on the organization's board of directors for many years. He was a past president of the Piedmont Lions Club and was an active member of the Rehoboth Baptist Church in Piedmont.

Rawls was elected in 2010 to Greenville County Council, representing District 26, and was planning to run for reelection. Prior to that he was a member of the Greenville County Transportation Committee and the Planning Commission.

Rawls' political activities were not limited to county government. He was appointed by Governor Jim Hodges to the Board of Directors of the S.C. State Housing Finance Authority and served as chairman from 2000 to 2003. He also actively supported the campaigns of Senators Lindsay Graham and Jim DeMint and served on Senator DeMint's Business Advisory Committee.

He is survived by his wife of 54 years, Brenda, two children, Bill and Trina, and four grandchildren.

SCBT to be renamed South State Bank

South Carolina Bank and Trust announced today that it will change its name to South State Bank effective June 30.

As the result of multiple mergers in recent years the company currently operates banks under five names.