Construction contracts require additional insured status that will respond to completed operations claims. Contractors faced with such obligations often attempt to have additional insured endorsements drafted with older language in the belief that this provides the required coverage. This article discusses a recent court decision that should provide reassurance that contractors who do so are complying with the insurance requirements of their contracts.
It has long been a standard practice in construction projects for parties who are additional insureds under other parties’ liability policies to require that the additional insured status extend to completed operations. A project owner, for example, faces loss exposures both on account of its contractors’ operations in the course of construction (damage to adjacent premises, for example, or injury to a visitor at the job site); and due to claims arising out of the completed project (a dangerous condition in a finished building).
In 1993 Insurance Services Office, Inc. (ISO), revised several of its standard additional insured endorsements, including the endorsement most commonly used in connection with construction projects (endorsement CG 20 10), specifically to rule out the additional insured’s protection against completed operations claims. Coverage under the revised endorsements applies only to liability arising out of the named insured contractor’s or subcontractor’s “ongoing operations” for the additional insured. In explaining its revision of the standard forms, ISO commented that it was never the intention of the insurance industry to provide additional insureds with completed operations coverage.
Encouraged by the 1993 change in standard additional insured language, or by ISO’s explanatory comment about the insurance industry’s attitude toward completed operations coverage for additional insureds—or quite possibly by both—a number of insurers began reexamining their positions with respect to the coverage that was available under pre-1993 versions of endorsement CG 20 10. If there was never any intent to give additional insureds completed operations coverage (the insurers’ reasoning went), then perhaps there is nothing specific in the 1986 or 1988 editions of the additional insured endorsements that would afford such coverage either. The language of those earlier editions, which were always widely assumed to provide completed operations coverage, reads 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.
The difference between this language and that of the 1993 “no-completed-operations” revised version is in the use of the phrase “your work” in the older version and “your ongoing operations” in the newer. “Your ongoing operations” clearly does not include completed operations. But does “your work”?
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by Jeff Woodward
IRMI
For more information about additional insured endorsements and commercial insurance, call Brown & Brown Insurance of Nevada at 702-597-5110.