Additional Insured Endorsement: read carefully

Additional Insured (AI) endorsements either grant liability coverage to a contract partner for a specific project or they cover vicarious liability claims arising out of the AI’s workmanship or products. Neither. Or both, depends how it’s written.

AI might be the most widely misunderstood endorsement in general liability. First, the court interpretations are recent by insurance standards. Second, the courts in different states interpret the wording differently. Third, since the comprehensive policy changed into the commercial policy form, the change in wording is being interpreted as meaningful. Fourth, by the time a liability claim gets to court, the policy wording may have been interpreted several times.

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 insured.

Some of the controversy comes from word choice in the endorsement:

Liability arising out of does not limit claims to negligence based acts or omissions. A very broad interpretation by the courts implies any connection between your operations and a loss gains coverage for the AI.

Work implies completed operations coverage while ongoing operations imply process only. The courts no longer make this distinction and interpret work as working, not completed work. The terms are synonymous on ISO forms, manuscript forms may be different.

The ISO form is being interpreted broadly as any process connection between your operations and damages may allow coverage under the AI.

Since the process usually involves your expertise combined with the general contractor, both parties may be held liable for the same act, even though clear negligence is only attached to one party.

Keep this broad interpretation in mind when considering AI status. Read your endorsement carefully, you may be accepting more risk than intended.