I often speak with prime contractors and owners who assure me that they require subcontractors to name them as additional insureds. This is the correct line of thinking as additional insured treatment is one of the key principals to adequately transfer the risk of construction defects or non property injury.
The devil, as they say, is in the details, however. During these inquiries I often ask for a copy of subcontract documents which, all too often, remain unclear as to the insurance policy requirements of subcontractors who are naming the prime contractor as an additional insured. For instance, the subcontracts are sometimes vague as to what coverage must be obtained by the subcontractor in order to adequately insure the general.
A prime contractor seeking additional insured coverage is limited to that specific coverage possessed by the subcontractor. For instance, if a subcontractor's policy is subject to exclusion(a), it follows that the prime contractor will also be excluded by those limitations.
Perhaps more widely overlooked is the fact that CGL policies recognize two forms of insurance. The first is completed operations coverage. This is the coverage which is triggered after completion of the project. It is key to triggering coverage for latent defects. The other form of coverage is ongoing operations coverage, which is the coverage which protects the parties during the period beginning at project commencement and ending at project completion.
The latter coverage, ongoing operations, is key in many job related injuries. For example, during the construction of a hotel, the subcontractor constructing the elevator fails to secure the opening and, tragically, a non employee or pedestrian is injured after falling several stories while exploring the construction site after work.
A claim like the one I just highlighted can be catastrophic, subjecting the prime contractor and sun to a multi million dollar judgment. Without obtaining ongoing operations coverage, both entities are "naked" when a claim is made that the injury occurred due to the subcontractors failure to secure the shaft.
A general contractor should take the small additional step of requiring both types of CGL coverage by having its contracts specifically require subcontractors to name it as an AI for both ongoing operations and products-completed operations coverage.
To discuss Additional Insured details in South Carolina and securing adequate protection, please contact Clay Olson of Harper Whitwell PLLC at 843-224-6676. Email firstname.lastname@example.org.