Important Endorsements

Waiver of Subrogation – In regards to insurance and contractors, if you the contractor are asked to provide a waiver of subrogation on your insurance, you are limiting the insurance company’s ability to collect money from someone else who may have been at fault for a claim that your carrier has (or will) pay.

In other words if you are working on a job site and the drywall contractors forklift knocks a job box off the second floor onto one of your employees head an injures him, your work comp carrier will probably pay your employees medical bills and lost wages and then Subrogate the claim to against the owner of the job box and/or the forklift.

If in this same scenario, you agreed to waive subrogation, your insurance company will then NOT be able to collect any monies from the “at fault” parties and the entire claim will go on your loss history.

In construction, it is very common for your General Liability carrier to be asked to provide this type of waiver. Although Work Comp carrier is sometimes asked too, they may be unwilling to provide just such a waiver. Determine if your jobs require this, when purchasing coverage.

If you rarely work jobs with dozens of contractors, it is entirely possible that you may never need to provide this.

Additional Insured (short explanation) – If you are asked to list another company as an additional insured, the general intent is so that your policy will respond to any claims sent directly to the party requesting that you list them as Additional Insured.  If you are a window subcontractor and the GC receives a claim that one of the windows you installed fell out and hit a pedestrian, your policy should respond directly to that claim as if it was sent directly to you – as long as the GC was listed as an Additional Insured.  There is much much more to this endorsement.  Read this page for a more detailed explanation.  Also many times additional insured endorsements may exclude completed operations even though the underlying policy covers this exposure.  Most GC’s will not accept this.

Blanket Additional Insured – This means that additional insured’s are essentially automatically endorsed to the policy when required by written contract or other trigger.  This is opposed to having a scheduled additional insured where each individual party requesting the endorsement must be listed individually.  This is also a incredible time saver for both the insured and the agent.  Also see Additional Insured.

Per Project Limits  – Your typical General Liability policy has a per occurrence limit which is the maximum the policy would respond to one individual occurrence.  It also has a general aggregate which is the most that policy would pay over its term.  For example a $1 million per occurrence limit with a $2 million general aggregate means the policy cold pay 2 times $1 million dollar claims during that policy term. It could also pay $1 million for one claim and 2 ore claims of $500,000 a piece.

“Per project limits” allow these limits to be reinstated for each occurrence.  Given the above examples, you policy could respond to numerous claims for $1 million dollars as long as each claim was a separate project.

Primary and Non-Contributory Language :  “Primary” is easily defined. This simply requires the subcontractor’s policy to protect the upper tier contractor for any liability arising out of the negligent acts of the lower tier contractor – even if the upper tier was also partly liable in causing the injury or damage. But beyond requiring the lower tier’s policy to protect the upper tier contractor, it requires the policy to do so on a primary basis – meaning that the lower tier contractor’s General Liability policy will pay first. Simply put: the lower tier contractor’ policy is the first line of financial defense for it and the upper tier contractor when coverage is provided on a “primary” basis.

Noncontributory,” unlike “primary,” is rather ambiguous. Unless defined in the construction contract, it must be defined using its everyday meaning (which is how the court assumes a person without legal training will understand and apply the term). The dictionary defines “noncontributory” to mean, “not providing contribution.” Apparently, then, “noncontributory” requires the lower tier contractor’s policy to be the sole source of recovery – with no requested or expected contribution from the upper tier’s policy. If this is truly the correct application of the meaning of the term, a major problem is created when the cost of the injury or damage exceeds the limit of liability provided by the lower tier contractor’s General Liability.  In practice the intent is “usually” to make it so the lower tier subs policy will pay out it’s limits before any contribution would be expected from the upper tier or GC.  Unfortunately the courts have interpreted this may different ways over the years adding to the confusion.  Here is a great piece on if this language is even necessary anymore.

Hired Non-Owned Auto – Typically, hired and non-owned auto coverage is part of a commercial auto policy. It is liability and property damage insurance for a vehicle that is owned by an individual other than the company, but is used on a company’s behalf. It is intended for those “incidental” accidents—such as those that might occur when you send an employee on the job site to buy lunch or go to Home Depot. If that employee were to be involved in an auto accident and the limits of their own private policy are exhausted, the contractor’s hired and non-owned auto coverage would pick up “as excess” where the other policy left off.