About a year ago, Marty Hogan, owner of Martin F. Hogan, a remodeling company in Pittsford, N.Y., got a surprise when he renewed his liability insurance. He was informed that he could no longer get additional insured endorsement on a blanket basis (see “Additional Insured,” below). Coverage for the additional insured would be for each project individually, which meant that Hogan had to ask trade partners at each job to show their endorsements.

“It’s true,” says Mark Leininger, an agent at NEK Insurance, in El Cerrito, Calif. “The ISO [Insurance Service Office] changed the coverage of the additional insured endorsement.” The change arose out of court decisions in several cases throughout the country. Since it’s an insurance industry change, it applies in all 50 states. “Generals and their subcontractors are just getting educated to it,” Leininger adds.

Good Protection

Having this new language is a good way for general contractors to maintain control of insurance issues since “it’s a legal remedy specific to a project,” Leininger says.

For example, a GC hires a plumber for a residential project in 2002 and four years later in 2006, the plumber’s work causes damage to the home. It just so happens that the plumber is again, in 2006, working with the same GC on another project. Prior to the recent endorsement change, the court would deem that the GC was an additional insured under the blanket coverage for that earlier project and the GC would have coverage for the loss.

Now, with the change, the GC would not have coverage because the endorsement is limited to “ongoing operations.” Even if the GC was 25% responsible for loss, there’s no coverage for the GC as an additional insured, Leininger says. “The current endorsement doesn’t provide coverage for the contributory negligence of the GC; nor does it provide coverage beyond completion of the project.”

Stick With It

So far, Hogan hasn’t figured out any particular system and just asks at each job for proof of endorsement. “These standardized endorsements didn’t take into account the burden it would place on small GCs,” Leininger says. “[But] within the realm of risk management, this process is what needs to be done so that the GC does not risk losing coverage under the subcontractor’s policy.”

—Stacey Freed, senior editor, REMODELING.