Determining the Scope of “Additional
Insured” Coverage
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By Roberta D. Anderson
It is common among parties to sophisticated construction projects, service agreements, leases, and
many other types of projects and transactions, to assess the risks associated with their contractual
activities and allocate those risks through a combination of contractual indemnification provisions and
insurance requirements. In the construction setting, for example, project owners, general contractors
and developers (so-called “upstream” parties) typically require their subcontractors and sub-
subcontractors (“downstream” parties) to indemnify them for claims arising from the contract work.
In addition to the contractual indemnification provisions, upstream parties frequently require that they
be provided with “additional insured” status on the downstream indemnitor’s/named insured’s general
liability insurance policy. This provides a number of benefits to the upstream indemnitee. It
effectively gives the additional insured/indemnitee direct coverage rights under the indemnitor’s
insurance policy, preserves the indemnitee’s own liability coverage and may protect the indemnitee in
the event the contractual indemnification provision in the parties’ contract is determined to be void
and unenforceable.
Additional insured status may be achieved in several ways. Commonly, it is established through an
omnibus definition of “Insured,” which may include, for example, the named insured and entities for
whom the named insured is obligated by “insured contract” to provide insurance. Alternatively,
additional insured status is often achieved through the purchase of “blanket” or “scheduled” additional
insured endorsements. The additional insured status under a liability policy is an important bargained-
for asset in many types of transactions.
Of course, the extent of the benefit of additional insured status hinges on the actual terms of the
insurance policy and applicable law. With respect to policy terms, the Insurance Services Office
(ISO)i commercial general liability (CGL) coverage forms provide the basis for many general liability
policies. Accordingly, familiarity with the ISO forms is important. With respect to applicable law, the
indemnity and insurance scheme has precipitated frequently conflicting judicial decisions on
numerous and complex issues. A number of these decisions, based upon the fact that the underlying
agreement and the insurance policy are in fact separate contracts, have held that the scope and validity
of the contractual indemnification provisions have no impact upon the scope and validity of the
additional insured coverage—with the effect that additional insureds sometimes enjoy broader
protection under the insurance policy than under the contractual indemnification p rovisions. By way
of example, although anti-indemnification statutes in many states prohibit the transfer of an
indemnitee’s sole (and/or concurrent) negligence through contractual indemnity provisions, some
courts have construed the terms of the insurance policy as encompassing and covering the additional
insured’s negligence even where the underlying contractual indemnification provision was void and
unenforceable. In addition, some courts have held that, while the underlying contract may expressly
limit the named insured’s indemnification and insurance obligations to the additional insured, the
May 9, 2013
Practice Groups:
Insurance Coverage
Commercial Disputes
Construction &
Engineering
Appellate Litigation
