One of the LinkedIn Groups I subscribe to is on Insurance Coverage, where I found this post last week:
Massachusetts Superior Court Decision Addresses Additional Insured Coverage
The court decision is discussed in this blog post from the Anderson Krieger law firm:
Does an Additional Insured Get Coverage When the Named Insured Has Done Nothing Wrong?
I can’t count the number of times in an email, article, seminar, or webinar when I’ve pointed out that, under ISO AI endorsements since 2004 (and most carrier AI endorsements I’ve seen), the AI has no coverage on a named insured’s CGL policy unless the named insured has SOME liability (i.e., negligence, fault, etc.). In other words, there is no coverage for the AI’s sole negligence.
However, as Craig Stanovich points out in the Linkedin discussion, that’s not what the policy forms actually say. Coverage is contingent upon loss “caused, in whole or in part, by” the named insured and others acting on behalf of the named insured. That may sound like a fine line, but requiring some part of the loss to be “caused by” the named insured is different from requiring negligence of the named insured and this court case illustrates that.
Words matter. Grammar matters. Punctuation matters. This is yet another reason why we cannot generalize about policy coverage. The language must be read and expressed precisely.
Bill Wilson
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The unendorsed CGL does grant contractual liability coverage for sole negligence. While most states have anti-indemnity laws to prevent such transfer, there are a limited number of states who grant such a benefit. For example, Florida has what I term a limited broad form anti-indemnity statue that allows for such a transfer involving construction contracts inasmuch as such statutes outline the conditions of said transfer. To my knowledge, there is no such restriction in Florida regarding non-construction contracts.
In part, here is the policy language that supports my thesis:
That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.
Good point, Bill. The late, great Don Malecki used to refer to AI protection coupled with contractual liability as a “belt and suspenders” approach to risk management. Both serve a purpose. The UNENDORSED policy addresses sole negligence under contractual liability with, as you state, an emphasis on unendorsed since ISO has a couple of troublesome endorsements in particuarly that restrict contractual liability and there are many non-ISO forms to be wary of. Additional insured status, on the other hand, usually ensures that the AI has defense outside of limits.