A Video Explaining the Requirements of "Additional Insured" Provisions in a Construction Contract

Additional Insured" Requirements of Construction Contracts and Policies

Although the “additional insured” requirement provides additional security to the owner and architect, it can add to the cost of insurance. Regardless, the requirement is often included in contract documents and, if not carefully drafted, can result in multiple disputes as to which insurer is required to defend which insured. Construction contract language should be designed to avoid such disputes.

An owner and a contractor should make every effort to obtain language in their contract forms that will avoid ambiguous “additional insured” endorsements. The form language in the example above includes a requirement that the contractor provide the owner with a certificate, a copy of the actual endorsement making the owner an additional insured, and a copy of the entire policy. An owner who receives an endorsement should read it carefully and if it is not clear, then the owner should demand that it be clarified.

The requirements are usually verified by the contractor providing to the owner, architect, and others a “certificate of insurance” that is a statement by an insurance agent or broker that insurance exists at the time the certificate is signed in the amounts stated in the certificate by the insurers represented. A certificate is not insurance but only evidence of insurance at a specific time. Certificates often promise to advise the certificate holder if the policy is cancelled or otherwise goes out of force.

Parties to such contracts must carefully review their insurance contracts and be certain that their agents and brokers obtain policies that provide for such waivers of subrogation. Failure to do so can void the insurance contract as was held by the California Court of Appeals in Liberty Mutual Insurance Co. v. Altfillisch Construction Co., 70 Cal.App.3d 789, 139 Cal.Rptr. 91 (Cal.App.Dist.4 1977) where the court held that the waiver was “clearly a breach of the insured’s implied covenant of good faith and fair dealing.”

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4