The US construction boom has shone a spotlight on the minutiae of associated insurance law.
Construction is booming in the US and so are the inherent risks presented to owners, contractors and sub-contractors alike.
Traditional risks such as slips and falls, workmanship and product defects are compounded by a skilled labour shortage, an ageing workforce and an influx of inexperienced workers. As a result, owners, contractors and sub-contractors continue to seek to shift liability among themselves through indemnification and insurance requirements clauses in contracts.
Most construction contracts include clauses among the parties requiring specific types and amounts of insurance and also require such policies name the project owners, architects, general contractors and/or sub-contractors as “additional insureds”.
Generally speaking, status as an additional insured effectively means coverage is available but only with respect to liability caused in whole or in part by the ongoing operations of the named insured.
Having a contract that requires a party be named as an “additional insured” is only the tip of the proverbial iceberg, as the question of whether and to what extent an insurance policy provides coverage for an additiona insured is one of the most complex issues in construction risk and insurance. The scope of additional insured coverage can be influenced by many factors including policy language, contract language, public policy and state laws. Indeed, the law regarding additional insured coverage varies significantly depending on
the controlling state law. Consequently, risk managers and insurance agents must continually apprise themselves of the ever-evolving status of the law.