Author: Chris Boggs

Insurance Services Office (ISO), or Verisk if you prefer, in its 2019 commercial general liability (CGL) multistate endorsement revision filing among other changes:

• Made a minor change to 25 additional insured endorsements;
  
• Brought two additional insured endorsements up-to-date and in alignment with most the construction-related additional insured endorsements;
• Added three new non-construction AI endorsement triggered by the presence of a contractual requirement for AI status; and
• Addressed the old problem of newly acquired or created LLCs.

'Tis But a Minor Change – But a Looooong List

Because the limits of coverage shown on the Declarations page might not be the limits applicable to a certain loss for which the additional insured may be granted coverage, generally because of an endorsement, ISO is revising 25 additional insured endorsements to remove any reference to the limits in the Declarations page.

Previous editions of the 25 affected additional insured endorsements stated:

With respect to the insurance afforded to these additional insureds, the following is added to Section III - Limits Of Insurance:

If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance:

1. Required by the contract or agreement; or

2. Available under the applicable Limits of Insurance shown in the Declarations;

whichever is less.

The revised editions remove any reference to the “limits of insurance shown in the Declarations" and replace that wording with: “Available under the applicable limits of insurance."

Again, the only reason this change was made is because an endorsement may alter the limits applicable to a current loss – making the amount of coverage something other than the limits shown in the Declaration. The endorsements changed are the:

• CG 20 03 - Additional Insured-Concessionaires Trading Under Your Name
  
• CG 20 05 - Additional Insured-Controlling Interest
• CG 20 07 - Additional Insured-Engineers, Architects or Surveyors
• CG 20 10 - Additional Insured-Owners, Lessees or Contractors-Scheduled Person or Organization
• CG 20 11 - Additional Insured-Managers or Lessors of Premises
• CG 20 12 - Additional Insured-State or Governmental Agency or Subdivision or Political Subdivision-Permits or Authorizations
• CG 20 13 - Additional Insured-State or Governmental Agency or Subdivision or Political Subdivision-Permits or Authorizations Relating to Premises
• CG 20 15 - Additional Insured-Vendors
• CG 20 18 - Additional Insured-Mortgagee, Assignee or Receiver
• CG 20 23 - Additional Insured-Executors, Administrators, Trustees or Beneficiaries
• CG 20 24 - Additional Insured-Owners or Other Interests From Whom Land Has Been Leased
• CG 20 26 - Additional Insured-Designated Person or Organization
• CG 20 27 - Additional Insured-Co-Owner of Insured Premises
• CG 20 28 - Additional Insured-Lessor of Leased Equipment
• CG 20 29 - Additional Insured-Grantor of Franchise
• CG 20 30 - Oil or Gas Operations-Nonoperating, Working Interests
• CG 20 31 - Additional Insured-Engineers, Architects or Surveyors
• CG 20 32 - Additional Insured-Engineers, Architects or Surveyors Not Engaged by The Named Insured
• CG 20 33 - Additional Insured-Owners, Lessees or Contractors-Automatic Status When Required in a Written Construction Agreement With You
• CG 20 34 - Additional Insured-Lessor of Leased Equipment-Automatic Status When Required in Lease Agreement With You
• CG 20 35 - Additional Insured-Grantor of Licenses-Automatic Status When Required by Licensor
• CG 20 36 - Additional Insured-Grantor of Licenses
• CG 20 37 - Additional Insured-Owners, Lessees or Contractors-Completed Operations
• CG 20 38 - Additional Insured-Owners, Lessees or Contractors-Automatic Status For Other Parties When Required in Written Construction Agreement
• CG 29 35 - Additional Insured- State or Governmental Agency or Subdivision or Political Subdivision – Permits or Authorizations

I told you it was a long list.

“Modernizing" the CG 20 11 and CG 20 24

Prior to 2004, ISO's CGL additional insured endorsements typically responded to the additional insured's liability “arising out of" operations performed for the additional insured by the named insured. ISO discovered that in many disputes between insurers and insureds, courts broadly construed the phrase "arising out of." Courts were not clear whether the endorsements provided coverage for only the additional insured's vicarious liability arising out of the named insured's negligent acts or whether coverage extended to the additional insured's sole negligence. Because of this lack of clarity, some courts ruled that such wording extended coverage for the additional insured's sole negligence and did not require the named insured to play a part in causing the injury or damage.

ISO attempted to “fix" this issue with its 2004 multistate form filing, replacing the “arising out of" language and replacing with language requiring the named insured to cause the injury or damage “in whole or in part." This limited protection for the additional insured to its vicarious liability for the actions of the named insured or for injury or damage caused by both the named insured and additional insured (contributory negligence).

However, these changes were mostly limited to construction-related additional insured endorsements. With the 2019 multistate filing, ISO took the opportunity to make similar changes to the:

• CG 24 11 Additional Insured – Managers or Lessors of Premises; and
  
• CG 20 24 Additional Insured – Owners or Other Interests from Whom Land Has Been Leased.

According to ISO, the additional insureds covered by these revised endorsements will have coverage only for vicarious liability or contributory negligence. The injury or damage must be “caused in whole or in part" by the named insured or those acting on behalf of the named insureds for the additional insured to have coverage.

Additionally, ISO replaced the term “premises" with “land" in the schedule heading of the CG 20 24. According to ISO, this wording better reflects the design of the endorsement. The schedule heading now reads: Designation Of Land (Part Leased To You).

“Automatic" Additional Insured Endorsements

Before the 2019 multistate filing, there were five “automatic" additional insured endorsements. Five more were added in this filing:

• CG 20 39-Additional Insured-Owners, Lessees or Contractors-Automatic Status When Required in Written Construction Agreement With You (Completed Operations)
  
• CG 20 40-Additional Insured-Owners, Lessees or Contractors-Automatic Status For Other Parties When Required in Written Construction Agreement (Completed Operations)
• CG 20 42-Additional Insured-Automatic Status For Designated Operations
• CG 20 43-Additional Insured-Automatic Status When Required in Written Contract or Agreement
• CG 20 44-Additional Insured-Vendors-Automatic Status When Required in Agreement

Two, the CG 20 39 and the CG 20 40, were explained in the article 3 Exciting Construction Risk Endorsements. Now let's take a quick look at the three remaining automatic additional insured endorsements created in 2019.

CG 20 42-Additional Insured-Automatic Status For Designated Operations

This endorsement provides automatic additional insured status to any person or entity requiring AI status by contract in relation to the operation designated in the contract and specifically described in the schedule within the endorsement. The schedule can be used to describe that portion of an ongoing operation to which the automatic additional insured status is limited. ISO says the ability to schedule the operation offers carriers flexibility. The description of operations can be as broad or as limited as necessary. This endorsement does not apply to "bodily injury" or "property damage" included in the "products-completed operations hazard." Also, the CG 20 42 has a long list of excluded professional services. The professional services exclusion reads:

This insurance does not apply to "bodily injury", "property damage" or "personal and advertising injury" due to rendering of or failure to render any professional service. This includes but is not limited to:

1. Legal, accounting or advertising services;
2. Preparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings or specifications;
3. Inspection, supervision, quality control, architectural or engineering activities done by or for you on a project on which you serve as construction manager;
4. Engineering services, including related supervisory or inspection services;
5. Medical, surgical, dental, X-ray or nursing services treatment, advice or instruction;
6. Any health or therapeutic service treatment, advice or instruction;
7. Any service, treatment, advice or instruction for the purpose of appearance or skin enhancement, hair removal or replacement, or personal grooming or therapy;
8. Any service, treatment, advice or instruction relating to physical fitness, including service, treatment, advice or instruction in connection with diet, cardiovascular fitness, bodybuilding or physical training programs;
9. Optometry or optical or hearing aid services including the prescribing, preparation, fitting, demonstration or distribution of ophthalmic lenses and similar products or hearing aid devices;
10. Body piercing services;
11. Services in the practice of pharmacy;
12. Law enforcement or firefighting services; and
13. Handling, embalming, disposal, burial, cremation or disinterment of dead bodies.

CG 20 43-Additional Insured-Automatic Status When Required in Written Contract or Agreement

This appears to be a “catch-all" automatic additional insured endorsement. It's not limited to construction and it's not specific to a particular relationship (such as a vendor, lessor, owner, etc.). The only requirement is that the named insured agree in a written contract to extend additional insured status to another person or organization.

Both the CG 20 42, previously introduced, and the CG 20 43 extend additional insured status for only ongoing operations; and both contain the same professional services exclusion.

CG 20 44-Additional Insured-Vendors-Automatic Status When Required in Agreement

To provide insurance carrier with an additional underwriting tool, ISO has introduced the CG 20 44 Additional Insured – Vendors – Automatic Status When Required In Agreement endorsement. The 20 44 provides additional insured status to any person or organizations the named insured is obligated to via a written contract. The AI status applies to the distribution or sale of any of the named insured's products as part of the additionally insured vendor's business.

The Old Problem of Newly Acquired or Formed LLCs

Section II – Who Is An Insured in ISO's commercial general liability (CGL) policy extends status as an insured to any organization the named insured newly acquires or forms provided the named insured owns or maintains majority interest is the organization. However, this extension does not apply to newly acquired or formed limited liability companies (LLCs). One reason for this lack of automatic status is that LLCs cannot be and are not owned. LLCs have members, but not owners.

Historically, an LLC was covered only when it was listed on the CGL policy. ISO has promulgated an optional endorsement that amends the Who Is An Insured provisions to include LLCs acquired or formed by the named insured – even if not listed. This optional endorsement retains the same limitations that currently apply to newly acquired or formed organizations, namely that coverage is granted only until the 90th day after an organization is newly acquired or formed, or the end of the policy period, whichever is earlier; and coverage does not apply to incidents that occurred before the LLC was acquired or formed.

For the CGL, the now available endorsement is the CG 24 54 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies. But ISO developed a similar optional endorsement for use with multiple forms. Why? Because this same insured status limitation applicable to LLCs applied in nearly every ISO general liability coverage part. Basically, no ISO-promulgated general liability form granted automatic status to a newly formed or acquired LLC. Following is a list of the available LLC endorsements:

• CG 34 35 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies (for use with the Electronic Data Liability Coverage Part)
  
• CG 34 36 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies (for use with the Liquor Liability Coverage Part)
• CG 34 37 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies (for use with the Pollution Liability Coverage Part - Designated Sites)
• CG 34 38 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies (for use with the Products/Completed Operations Liability Coverage Part or for use with the Pollution Liability Limited Coverage Part – Designated Sites)

To avoid an E&O issue, remember to request this endorsement to fill in the gaps in the unendorsed automatic insured status of the CGL.

Reminder and “Warning"

Remember, all the endorsements introduced in this article had a December 1, 2019, effective date. However, availability and “availability" are two different things. While these endorsements may be available for use in the state, the insurance carrier may not have these endorsements “available" for use yet.

Maybe a friendly nudge will convince the insurance carrier. Anyway, I'll leave that up to you.

Last Updated: December 20, 2019