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Additional Insured Coverage for Construction Defects –

General Liability Endorsement CG2010 11/85 edition – is GONE!

Robert J. Marshburn, CRM, CIC, ARM, CRIS, CISC

Founder & CEO | Certified Risk Managers LLC

There is no longer any responsible carrier we know of that will endorse the Commercial General Liability policy for residential construction in California with this edition date of the Additional Insured endorsement for completed operations. It is rapidly becoming unavailable in other states as well. It is also becoming extremely difficult to get for commercial construction.

In the past, this endorsement obtained by Sub Contractors on their policies gave the Additional Insured (the Developer/General Contractor) the ability to not only transfer the completed operations liability of the construction operation for as long as the statue of limitations would allow (usually at least 10 years), but also gave the Additional Insured coverage for the costly defense of Construction Defect Liability under the Sub's policy.

The Additional Insured endorsements that carriers will now accept and use are the newer 2001, 2004, and 2013 versions of the CG2010 that only allow coverage for "ongoing operations", not completed operations, and therefore have NO coverage for Construction Defect Liability or defense costs for the Additional Insured for these completed operations exposures. In order to obtain coverage for "completed operations" liability, carriers will generally issue the newer versions of the ISO CG2037 combined with the later versions of the CG2010, or other ongoing operations liability forms instead of the old CG2010 11/85 edition. For more information on the differences in the Additional Insured forms, see the links for the 2001, 2004, and 2013 versions.

Those carriers that have in the past issued the CG2010 11/85 for the Subs suffered the long term obligation over many years to defend and pay judgments of the Sub as well as the Additional Insured and have been swamped with claims and costs. A number are now insolvent. The last of the carriers who were still doing so have now pulled the plug on issuing this endorsement to try to avoid the same fate...

Many contractors and carriers are using Wrap Policies (OCIPs, CCIPs, etc.) to cover these exposures, but they contain many dangers and gaps of their own. California will no longer allow the Owner, General Contractor, or Developer to to be indemnified or insured by the subcontractor for these residential wrap-up construction projects!

To manage this risk, General Contractors and Developers are now must be sure that they revise all contracts with Contractors to reflect the new reality as discussed in the 2013 ISO forms information. Not doing so may mean there is no coverage even when named as an additional insured on the policy of a hired contractor!

A strong, well implemented set of Construction Defect Risk Management Protocols will contribute heavily to the bottom line in the years to come through claims that are avoided completely, or at least significantly reduced…

As widely recognized National Educators and Consultants specializing in solving Construction Defect and related issues we are happy to help you with a personalized program to protect your bottom line in this rapidly changing area.

Our Proprietary Automated Insurance Verification™ Risk Management Service has Enhanced Verification Provisions that helps Automatically Verify, Expose, Correct, and Activate Coverage Compliance with your Contract Insurance Coverage Requirements.

If you would like information on how our consulting services can benefit your business, please contact us.

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