Additional Insured Status for General Contractors

Today, we have a post regarding insurance coverage from Division 1 member Stephen Wright of the Atlanta-based law firm of Taylor English Duma LLP.

Stephen Wright of Taylor English Duma LLP

Stephen has a business background, having received his degree from Indiana University in Business Economics. His practice is not entirely construction-based, but his advice to clients on insurance issues relates across the board.

In the post that follows, Stephen outlines the ins and outs of the "your work" exclusion on a typical comprehensive general liability policy. Perhaps unsurprisingly, even with the same policy language, that exclusion is not applied consistently in all states.

New Twists: As General Contractor, Are You Protected as an "Additional Insured"?

By Stephen L. Wright

Let’s say you’re a general contractor on a commercial project and you’ve had your subcontractors give you certificates of insurance that identify your company as an “additional insured” under the subcontractors’ general liability policy.  So you’re covered in the event your subcontractors’ work causes some type of damage, right? Think again.

It all depends upon which state law applies. If you’re in Connecticut, you’re in luck. If the general contractor is in Georgia, not so much. But in either case, the wording of the specific insurance policy can make the difference.

The distinction between the states turns on a typical exclusion found in all comprehensive general liability policies involving construction companies. The “your work” exclusion states in essence that there is no insurance coverage if the damages are to the contractor’s own work. The thought here is that this is really a contract risk and the contractor needs to be careful in the performance of its own work. But how does this exclusion apply when the general contractor is an additional insured on a subcontractor’s policy?

It probably comes as little surprise that there is disagreement as to how these two provisions should interrelate. In Connecticut, the state Supreme Court recently found that the policy was only intended to relate to the subcontractor’s own scope of work such that damage to other parts of the project caused by a subcontractor’s defective work could be the basis of a claim by the general contractor.  

By contrast, in Georgia a recent court decision found that the scope of “your work” is determined from the perspective of the party making the claim so that a general contractor would have the exclusion apply to the entirety of the project. The court found that to find otherwise would make the insurer a guarantor of the subcontractor’s performance. The Connecticut court rejected this conclusion and pointed out that performance bonds guarantee a much broader spectrum of subcontractor failures as opposed to insurance which just focuses on defective work.

Bottom line: be aware of what the law of the state in which the project is located provides and make sure that the specific policy language of the “your work” exclusion says what you need it to say. There is no one standard way of phrasing this exclusion and each insurer can have its own individual approach.

Stephen L. Wright is a Partner with Taylor English Duma LLP in Atlanta.