# Liability Insurance Question - Am I Paranoid?



## wallmaxx (Jun 18, 2007)

My wife runs my books. Today, the accountant for my main customer, a local GC who I do most of my work for, asked my wife to add the GCs company as an additional insured party to *MY INSURANCE POLICY*. She complied without thinking about it. 

What gives? Is this normal? I've never seen this.

I have never had to INSURE the guy in charge of the whole project before.

Maybe I'm just a simpleton, but I always thought that I came to the site, insured out the wazoo, to cover anything that I might break, injure or damage. The coverage was for MY business alone. The GC has his own insurance that covers his liabilities, etc.

How is it advantageous for me to expose my business to risks that are outside my control and/or responsibility? Why would he want on my policy? Is he trying to spread the total liability across multple contractors?

I just sent off a memorandum for record to my insurance agent to UNDO this mess, and to only make changes once verified / approved by me.

It's a bit late to call him...but I will find out about all this tomorrow. Just thought I'd ask some of you people who are better at the bussines end of bussiness than I am.


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## rbsremodeling (Nov 12, 2007)

That is typically how it is done here on larger projects. In my eyes its nothing out the blue.

Did it have a specific address for a site you are working on for the GC? or just his company named?


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## Aggie67 (Aug 28, 2008)

Typical. But we pass the cost on, obviously.


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## wallmaxx (Jun 18, 2007)

Just his name.

These are single family dwelling projects.

Why would he be included on MY insurance? Ain't he 'sposed to get his own.


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## rbsremodeling (Nov 12, 2007)

wallmaxx said:


> Just his name.
> 
> These are single family dwelling projects.
> 
> Why would he be included on MY insurance? Ain't he 'sposed to get his own.




He has his own. He is making sure you have what you say you have an you are current on your payments. He requests it and the insurance company will send it over to him.

He puts it in his file to show his insurance company if they audit him that he did what they told him to do.

I do it once a year with my regular subs and twice a year to new subs. 

Some guys/GC request it on every project with the address listed for every address you work on.

It reinforces his position in making a claim. But it gives him no more leeway/rights than he would have in any event. 

He still has to make a claim with your company if something goes wrong and they still have to approve/agree to the payout.

He can just prove you worked for him and if the address is listed on what jobs you worked on.


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## mikec (Jan 2, 2007)

Couldn't he just ask for a cert, with his job address and company name?


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## Kgmz (Feb 9, 2007)

You have to have both, a certificate and additional insured.

The reason for all this is to protect the general from things the sub may have done wrong or get hurt, and is also to protect you. And is pretty much standard practice in all insurance policies I have seen for the last several years. Read the fine print if you hire subs.

From my policy:

Independent Contractors or Subcontractors Warranty

The Commercial General Liability Coverage From (CG 00 001), Section I - Coverages, Coverage A Bodily Injury and Property Damage Liability, 2. Exclusions and Coverage B Personal and Advertising Liability, 2. Exclusions is amended to include the following.

This insurance doe not apply to "bodily injury", "property damage". "persoanl injury". advertising injury", or medical payments for acts of independent contractors or subcontractors you hire or are working on your behalf unless the conditions stated below are met and coverage for independent contractors or subcontractors exposure under this policy was purchased at inception.

It is agreed that you will furnish the following from each independent contractor or subcontractor you hire or who performs work on your behalf and that the following will be obtained prior to commencement of any work performed for the insured.

(1) Certificate of Insurance evidencing commercial general liability coverage and workers compensation coverage in effect for the duration of time work is being performed on behalf of insured from each independent contractor or subcontractor. Limits of liability for each coverage shall be equal to or greater than those provided by this policy; and

(2) An endorsement naming you as an Additional insured for the commercial general liability and workers compensation coverage of each independent contractor or subcontractor; and

(3) The contact representing agreement you and each independent contractor or subcontractor you hire or that does work on your behalf.

No duty to defend or indemnify any insured under this policy for any claims that are or should be covered under the policies required of independent contractors or suncontractors under this endorsement will exist absent exhaustion of all independent contractors and subcontractors policies. Any coverage under this policy for claims against and insured based on work done for or on the behalf of any insured by and independent contractor or subcontractor is expressly excess over, and will not contribute with, the insurance required under this endorsement.





And make sure the subs insurance liability is more or equal than yours as stated in number 1. 

This states minimum of,

$50,000 property damage policy and $200,000 public liability policy 
OR $250,000 combined single limit policy

is not going to cut it. I have a 2 million liability policy and the subs must also have 2 million in liability. I have never seen a sub with the state minimum, but have seen a few with only 1 million in liability coverage.


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## Astrix (Feb 23, 2009)

When people sue, the tendency is to name every possible person and company that could be in any way remotely responsible for the loss. Then, as the lawsuit gets underway and is investigated, the lawyers will clear out the names of those that have no negligence in the matter until they are left with the proper defendants.

The way that the Additional Insured endorsement should read, if it is correctly worded, is as follows: “123 General Contracting Ltd. is added as Additional Insured but only with respect to liability arising out of the operations of Wallmaxx Inc.”

You are not providing insurance for the GC; the GC still has to have their own liability insurance for any claims caused by their own work. The purpose of the Additional Insured endorsement is to have your insurer handle the GC's defense on claims that are *your* fault. Your insurer will clear their name from the list of defendents. This way the GC does not have to get their own insurer involved in a claim that really has nothing to do with them. 

These Additional Insured clauses should not cost you anything extra because the insurer is not really providing any extra coverage. All they are agreeing to do is take on a bit of extra legal defense costs to clear the Additional Insured’s name.


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## greg24k (May 19, 2007)

If I am not mistaken, he is asking you to add GC you are doing the work for as a Certificate holder.

There is a section at the bottom on the Certificate of Insurance say Certificate Holder, and insurance agency will put the name of the company or GC you are doing the work for. Which means, if something happens, it shows that your insurance company is covering the company you are working for if anything should happen or you mess something up.

That is a standard practice and you not paying anything extra. I am a GC and I get an audit from the state every year, and every check I write to any contractor, I have to be a holder of his policy, if I don't have his insurance or I am not on it, I pay $100 per every $1000. So if I wrote someone $5000 check and I don't have his insurance, they will nail me for $500.

So don't worry about it... just make sure thats the case :thumbsup:


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## cleveman (Dec 28, 2007)

Astrix nailed it.

It's a $100 here. I hope it stops somewhere. Otherwise we'll have to start doing this for every single customer. If you work for a city, for example, I was asked to do this for the city and the engineer. Why not for every single homeowner whose property the project touches? May as well include the electric, gas, cable, telephone, blah blah blah companies as well.


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## wellbuilthome (Feb 5, 2008)

I can list some one as insured for free . If i pull a permit for a job the towns want to be added to the policy as insured . I think its mostly because they get notified if your policy is canceled . We have a different certificate of WC for our audit where they charge me 10% as Greg said.


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## BuiltByMAC (Mar 11, 2006)

wallmaxx said:


> Is this normal? I've never seen this.


yup, it's normal - not common, but normal. My insurance co. gave me the first two free, after that they charge $100 per.
Kgmz has a good point - I had to up my liability to $1 Mil at the GC's request. The add'l cost for the added coverage was nominal, I didn't pass it on.

You've gotten good feedback from the above posters...

Mac


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## AustinDB (Sep 11, 2006)

one other note, hope I'm not being redundant, but the GC/property owner can request a notification if insurance lapses, thereby protecting them if the contractor's policy ends (was not renewed) and later an insurance claim arose. Then the onus would be on the insurance company for notifying the cert holder.


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## jimmys (May 1, 2009)

That's really what the GC needs it for. Your cert will show you're insured, but the Additional listing means the ins. co. has to inform him if you are cancelled. Otherwise he has no way of knowing, and may end up holding the bag for you. As GC, we've had to do that several times. I often forget to ask for the Additional listing, but should, especially with new subs.
Jim


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## A W Smith (Oct 14, 2007)

wellbuilthome said:


> I can list some one as insured for free .* If i pull a permit for a job the towns want to be added to the policy as insured *. I think its mostly because they get notified if your policy is canceled . We have a different certificate of WC for our audit where they charge me 10% as Greg said.


I send out certificates several times a year naming others as insured and as far as I know my insurance carrier doesn't charge me. Only Waldwick NJ requested to be named and I notified my insurance company for certificate naming them. But that was before the state had home improvement contractor registration. if I recall Waldwick required a town license to pull permits.


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## DivineGC (Apr 5, 2007)

I am a GC that does work in NJ and NY and even though I have full liability and workmans comp, my insurance company requires I get additionally insured certificates from all my jobs every time. Never had a problem but I guess it helps protect my insurance company. Even though we pay our insurance, our insurance companies want to make sure we don't have to use them if we have a claim.


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## Astrix (Feb 23, 2009)

I just want to add a few clarifications:

(1)
The Additional Insured clause and the Notice of Cancellation clause are two different parts that can be shown on a Certificate of Insurance. Each stands on its own but you often see them together.

The Additional Insured clause adds the Certificate holder (and sometimes extra names if requested) as "Additional Insureds" which, as I have already explained above, only gives them access to your insurance company lawyers to clear out their name if they are included in a lawsuit along with you, and it is determined that your operations were the reason for the lawsuit.

Separately, is the Notice of Cancellation. This means that the Certificate holder will receive written notice from the insurance company if you cancel your policy or reduce the insurance coverage. Usually they give 15 days, but for construction it is often 30 or even 60 days. This Notice then gives the Certificate holder time to either get you to give them proof of replacement insurance or kick you off the job.

You don't have to be an Additional Insured to get the Notice of Cancellation; and you don't have to have the Notice of Cancellation to be an Additional Insured.

(2)


> Even though we pay our insurance, our insurance companies want to make sure we don't have to use them if we have a claim. - Divine GC


It also helps you if your insurance isn't unnecessarily accessed in that you don't have to pay your deductible and you don't have a claim on your record that really isn't your fault.


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## wellbuilthome (Feb 5, 2008)

A W Smith said:


> I send out certificates several times a year naming others as insured and as far as I know my insurance carrier doesn't charge me. Only Waldwick NJ requested to be named and I notified my insurance company for certificate naming them. But that was before the state had home improvement contractor registration. if I recall Waldwick required a town license to pull permits.


Most towns have a required licence in bergen county . They cost $30 to $500 +- Ive been out of NJ for 3 years now . Rock land county NY has a licence that cost about 500 bucks and you will be jailed for working with out one . now, I only work in my area , Its about 1 mile wide and 12 miles long and covers 5 towns .:thumbup: But I cant pull a permit with out the comp and listing the towns as insured. Its no big deal to me.


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## assocplumbers (Apr 15, 2009)

wellbuilthome said:


> Most towns have a required licence in bergen county . They cost $30 to $500 +- Ive been out of NJ for 3 years now . Rock land county NY has a licence that cost about 500 bucks and you will be jailed for working with out one . now, I only work in my area , Its about 1 mile wide and 12 miles long and covers 5 towns .:thumbup: But I cant pull a permit with out the comp and listing the towns as insured. Its no big deal to me.


My understanding of "Additional Insured" is that you are at risk if "Anyone" screws up on the job. 

The General Contractor can use your insurance company instead of theirs for any issues that come up, whether yours or someone elses fault.

We do not sign any contracts with an "Additional Insured" clause unless it has been marked out and initialed by both parties.

Sure we lose a few jobs, but that is OK too.

I think some people are confusing "Additonal Insured" with "Certificate of Liability".

A "Certificate of Liability" only shows that you have insurance and shoud lbe standard procedure.


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## TimberlineMD (Jan 15, 2008)

"Addtionally Insured" means just that. You are adding someone else to your policy. Court cases have awarded injured parties monies from sub contractors insurance that have given "additionally insured" certificates to General contractors and to owners who have been found to be at fault. The courts have held that because the party that allowed his policy to "additionally insure" another, even though no fault was found against the insuring party, because he "additionally insured" another who was found at fault the innocent party policy could be used to satisfy any judgement. My lawyer agreed with me that in therory, under certain situations, a GC could drain every sub's insurance down to pay a claim against him without ever having his policy touched. In that scenerio all the subs insurance premiums would skyrocket or be cancelled. The GC would be free and clear. I would only grant the certificate of insurance. It proves you have it and if something does happen they will have to prove it was your fault before the could collect.


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