An agent offers risk management consultation services to landlords. Before tenants move into a space, a build-out occurs. The tenants send the agent their general contractor's certificate of insurance (COI) for evaluation. The leases require a tenant and their contractor to add the landlord as additional insured with a waiver of subrogation, and ensure that the coverage is primary and noncontributory.

Most general contractors' and subcontractors' certificate of insurance states: “XYZ are included as additional insured as required by written contract." However, there is rarely a written contract between the general contractors, the subcontractors and the landlord. Typically, these COIs arrive after the job is complete. And if the tenant hires a sub, the agent rarely receives those COIs.

Virtually all parties involved—the landlord, the tenant and the general contractor—mistakenly believe the contractor's additional insured endorsements are triggered by the lease agreement between the landlord and tenant.

Q: What endorsements will protect the landlords as additional insureds when there is no written contract?

Response 1: Regardless of what the COI says, it is important that your landlords get a copy of the additional insured endorsement that is purporting to provide coverage. A statement on the COI means nothing without the policy language to support it. 

Allowing work to begin before a COI and endorsement are received is dangerous. As tedious as this is for the landlords, it is the only way to make sure they are protected.

If there is a contract between the tenant and the general contractor—or the general contractor and the subcontractors—that requires additional insured coverage for the landlord. Some additional insured endorsements are broad enough. One example is CG 20 38 12 19, the Additional Insured—Owners, Lessees or Contractors—Automatic Status for Other Parties When Required in Written Construction Agreement endorsement.

In many cases, though, the landlord will need to be named on an additional insured endorsement, such as CG 20 26 12 19, Additional Insured—Designated Person or Organization, on each contractor's policy, either because there is no contract that requires they get additional insured status or because the automatic additional insured endorsement isn't broad enough to include them. 

Response 2: The tenants should add CG 20 11, Additional Insured—Managers or Lessors of Premises. The contractors should add CG 20 10, Additional Insured—Owners, Lessees or Contractors—Scheduled Person or Organization; and if completed operations coverage is required, CG 20 37, Additional Insured—Owners, Lessees or Contractors—Completed Operations. None of these endorsements require a written contract.

Response 3: You can't protect clients who are unwilling to help protect themselves. Perhaps you should give up that part of your practice for clients who don't use properly drafted contracts with proper provisions. All you can tell those clients is that the COIs are an illusion of coverage. For certain coverages to apply, they must be triggered by properly drafted contract requisites. Absent proper contracts, it's a crapshoot and they are kidding themselves.

For clients who are concerned about risk and potential exposure to loss, we include proper defense, indemnity and hold harmless provisions, exculpatory provisions and an insurance addendum that details the requisites. That would include, but not be limited to, a waiver of subrogation, primary and noncontributory coverage, and an additional insured endorsement with the specific ISO form numbers to fit the situation—whether in privity of contract or as an interested third-party beneficiary. In some instances, we give options of combinations of ISO forms that are acceptable and add comparable forms providing equivalent coverage. Coverage requisites are clearly detailed to fit the situation.

Some of my clients listen and learn while some don't. To those who don't, I tell them that if something goes wrong it could become a time-consuming, expensive, painful litigation nightmare. I remind them that most things don't matter until they matter, and then it's often too late to deal with it.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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