New AI Endorsements – Automatic Status for Completed Operations
The Insurance Services Office, Inc. (ISO) recently released 92 new and 42 revised endorsements for use with Commercial General Liability (CGL) ISO coverage forms which became effective December 1, 2019 in most jurisdictions across the country. The is the first major CGL endorsement filing by the ISO since 2013, and the extensive endorsement filing was considered unusual because it was made with no changes in ISO’s coverage forms. These endorsements being made optional provides considerable additional flexibility for insurance carriers and may result in some carriers refusing to write a particular classification or insured without the inclusion of one of the new endorsements. Consequently, following the release of these 134 new & revised endorsements, policyholders need to be careful to search out and be aware of any potential gaps in coverage.
There are two new Additional Insured (AI) endorsements of particular note for the construction industry:
- CG 20 39 12 19 – Additional Insured – Owners, Lessee or Contractors – Automatic Status when Required in Written Construction Agreement with You (Completed Operations)
- CG 20 40 12 19 – Additional Insured – Owners Lessees or Contractors – Automatic Status for Other Parties when Required in Written Construction Agreement (Completed Operations)
Additional Insured coverage for Completed Operations is generally provided under form CG 20 37, which requires each additional insured to be specifically listed in the endorsement schedule. However, these two new ISO endorsements both automatically extend AI status for Completed Operations without having to specifically identify each additional insured in the endorsement schedule.
The difference in the two new AI endorsements is as follows: CG 20 39 requires a direct contractual relationship with the named insured, conferring AI coverage only “when you and such person or organization have agreed in writing in a contract or agreement that such person . . . be added as an additional insured on your policy. ” However, under CG 20 40 there is no requirement of direct contractual privity between the named insured and the additional insured. Instead, CG 20 40 provides AI coverage to anyone required to be named as an additional insured under any written contract that performs operations for the named insured.
Policyholders should also be aware of two important distinctions between these two new endorsements and the existing CG 20 37–Additional Insured Completed Operations endorsement. First, AI coverage under both the two new endorsements is conditioned upon the named insured having agreed in a written construction contract to provide such AI coverage. The existing CG 20 37 endorsement does not require that any such written contract exist. In other words, the two new AI endorsements and the existing CG 20 37 endorsement can be thought of as opposites: under the two new AI endorsements, the AI does not have to be specifically listed on the policy’s endorsement schedule but does have to be listed in a separate written agreement, whereas under the existing CG 20 37 endorsement, the AI does have to be specifically listed on the policy’s endorsement schedule but does not have to be listed in a separate written agreement.
Secondly, both the two new AI endorsements expressly exclude “any professional architectural, engineering or surveying services, including: The preparing, approving, or failure to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, changes orders or drawings and specifications; or Supervisory, inspection, architectural or engineering activities.”
In contrast, the CG 20 37 endorsement does not include any such exclusion for professional services. Consequently, it is important that owners and other upstream parties seeking AI coverage are aware of the professional services exclusion and its impact on coverage where the new CG 20 39 and CG 20 40 endorsements are at issue.