Risk is the name of the game in the worlds of construction and insurance, but the risk is amplified when these two worlds join together. Obtaining “additional insured” (“AI”) coverage can play a significant role in managing the risk for the multiple contributors of a construction project. Generally, AI insurance coverage helps guarantee that the “upstream” construction contributors, such as the General Contractor, is sufficiently protected under a “downstream” contributor’s insurance policy. AI coverage is most commonly obtained by subcontractors to the benefit of the general contractor and developer/owner, and by a general contractor to the benefit of the developer/owner. Once AI status has been conferred, it is important to know how to verify and prove the coverage and what your rights and duties are under the coverage, as the threat of legal liability is constantly looming. See 3-30A New Appleman Insurance Law Practice Guide 30A.35-30A.37.
Knowing how to prove one’s status as an additional insured can alleviate many problems when an incident occurs. Many construction contributors who desire to be added as additional insureds under another’s insurance policy only demand, or acquire, a “Certificate of Insurance” issued by the Named Insured’s broker. Id. While this certificate generally looks the part, it can be a nightmare when relied upon to confirm the coverage. This certificate, by itself, may not be enough to bind the insurer without some indication of authorization by the insurer. Id. On this issue, Georgia law takes the insurer’s side. According to O.C.G.A. § 33-24-19.1(j), “A certificate of insurance is not a policy of insurance and does not affirmatively or negatively amend, extend, or alter the coverage afforded by the policy.” O.C.G.A. § 33-24-19.1. While an authorized certificate of insurance can be used to verify and prove coverage, a copy of the AI endorsement is much-preferred. This can be obtained by asking the Named Insured’s broker or the insurer directly. See 3-30A New Appleman Insurance Law Practice Guide 30A.39.
While an additional insured is usually conferred the same rights and duties under a policy as the Named Insured, the AI coverage can be narrower than that of the Named Insured. Id. This is almost entirely dependent on the language in the policy. Id. AI coverage for “upstream” contributors will likely include both the duty to defend and duty to indemnify, just as the Named Insured’s coverage does. See BBL-McCarthy, LLC v. Baldwin Paving Co., 285 Ga. App. 494 (2007). Although, coverage does not usually extend to a situation involving the additional insured’s sole negligence. See 3-30A New Appleman Insurance Law Practice Guide 30A.40. In fact, Georgia law has deemed coverage in this scenario “against public policy and void and unenforceable.” O.C.G.A. § 13-8-2(b). An additional insured must also elect coverage by forwarding a copy of the complaint to the insurer. BBL-McCarthy, 285 Ga. App. at 499 (Citing Hicks v. Continental Ins. Co., 146 Ga. App. 124, 125 (1978)). This form of notification usually must be done pursuant to the policy, although a delay in providing notification can be deemed reasonable under the circumstances. In determining the reasonableness of a delay, Georgia courts take any demonstrated prejudice against the Insurer into account. See JNJ Found. Specialists, Inc v. D.R. Horton Inc., 311 Ga. App. 269 (2011). Therefore, it is crucial for an AI to comply with the policy’s language on proper notification or election for coverage.
While the aforementioned rights and duties of an additional insured are essential, the most important duty of a prospective additional insured is to make sure the language in the policy is clear, unambiguous, and sufficiently addresses any and all needs.
By James H. Fisher and Tiffany Winks of Hall Booth Smith