The “Other Insurance” Provision in CGL Policies

CGL insurance policies have a provision dealing with “Other Insurance.” The provision says that the CGL policy is the primary policy EXCEPT when “other insurance” applies in which case the policy operates as excess insurance. An example of applicable language in a CGL policy is as follows:

b. Excess Insurance

(1) This insurance is excess over:

(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:

(i)  That is Fire, Extended Coverage, Builder’s Risk, Installation Risk or similar coverage for “your work”;

(ii)  That is Fire insurance for premises rented to you or temporarily occu- pied by you with permission of the owner;

(iii)  That is insurance purchased by you to cover your liability as a tenant for “property damage” to premises rented to you or temporarily occu-pied by you with permission of the owner; or….

(b) Any other primary insurance available to you covering liability for damages aris- ing out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured by attachment of an endorsement.

A CGL insurer may argue that the “Other Insurance” provision applies so that its policy is deemed the excess and not the primary insurance policy.

In a recent case, a shell subcontractor improperly installed reinforcing steel in a concrete structure causing severe damage to the structure. The CGL carrier denied coverage for the damage. The general contractor received subcontractor default insurance proceeds to repair the damage and sued the CGL carrier for breach of contract in denying coverage to (a) reimburse the subcontractor default insurance carrier and (b) recoup any deductible it was liable for. The CGL insurer argued that based on the “Other Insurance” provision, the subcontractor default insurance should be deemed the primary policy and the CGL policy the excess policy. The court dismissed this argument for three reasons: (1) since CGL policies and subcontractor default policies insure different risks, the “Other Insurance” provisions was inapplicable; (2) the subcontractor default insurance policy did not insure the subcontractor whereas the CGL policy did; and (3) the “Other Insurance” provision does not apply when there is a contractual right of indemnification between the parties insured under the applicable policy (e.g., the subcontractor agreed to contractually indemnify the general contractor for property damage and the CGL insurer insured the subcontractor for property damage).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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