Do you know what primary and noncontributory means when it comes to liability insurance coverage priority? If you do not, you should take the time to understand the significance of this language. This language is important when when you want to be named as an additional insured under another’s liability policy.
A subcontract will require the subcontractor to identify the general contractor as an additional insured under the subcontractor’s CGL policy. A subcontract will also require the subcontractor to indemnify the general contractor for claims associated with personal injury, death, or property damage arising out of or relating to the subcontractor’s scope of work.
From a general contractor’s perspective, the general contractor wants the subcontractor’s CGL policy to be primary and noncontributory to its CGL policy. If a personal injury or property damage claim is asserted against the general contractor arising out of the subcontractor’s scope of work, the general contractor, as an additional insured, wants to tender the defense of that claim to the subcontractor and the subcontractor’s CGL policy. In this regard, the general contractor, again, wants the subcontractor’s CGL policy to be primary and noncontributory to its policy.
While this may not sound like a big deal, it is…a very big deal. If the subcontractor’s CGL policy is not primary and noncontributory to the general contractor’s CGL policy then the subcontractor’s CGL policy may be deemed excess coverage. An excess policy, however, does not have a duty to defend an insured (primary insured or additional insured) until the primary insurance is exhausted. This is definitely not what a general contractor wants when it wants a subcontractor to identify it as an additional insured under the subcontractor’s CGL policy. The general contractor wants to be able to tender that claim to the subcontractor and the subcontractors’ CGL policy so that the subcontractor defends and indemnifies the general contractor (as the primary CGL insurance policy).
The key for a general contractor is to include language in the subcontract that the subcontractors’ CGL insurance policy is primary and noncontributory to the general contractor’s CGL policy. The subcontract should also require the subcontractor to ensure its subcontractors’ CGL policy includes a primary and noncontributory endorsement, specifically as it pertains to additional insureds.
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