CG 20 33: Additional Insured - Owners, Lessees Or Contractors - Automatic Status When Required In Construction Agreement With You
1. What the form is
The CG 20 33 is an endorsement to the Commercial General Liability (CGL) policy (CG 00 01) that automatically grants additional insured status to owners, lessees, or contractors when a written construction agreement between the named insured and that owner, lessee, or contractor requires it. This means if the named insured (e.g., a subcontractor) signs a construction contract with another party (e.g., a general contractor or project owner) and that contract mandates the named insured to include the other party as an additional insured on their CGL policy, this endorsement fulfills that requirement automatically for ongoing operations. The key here is the automatic status, which eliminates the need to specifically name each additional insured on the policy for each project, provided the contractual requirement exists. Coverage for the additional insured applies only to liability arising out of the named insured's ongoing operations performed for that additional insured. It's important to note that this endorsement typically only applies to ongoing operations and does not cover "products-completed operations hazard".
2. Classes of business it applies to
This endorsement is primarily used in the construction industry. It's relevant for various parties involved in construction projects, including:
- General Contractors: Who hire subcontractors and are required by the project owner to ensure all parties have appropriate coverage. They may require their subcontractors to name them as an additional insured.
- Subcontractors: Who are frequently required by general contractors or project owners to name them as additional insureds as a condition of the construction agreement. For example, an electrical subcontractor may be required to name the general contractor and the property owner as additional insureds on their CGL policy for a new office building project.
- Project Owners: Who contract with general contractors and want to be protected under the contractor's CGL policy for liability arising from the contractor's work on their project.
- Lessees: In situations where a lessee is undertaking construction or renovation work and is required by the property owner (lessor) to provide additional insured status.
Essentially, any business engaged in construction activities where written contracts dictate additional insured requirements for ongoing operations would find this form applicable.
3. Special considerations
- Written Construction Agreement: The existence of a written construction agreement requiring additional insured status is crucial for this endorsement to trigger. Without this written agreement, no automatic coverage is granted.
- Ongoing Operations Only: This endorsement specifically applies to liability arising out of the named insured's ongoing operations. It does not provide coverage for completed operations. For completed operations coverage, a separate endorsement like the CG 20 37 or the automatic completed operations endorsement CG 20 39 would be needed.
- Privity of Contract: The CG 20 33 typically requires direct contractual privity between the named insured and the party seeking additional insured status. This means it covers the owner, lessee, or contractor with whom the named insured has a direct written agreement. It may not automatically extend coverage to "upstream" parties (e.g., the project owner, if the named insured is a subcontractor who only has a direct contract with the general contractor) unless specifically addressed. For broader coverage that includes other parties required in the construction agreement (even without direct privity), the CG 20 38 endorsement is often more appropriate.
- "Caused, in whole or in part, by": Coverage for the additional insured is typically limited to liability for bodily injury or property damage "caused, in whole or in part, by" the named insured's acts or omissions, or the acts or omissions of those acting on the named insured's behalf. This language is intended to prevent coverage for the additional insured's sole negligence.
- Limits of Insurance: The coverage afforded to the additional insured will not be broader than that which the named insured is required by the contract to provide, and the amount paid will not exceed the policy's applicable limits of insurance or the limits required in the contract, whichever is less.
- Professional Liability Exclusion: Later editions of this form, or similar automatic endorsements, may contain exclusions for professional liability. This is important if the additional insured could be a design professional, as their professional services would likely not be covered under this CGL endorsement.
- State Law: The extent of coverage provided to the additional insured may also be limited by applicable state laws, such as anti-indemnity statutes.
Real-world example: A general contractor (GC) hires an HVAC subcontractor for a new building. The contract requires the HVAC sub to name the GC as an additional insured. If the HVAC sub has the CG 20 33 endorsement, the GC automatically becomes an additional insured on the HVAC sub's CGL policy for liability arising from the HVAC sub's ongoing work. However, if a visitor is injured due to the GC's sole negligence in an area unrelated to the HVAC work, this endorsement on the sub's policy likely wouldn't cover the GC.
4. Key information for agents and underwriters
- Risk Assessment: Underwriters need to assess the nature of the named insured's construction operations and the types of entities they typically contract with. The increased scope of potential insureds under an automatic endorsement means careful evaluation of the named insured's contractual risk management practices is essential.
- Pricing: While automatic endorsements offer convenience, they can represent an increased exposure for the insurer. Pricing should reflect the potential for additional insureds to be added throughout the policy period without individual review for each one.
- Coverage Gaps: Agents must counsel clients on the limitations of the CG 20 33, particularly the lack of completed operations coverage and the potential privity of contract requirement. If a contract requires completed operations coverage for the additional insured, or if it requires coverage for parties with whom the named insured does not have a direct contract, then CG 20 33 alone is insufficient. In such cases, endorsements like CG 20 37 (for scheduled completed operations), CG 20 39 (automatic completed operations for the party in direct contract), or CG 20 38 (automatic ongoing operations for other parties required in the contract) and CG 20 40 (automatic completed operations for other parties required in the contract) should be considered.
- Contract Review: While the endorsement is automatic, it's still crucial for agents and insureds to understand the insurance requirements within their construction agreements. The endorsement only provides coverage when required by the written construction agreement. Mismatches between contractual requirements and the coverage provided by the endorsement can lead to disputes and uninsured exposures.
- Alternative Endorsements: Be aware of when the CG 20 33 is appropriate versus other additional insured endorsements. For instance, if the goal is to cover any party the insured is required to cover by any written contract (not just construction agreements), the CG 20 43 might be considered, though it also has its own specific terms and limitations. If the contract requires naming parties not in direct contract with the insured (e.g., an owner when the insured is a sub-subcontractor), the CG 20 38 is generally preferred for ongoing operations.
- Certificates of Insurance: Simply stating on a certificate of insurance that an entity is an additional insured is not enough; the policy and its endorsements dictate coverage. The CG 20 33 relies on the underlying written contract.
Understanding the nuances of the CG 20 33, especially its limitations regarding completed operations and privity of contract, is vital for insurance professionals to properly advise their construction clients and ensure adequate coverage is in place.