1. Forms
2. CG
3. CG-20-40

Form CG 20 40: Additional Insured – Owners, Lessees Or Contractors – Automatic Status For Other Parties When Required In Written Construction Agreement (Completed Operations)

What the form is:

The CG 20 40 is an endorsement to a Commercial General Liability (CGL) or Products/Completed Operations Liability Coverage Part. Its primary purpose is to automatically grant additional insured status to specific parties for liability arising out of the named insured's completed operations, but only when a written construction agreement requires it. This form is crucial for extending coverage to parties like owners or general contractors (upstream parties) after the named insured (typically a subcontractor) has finished their work on a project. The coverage applies to "bodily injury" or "property damage" caused, in whole or in part, by the named insured's work included in the "products-completed operations hazard."

A key feature of the CG 20 40 is that it provides this automatic status not only to the party the named insured directly contracted with, but also to other parties that the named insured is required to include as an additional insured under that same written agreement. This is a significant distinction from some other additional insured endorsements (like the CG 20 39) which may require direct contractual privity between the named insured and the additional insured. The CG 20 40, therefore, offers broader protection for upstream parties.

Classes of business it applies to:

This endorsement is predominantly used in the construction industry. It's vital for:

• Subcontractors: They are frequently required by general contractors or project owners to provide additional insured coverage for completed operations. For example, if an electrical subcontractor's faulty wiring (completed work) causes a fire a year after the project is finished, this endorsement would provide coverage to the general contractor and/or owner if the construction contract mandated it.
• General Contractors: When hiring subcontractors, general contractors will often require this endorsement to protect themselves from liability arising from the subcontractor's completed work.
• Project Owners and Lessees: They also benefit from this coverage by being included as additional insureds, shielding them from liability related to the completed operations of contractors and subcontractors on their projects.

Special considerations:

• Written Construction Agreement is Key: The existence of a written construction agreement mandating additional insured status is a prerequisite for coverage under this endorsement. Without this contractual requirement, the endorsement does not provide additional insured status.
• Completed Operations Only: This endorsement specifically applies to the "products-completed operations hazard." It does not provide coverage for ongoing operations. For ongoing operations coverage, a separate endorsement (like the CG 20 38) would be needed. The CG 20 40 is often used in conjunction with the CG 20 38 to provide comprehensive additional insured coverage for both ongoing and completed work.
• "Caused, in whole or in part, by 'your work'": The liability must stem from the named insured's work. This language is generally interpreted to mean that the additional insured is not covered for their sole negligence.
• Scope of Coverage Limitation: The coverage afforded to the additional insured will not be broader than what is required by the written contract or agreement. It also only applies to the extent permitted by law.
• Professional Services Exclusion: It's important to note that the 2019 and later versions of this endorsement typically include an exclusion for professional services (e.g., architectural, engineering, or surveying services). This could create a coverage gap if the claim involves such services. This is a key difference from an endorsement like the CG 20 37, which does not typically have this exclusion.
• "Dagger" Classes: If the named insured's operations fall under a "dagger" classification code (where products/completed operations hazard is not separately rated), this endorsement may not function as intended because the definition of "products-completed operations hazard" might be effectively removed from the policy. In such cases, an endorsement like the CG 20 41 might be necessary to provide the intended completed operations coverage for additional insureds.
• State Variations: While widely applicable, acceptance and interpretation of ISO forms can vary by state. For example, as of a certain point, New York had not accepted the 2019 versions of certain additional insured endorsements, including the CG 20 40.

Key information for agents and underwriters:

• Risk Assessment: Underwriters need to carefully review the types of construction agreements the named insured typically enters into. The breadth of parties the insured is required to name as additional insureds will impact the potential exposure. The nature and quality of the named insured's work are also critical, as this endorsement covers liability arising from that work after completion.
• Pricing: The automatic nature of this endorsement and its potential to cover multiple upstream parties for completed operations (which can have a long tail for claims) should be factored into pricing.
• Coverage Gaps: Agents should be aware of the professional services exclusion and advise clients accordingly, especially if they are involved in design-build projects or have incidental professional exposures. Also, ensure clients understand this endorsement only covers completed operations and that separate coverage for ongoing operations is necessary.
• Contractual Review: It's crucial for agents to advise their clients to have their construction contracts reviewed to understand their obligations regarding additional insured coverage. The policy should align with these contractual requirements.
• Pairing with CG 20 38: For comprehensive coverage, the CG 20 40 (for completed operations) is often paired with the CG 20 38 (for ongoing operations). Using mismatched pairs (e.g., CG 20 33 with CG 20 40) could lead to differences in the breadth of entities covered and potential E&O issues.
• Documentation: While the endorsement provides automatic status, maintaining copies of the written construction agreements that trigger the coverage is essential for claim verification.
• Superior Coverage Aspect: Compared to the CG 20 39 (which requires direct contractual privity for completed operations), the CG 20 40 generally offers broader protection by extending coverage to other parties as required by the contract, even without direct privity. This makes it a preferred endorsement for upstream parties seeking comprehensive protection.