1. Forms
2. CG
3. CG-24-26

Form CG 24 26: Amendment Of Insured Contract Definition

1. What the form is

The CG 24 26 endorsement, "Amendment Of Insured Contract Definition," modifies the definition of an "insured contract" within the Commercial General Liability (CGL) policy. Specifically, it alters part "f" of the definition, which pertains to contracts where the insured assumes the tort liability of another party. The key change introduced by this endorsement is the addition of a requirement that the "bodily injury" or "property damage" for which contractual liability coverage is sought must be "caused, in whole or in part, by you [the named insured] or by those acting on your behalf." This is a more restrictive requirement than the broader "arising out of" language found in unendorsed CGL policies, meaning that for coverage to apply under an indemnification agreement, the named insured must have some degree of fault in causing the injury or damage. The endorsement aims to align the contractual liability coverage more closely with the coverage provided under many additional insured endorsements, particularly those revised in 2004 and later. It effectively reduces contractual liability coverage from a broad form to an intermediate form.

2. Classes of business it applies to

This endorsement is not limited to specific industries but has significant implications for any business that enters into contracts requiring them to indemnify another party. It is particularly relevant in industries where such agreements are common, such as:

• Construction: Subcontractors are frequently required to indemnify general contractors or project owners. If this endorsement is attached to the subcontractor's CGL policy, the indemnification will only be covered if the subcontractor (or someone acting on their behalf) is at least partially at fault for the bodily injury or property damage. For example, if a general contractor is held liable for an injury solely due to their own negligence, the subcontractor's policy with this endorsement would likely not cover the general contractor's liability, even if the subcontract contained an indemnification clause.
• Service Industries: Businesses providing services on others' premises, like maintenance contractors or janitorial services, often sign contracts with hold harmless agreements. The CG 24 26 would limit their ability to cover the premises owner's liability unless the service provider was partly responsible for the incident.
• Leasing and Rental: While lease agreements are typically considered "insured contracts" under other parts of the definition, any non-standard indemnification clauses within those leases that fall under part "f" would be subject to this "caused, in whole or in part" requirement.

Essentially, any insured that assumes tort liability for another party through a contract (other than the specifically enumerated types of contracts like lease of premises, sidetrack agreements, etc., which have their own definitional clauses) could be affected by this endorsement.

3. Special considerations

• Alignment with Additional Insured Endorsements: A primary purpose of the CG 24 26 is to make the contractual liability coverage consistent with the limitations often found in additional insured endorsements, which also frequently use the "caused, in whole or in part" language. This prevents a situation where an indemnitee might find broader coverage through contractual liability than they would as an additional insured.
• Impact on Indemnity Agreements: This endorsement significantly curtails coverage for broad form indemnity agreements, where an indemnitor agrees to assume liability even for the indemnitee's sole negligence. With CG 24 26, if the indemnitee is solely negligent, the indemnitor's CGL policy will not respond to the contractual assumption of that liability. For example, if a property owner (indemnitee) requires a contractor (indemnitor) to indemnify them for any and all liability, and an injury occurs due solely to the property owner's negligence, the contractor's CGL policy with CG 24 26 attached would not cover that assumed liability.
• State Laws on Indemnification: The enforceability of indemnification agreements varies by state. Some states prohibit indemnification for an indemnitee's sole negligence. The 2013 and later versions of CG 24 26 clarify that the assumption of tort liability is only considered an "insured contract" to the extent permitted by law. However, in states that do permit broader indemnification, this endorsement can create a gap between the contractual obligations assumed by the insured and the coverage provided by their CGL policy.
• "Caused, in whole or in part": This phrase means that the named insured (or those acting on their behalf) must be at least partially at fault for the bodily injury or property damage for coverage to apply to the assumed liability. Even 1% of fault on the part of the named insured could trigger coverage for their contractual obligation to indemnify the other party (to the extent of that party's liability that was assumed).
• Comparison to CG 21 39: The CG 24 26 is less restrictive than the Contractual Liability Limitation endorsement (CG 21 39). The CG 21 39 eliminates coverage for part "f" of the insured contract definition entirely, severely limiting contractual liability coverage to only specifically listed types of contracts (like leases, sidetrack agreements, etc.). The CG 24 26, while limiting, still provides coverage if the named insured is partially at fault.

4. Key information for agents and underwriters

• Risk Assessment: Underwriters may use this endorsement to limit their exposure when an insured frequently enters into contracts with broad indemnification clauses, especially in states where such clauses are enforceable. It helps to prevent the insurer from picking up liability for the sole negligence of another party with whom the insured has contracted.
• Pricing: The use of this endorsement might allow for more favorable pricing compared to a policy providing broader contractual liability coverage, as it reduces the insurer's potential exposure.
• Coverage Gaps: Agents must counsel insureds about the potential coverage gaps created by this endorsement. If an insured signs a contract agreeing to indemnify another party for that party's sole negligence, and the CG 24 26 is on their policy, the insured will be personally responsible for that assumed liability if the indemnitee is found solely at fault. This is a critical point of discussion, especially for businesses in litigious environments or those routinely signing contracts drafted by other parties (e.g., large corporations or municipalities).
• Contract Review: It is crucial for insureds to carefully review the indemnification provisions in their contracts and understand how this endorsement impacts the coverage for those assumed liabilities. Agents should advise their clients to seek legal counsel on contract language and to negotiate indemnification terms that align with their insurance coverage.
• Alternative to CG 21 39: For underwriters seeking to manage contractual liability exposures, the CG 24 26 offers a less drastic measure than the CG 21 39. It allows for coverage of assumed liability when the insured is partially at fault, which is often a more palatable solution for insureds than the near-total elimination of this coverage under CG 21 39.
• Negotiation Point: Insureds, particularly those with strong risk management practices or significant bargaining power, may try to negotiate the removal of this endorsement to obtain broader contractual liability coverage, especially if they are contractually required to provide indemnification for the other party's partial or even sole negligence (where permitted by law).