August 3, 2016

Key Items to Look For When Collecting & Reviewing Endorsements

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As we discussed in a previous post, it’s incredibly important to collect and review additional insured and waiver of subrogation endorsements to ensure your vendor is properly covered and has the right documentation in place.

It’s equally important to understand that reviewing the COI simply isn’t enough as often times it’s impossible to understand if everything has been added correctly without collecting and reviewing the actual endorsements. After you have requested the endorsements from your vendor’s agent, review in careful detail and be sure to:

  1. Review additional insured and verify names and spellings are correct
  2. Review additional insured endorsements and verify the correct status:
    1. Ongoing Operations: Additional insured status while working; As soon as an individual walks off the job site the status is completed
    2. Completed Operations: Coverage when work is completed

It’s critical to know that some policies might have either “Ongoing Operations” OR “Completed Operations” status, while some may have both. Of course, having both is more expensive, so if you neglect to verify that they have Completed Operations covered, then there’s a good chance they don’t have the coverage.

As you can see, it’s incredibly important to see the endorsements for yourself and verify that both “Ongoing Operations” and “Completed Operation” status are included in the endorsement.

According to a recent article in International Risk Management Institute, Inc. entitled The Scope of “Ongoing Operations” Additional Insured Endorsements: Broader than Expected, author Steven Rawls explains the complexity:

“Additional insured endorsements come in all shapes and sizes. Some cover the sole negligence of the additional insured. Others cover the additional insured only for the named insured’s negligent acts. Still others cover particular projects or a particular activity. In every case, the language of the endorsement and the jurisdiction’s interpretation of that language governs the scope of the coverage provided.”

A Real Life Example:

According to a recent Insurance Journal article authored by Dwight Kealy entitled, “Additional Insured Endorsements in Construction,” the author details the following 2 examples providing context for the difference between “Ongoing Operations” status and “Completed Operations” status. The following is a direct excerpt from the article:

Sample Ongoing Operations Occurrence

“To understand the effect of this change, imagine a property owner hiring a contractor to build a brick wall. While building the wall, the contractor drops a load of bricks on top of a line of cars. This causes property damage arising out of the contractor’s ongoing operations. The car owners sue the property owner.”

“If the property owner was named as an additional insured on the contractor’s CGL policy using CG 20 10 11 85, the property owner should be covered. This is because the CG 20 10 11 85 provides coverage for liability arising out of ‘your [the named insured/contractor’s] work,’ and ‘your work’ includes both the named insured’s ongoing and completed operations. If the property owner was named as an additional insured using the CG 20 10 after 1985, the property owner would also be covered as an additional insured on the contractor’s policy because the CG 20 10 after 1985 provides coverage for ongoing operations, and this was an ongoing operations exposure.”

Sample Completed Operations Occurrence

“Two months after the contractor finishes the wall, the wall falls on a line of cars. This is property damage out of the contractor’s completed operations. Once again, the car owners sue the property owner.”

“If the property owner was named as an additional insured using the CG 20 10 11 85, the property owner would have coverage for the completed operations exposure as ‘your work.’ If the property owner was named as an additional insured using the CG 20 10 with an edition date after 1985, the property owner would not have coverage for the completed operations exposure under the contractor’s CGL policy. The CG 20 10 after 1985 does not provide coverage to the additional insured for completed operations. It only provides coverage for ongoing operations, and this was a completed operations exposure.”

As you can see from the above examples, the language on the policies and endorsements could mean a massive liability to the upstream company if the endorsements are not written correctly. Situations as outlined in the second example can easily be avoided if the upstream organization collects and reviews the endorsements from each of their vendors and contractors.

Eliminate Bottom Line Risk

myCOI is a cloud-based software solution and exists for one reason: to help you handle the everyday tasks of managing certificates of insurance and protecting your company against underinsured claims, costly litigation and failed audits. The software and certificate tracking services are combined into an easy-to-use solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the COI communication process and ensure you remain protected.

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