Whether you are giving one to someone else or asking for one, you need to use additional insured endorsements (AIE) that give you as much protection as possible and that meet the promises you have made in your contracts. A recent court decision in Mississippi set out the all too sad, but predictable, tale of a general contractor and subcontractor who didn't sweat these details.

In Noble v. Wellington Associates, Inc., a residential foundation subcontractor completed its work in 2006. The entire home was finished and sold in 2007. Subsequently, the homeowner sued the general contractor because of foundation problems. When the general contractor made demand on the subcontractor's insurer to defend the lawsuit based on the general's status as an "additional insured," the general discovered that it had only been added as an additional insured for the subcontractor's ongoing operations and not for completed operations, so there was no coverage.

The general sued everyone under every theory it could think of, but lost at every turn. It said that it had been deceived by the fact that it was given an insurance certificate that didn't disclose the limitations on its coverage. "Wake up and smell the coffee" said the court – in judicial words, that is. It may be that the subcontractor breached its subcontract by not providing the coverage it promised, but the insurer and its agent never promised to cover this kind of loss. The subcontractor was left with no insurance coverage, and the general contractor was left with a subcontractor who couldn't pay for the loss.

The outcome would have been different if the subcontractor had understood that it should specify the exact type of AIE it wanted (which might cost more), or  if the general contractor had specified the form of AIE required of subcontractors. The contractor also should not have permitted the subcontractor to start work until the AIE was reviewed.

Use this as a warning to not overlook AIEs.