The Insurance Services Office, Inc. (ISO) issued several new and revised endorsements for use with Commercial General Liability (CGL) coverage forms, which became effective December 1, 2019, in most jurisdictions. The new ISO endorsements include several notable changes that Policyholders should be aware of, including revisions to existing Additional Insured (AI), Primary and Noncontributory, and Waiver of Subrogation endorsements, as well as a number of new AI and other endorsement forms. A summary of the more significant elements of new ISO endorsements is provided below. NEW ISO FORMS
• New AI Endorsements - Automatic Status for Completed Operations
For Contractors, Owners and other construction industry stakeholders, there are two new AI endorsements of note, CG 20 39 12 19 – Additional Insured – Owners, Lessee or Contractors – Automatic Status when Required in Written Construction Agreement with You (Completed Operations) and CG 20 40 12 19 – Additional Insured – Owners Lessees or Contractors – Automatic Status for Other Parties when Required in Written Construction Agreement (Completed Operations). AI coverage for Completed Operations is generally provided under form CG 20 37, which requires each additional insured to be listed in the endorsement schedule. The new ISO endorsements automatically extend AI status for Completed Operations without having to specifically identify each additional insured, thereby mirroring current AI endorsements that confer automatic AI status for Ongoing Operations (e.g. CG 20 33 and CG 20 38). Thus, the CG 20 39 and CG 20 40, correspond with CG 20 33 (ongoing operations), and CG 20 38 (ongoing operations), respectively, to extend AI coverage for Completed Operations.
A comparison of the two new AI endorsements confirms that CG 20 40 provides superior coverage for Owners and Contractors, as there is no requirement of direct contractual privity between the AI and named insured. CG 20 40 provides AI coverage to anyone required to be named as an additional insured under a written contract that performs operations for the named insured. In contrast, CG 20 39 requires a direct contractual relationship with the named insured, conferring AI coverage only “when you and such person or organization have agreed in writing in a contract or agreement that such person . . . be added as an additional insured on your policy” (emphasis added).
Policyholders should also be aware of two important distinctions between the new CG 20 39 and CG 20 40 - AI Completed Operations endorsements and the existing CG 20 37 – Additional Insured Completed Operations endorsement. First, AI coverage under both the CG 20 39 and CG 20 40 is conditioned upon the named insured having agreed in a written contract or agreement to provide such coverage, whereas the CG 20 37 does not require that any such written agreement exist. In addition, both the CG 20 39 and CG 20 40 expressly exclude certain professional services:
“Bodily injury or property damage arising out of the rendering or, or the failure to render, any professional architectural, engineering or surveying services, including:
- The preparing, approving, or failure to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, changes orders or drawings and specifications; or
- Supervisory, inspection, architectural or engineering activities.”
In contrast, the CG 20 37 does not include any such exclusion for professional services. Consequently, it is important that Owners and other upstream parties seeking AI coverage are aware of the professional services exclusion and its impact on coverage where the new CG 20 39 and CG 20 40 endorsements are at issue.
• New AI Endorsements – Automatic Status Designated Operations
ISO also introduced two automatic additional insured endorsements for general, non-construction specific use. The first is CG 20 42, Additional Insured – Automatic Status for Designated Operations, which makes any person or organization an additional insured with respect to scheduled operations of a named insured who has agreed under any contract or agreement. The second form is the CG 20 43, Additional Insured – Automatic Status When Required In Written Contact or Agreement, which provides automatic insured status for any person or organization for whom the named insured has agreed, in a written contract, to provide coverage. Neither form requires a direct contract between the named insured and AI, nor do they require the designated or scheduled operations under CG 20 42 and CG 20 43, respectively, be performed for the AI. Although both AI forms offer wide utility, they also include a broad and highly diverse list of exclusions, which must be further considered prior to acceptance of the new endorsements.
• New AI Endorsements - Liquor Liability ISO has released four new AI endorsements, which extend AI status under the Liquor Liability Coverage Forms (CG 00 33 & CG 00 34), in the following circumstances:
- CG 34 01 Additional Insured—Owners, Managers or Lessors of Premises—Liquor Liability, makes a premises owner, manager or lessor an additional insured under the liquor liability coverage of a tenant in the business of selling, serving, or furnishing alcohol.
- CG 34 02 Additional Insured—Grantor of Franchise—Liquor Liability, extends additional insured status under liquor liability coverage to the grantor of a franchise when the named insured franchisee is in the business of selling, serving, or furnishing alcohol.
- CG 34 03 Additional Insured—State or Government Agency or Subdivision or Political Subdivision—Permits or Authorizations—Liquor Liability, makes a governmental entity an additional insured under liquor liability coverage of a person or organization that has been granted a permit to conduct a liquor business on governmental property.
- CG 34 04 Additional Insured—Sponsor(s)—Liquor Liability, provides additional insured status under liquor liability coverage to a sponsor of an event being put on by a liquor liability named insured. Coverage is limited only to the event or function scheduled in the endorsement.
FURTHER NOTABLE REVISIONS
• Limits Language Modified in AI Endorsements.
The 2019 AI endorsements, CG 20 37, CG 20 10, CG 20 12, & CG 20 34, eliminate the “shown in the Declarations” language from the Limits of Insurance section of the forms and insert “[t]his endorsement shall not increase the applicable limits of insurance.” This revision effectively provides that coverage limits may not be confined to the Declaration page and can be modified by other provisions of the policy.
• Waiver of Subrogation
The revised Waiver of Subrogation endorsement, CG 24 04, seeks to resolve the 2009 endorsement’s ambiguity as to whether privity of contract between the AI and the named insured is required, by eliminating the reference to operations performed “under a contract with that person or organization.” This revision is important for Owners and upstream parties generally, which are not in direct contractual privity with a name insured subcontractor and further broadens the scope of the waiver to a broader set of policies. Comparatively, the 2009 version only applied to CGL and PCO coverage parts.
The 2019 endorsement also contains new language that conditions the waiver of subrogation on the insured’s own waiver of claims prior to the loss; thereby, limiting the scope of the insurer’s waiver of subrogation to that of the insured’s own waiver against the scheduled entity. In addition, ISO has issued an automatic waiver endorsement, CG 24 53 Waiver of Transfer of Rights of Recovery Against Others to Us (Waiver of Subrogation) – Automatic. This new form is the functional equivalent of CG 24 04.
• Primary and Noncontributory Endorsement Extended to Liquor Liability
Finally, the CG 20 01- Primary and Noncontributory endorsement has been revised to broaden its application to coverage for liquor liability. This endorsement supplements the four new AI endorsements for liquor liability offered to Owners, Managers, or Lessors of Premises (CG 34 01); a Grantor of Franchise (CG 34 02); a State or Government Agency or Subdivision or Political Subdivision (CG 34 03); and Sponsors (CG 34 04).
Although the full import of the new ISO endorsements is not yet known, the general effect of these endorsements is largely favorable to policyholders and their ability to access additional insured coverage. There are certain provisions within the new ISO endorsements that may, however, operate to restrict coverage under certain circumstances. Thus, it is critical that policyholders analyze the new ISO endorsements and determine the relevant coverage implications given their specific operational exposures and risk transfer goals. SDV assists a broad range of clients analyze their own insurance programs and coverage provided by the parties that are the focus of risk transfer, to ensure exposures are effectively reduced and risk transfer goals achieved.