Published June 27, 2019 • 2 minute read
What Are Primary & Noncontributory Endorsements?
The request for additional insured status on a “primary and noncontributory basis” on a commercial general liability (CGL) or commercial automobile liability (Auto) policy shows up frequently in the insurance section of contracts and agreements. This request is looking to modify the Other Insurance section of a CGL or Auto policy to confirm that it will respond first and not look to seek contribution from the additional insured’s own liability coverage.
Let’s look at “primary” status first. It is used to designate the other party’s liability insurance as responsible for responding to claims on behalf of the additional insured before the additional insureds own insurance coverage. Since additional insureds typically have their own CGL and Auto policies, they want to clarify in advance of a claim, that the liability coverage extended to them as an additional insured under a third party’s CGL or Auto coverage will be the first to respond to a claim when the other party is performing work, providing services, using the additional insured’s equipment or leasing space and so on where a claim arises from that other party’s operations, work or services.
Noncontributory, in insurance, means that the other party’s insurer, who is defending the additional insured will not seek contribution from the additional insured’s own liability policy.
Another way to think of primary and noncontributory status is that the other party’s insurer is relinquishing their ability to be excess of any other insurance maintained by the additional insured and to not have the ability to seek contribution from the insurance maintained by the additional insured.
A landlord hires a general contractor to perform upgrades to a building while tenants continue to occupy the building. A guest of a tenant is injured while walking to the tenant space due to the electrical subcontractor’s employees leaving exposed live wires in an active hallway where the guest was walking. The guest is injured and brings a claim against the electrical subcontractor, general contractor and the landlord.
The landlord and the general contractor tender the claim to the electrical subcontractors insurer but since they did not require their status as an additional insured under the subcontractors CGL policy, the insurer denies the tender since the Other Insurance clause on the subcontractors policy states that their policy is excess of any other insurance maintained by any insured.
If the landlord and GC had required their additional insured status to be on a primary and non-contributory basis, the electrical subcontractor’s insurer would not be able to deny the tender and would have to accept the claim as the primary insurer responsible for defending all three defendants to the claim. This transfer helps to protect the landlord and GC’s CGL coverage from having to defend and indemnify them for the negligence of the electrical subcontractor.
How BCS Helps
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