All insurance policies have an “Other Insurance” clause which dictates which policy will respond to a claim for the policyholder (named insured) and any additional insureds added to the policy. Often times, additional insureds will look to amend the Other Insurance clause on the liability policy where they are an additional insured by adding a primary and noncontributory status endorsement or language.
Many folks who work with insurance compliance struggle with how best to communicate why primary and non-contributory status is essential. In this post, we will discuss what primary and non-contributory language means for all parties involved and how BCS can help you avoid pitfalls related to such language.
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
Unlike other insurance tracking companies, BCS employs a full-service compliance solution, by combining best-in-class software with outstanding customer support. Not only will BCS collect and monitor your insurance documents, but they will review and actually correct them, too. Correction is the key to achieving the highest standard in third-party liability risk mitigation.
Whether you just need certificate of insurance tracking for your vendors/tenants or require a full review of their endorsements and policy pages, BCS's InsurComply system handles all your insurance compliance needs.
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