It’s one of the most complicated topics in insurance but comes with the benefit of helping ensure commercial properties “hardly ever take a loss” according to David Gross, Managing Director of Burns & Wilcox Brokerage.

Additional Insured clauses in construction insurance are designed to share risk from the property’s owner to its contractor to its subcontractors.

Entities are additional insured because they’re endorsed within the policy or endorsed after the policy is written.

“If a contract`s written properly, on an apartment building for example, and the right additional insured is in place, their guys are going to hardly ever, ever take a loss,” Gross said.

“If they have any issues, any negligence, then their additionally insured clause will respond on their behalf as the general contractor. The crap kind of flows downhill.”

The complexity comes with the forms.

“You automatically go out and try to get the best additionally insured forms you can and that’s where a lot of brokers fail, they don’t understand the differences in the forms,” Gross said.

The additional insured forms have been updated, split and reworked over the years and none of them have intuitive names.

For that reason the distinguishing end numbers of the form names have been made bold.

“It’s pretty technical and a lot of guys go out and they just get the basic CG 20 10, CG 20 37, I’ll come in and get the CG 00 01 10 01 and knock those guys out.”

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Gross outlined what his process was entering a construction insurance contract with contractors and subcontractors.

“I want to put an indemnification clause in place, put harms and falls in place, I also am requiring him to carry a certain amount of limit, I also require him to carry additional insured status for me,” Gross said.

“The Cadillac is a CG 20 10 11/85, that’s the best form basically ever written. It does ongoing operations, it does completed operations.

However, Gross describes the CG 20 10 11/85 as the “White Rhino” and “you’re hardly ever going to find them on a residential construction project.”

Some commercial properties still have them available and Gross said he had “one, maybe two carriers” who offered the form.

Though the forms carry similar names, the difference can be whether the client is held liable for an incident occurring during construction, after construction, or both.

“I did a factory in Oklahoma recently, it finished in March, there was a major water leak over the weekend,” Gross said.

“It does massive amounts of damage when it leaks, it’s a $500,000 claim and that’s when my completed operations kicked in, you’ve turned the keys over, it’s not ongoing. That’s why you need a CG 20 37.”

Gross explained the form he was so fond of, CG 00 01 10 01, was split into CG 20 10 and CG 20 37, taking necessary parts of coverage like the completed operations aspect with them.

“Most of them (carriers) have gone to the CG 00 01 10 01 forms, which are combined of the CG 20 10, CG 20 37 forms, it almost does what the CG 20 10 11/85 does,” Gross said.

“After that you go to the CG 20 15 04 13 forms, which are not that great.”

Will Koblensky, Insurance Business Feb 2017