Owners and general contractors usually ask to be added to a subcontractor’s policy as “additional insureds” in order to protect themselves against vicarious liability claims arising from the activities of the sub.
Let’s say that a subcontractor’s employee accidentally drops a tool from a scaffold, injuring a pedestrian on the sidewalk below. Although any liability claim against the sub will go directly to the sub’s insurance, the GC and owner might also find themselves drawn into the suit. For example, the claimant might argue that they were liable for bringing the sub onto the jobsite. Adding them as additional insureds to the sub’s policy is an attempt to make the sub coverage the primary source of defending and paying the claim.
However, such arrangements carry numerous potential pitfalls, such as inadequate coverage (due to exclusions or limitations) and/or inadequate coverage limits (due to previous claims draining the available limits).
As an alternative, the subcontractor might buy a separate Liability policy tailored to protect the named insured for vicarious liability from the actions of the sub. Two such policies are the OCP (Owners and Contractors Protective Liability policy) and PMPL (Project Management Protective Liability). Each provides separate limits of coverage from the sub’s regular Liability policy. Although the two differ in several ways, each offers an attractive solution to the vicarious liability issue.
If you’d like to choose either of these options in your contractual arrangements as an owner/GC or as a sub, our Construction insurance professionals stand ready to help. Give us a call.