Thought Leadership

It’s just semantics, right? How a few words affect your coverage

“What’s the difference between these two additional insured coverage certificates?”

Both certificates covered claims for damages “caused in whole or in part by” the insured or someone acting on behalf of the insured. However, one certificate also covered damages “arising out of or caused in whole or in part by . . . .” Either version satisfies a requirement that a company carries commercial general liability insurance that names you as an additional insured. From a coverage perspective, however, these two certificates are quite different.

Arising out of” allows for claims that are not based directly on the services provided under the contract. For example, if you contract with a company to provide on-site computer network support and the service provider damages items in your office, this would be “caused in whole or in part by” the provider and covered under the policy. On the other hand, if the service provider installed a network component according to the manufacturer’s specifications, and the component subsequently fell and damaged items in your office, it may not be deemed “caused in whole or in part by” the provider. The insurance provider may deny the claim and require litigation to determine if this damage was caused by the provider. A policy which includes “arising out of” would clearly encompass this damage because even if it was not deemed attributable to the provider, it definitely resulted (i.e. arose out of) from the provider’s actions.

For a company acquiring services, “arising out of” broadens what injuries or damages would be covered. From a provider’s perspective, “arising out of” may have negative consequences because this coverage may not be offered on the additional insured certificate from your insurance company or such coverage may be more expensive.

Besides naming you as an additional insured, both parties should check that the insurance coverage that is needed is fully covered by the amount of insurance actually carried under the policy. In addition, consider ensuring that the coverage is both primary and non-contributory. Most additional insured certificates contain default language that unless the contract expressly requires these elements, the coverage is secondary and requires contribution.

Below is one suggested insurance clause to address these elements:Insurance: Contractor shall . . . furnish Company with certificates of insurance and a copy of the actual policy and applicable endorsements evidencing that he has obtained the following insurance . . . . Such coverage must provide (i) that Company, its subsidiaries and affiliates, as applicable, are named as additional insured as their interests may appear with respect to the coverage listed below; (ii) that such insurance is primary insurance for all such additional insured including, without limitation, Contractor’s indemnification obligations, for injury or damages arising out of or caused in whole or in part by either Contractor’s or others working on Contractor’s behalf acts or omissions under this Contract; (iii) that such coverage shall be deemed the primary insurance for the additional insured; and (iv) is deemed non-contributory . . . .

As it turns out, a few words can make all the difference . . . .


KC Ahrens
Phone: 952-746-2157