When it comes to commercial general liability (CGL) insurance for New York businesses, the additional insured endorsement is a critical provision. This endorsement determines when and how liability coverage extends to third parties involved in a project, such as general contractors, property owners, or subcontractors. A key factor in shaping the wording of this endorsement is whether privity—a direct contractual relationship—is required between the insured and the additional insured.
This article will explore the differences in endorsement wording based on whether privity is required or not, and explain why this distinction is important for New York businesses.
Privity and Additional Insured Endorsements
Privity refers to a direct contractual relationship between two parties. In the context of CGL insurance, privity often determines who qualifies as an additional insured under a policy. For example, a subcontractor might be required by contract to list the general contractor or project owner as an additional insured on their CGL policy. Whether this coverage is extended depends on whether the parties have a direct contractual relationship (privity) or not.
The language in the additional insured endorsement will reflect this distinction.
Wording of Additional Insured Endorsement if Privity is Required
When privity is required, the additional insured endorsement will only extend coverage to those parties who have a direct written contract with the named insured. This means that for a general contractor or project owner to be covered under the subcontractor’s policy, there must be a formal contractual agreement between them.
Sample Wording (Privity Required):
“The person or organization shown in the Schedule is an additional insured, but only with respect to liability for ‘bodily injury,’ ‘property damage,’ or ‘personal and advertising injury’ caused, in whole or in part, by your acts or omissions, or the acts or omissions of those acting on your behalf, in the performance of your ongoing operations, but only if the person or organization has a direct written contract with you requiring such coverage.”
This language clearly limits coverage to entities with privity, ensuring that only those with a direct contract can be added as an additional insured.
Wording of Additional Insured Endorsement if Privity is Not Required
On the other hand, if privity is not required, the endorsement can be broader, extending coverage to parties who benefit from the insured’s work even if they do not have a direct contractual relationship with the insured. This is common in complex construction projects where a subcontractor’s work may impact multiple parties, such as general contractors, property owners, and even other subcontractors.
Sample Wording (Privity Not Required):
“The person or organization shown in the Schedule is an additional insured, but only with respect to liability for ‘bodily injury,’ ‘property damage,’ or ‘personal and advertising injury’ caused, in whole or in part, by your acts or omissions, or the acts or omissions of those acting on your behalf, in the performance of your ongoing operations, whether or not the person or organization has a direct written contract with you.”
This version of the endorsement allows for a wider range of entities to be covered, providing additional flexibility for general contractors and property owners who may not have a direct contractual relationship with every subcontractor on a project.
Why the Distinction Matters
The distinction between privity and non-privity endorsements is critical for managing risk in New York’s construction industry. If privity is required, businesses may limit their exposure to third parties, restricting additional insured coverage to only those with direct contracts. This can help control premium costs and reduce liability. However, requiring privity may leave some parties without coverage, which could lead to disputes or gaps in protection.
Conversely, non-privity endorsements offer broader coverage, making it easier for general contractors and property owners to be protected. This may increase premiums but can provide peace of mind by ensuring more comprehensive risk management.
BGES Group: Your Tri-State Construction Insurance Specialists
Navigating the complexities of additional insured endorsements and other insurance provisions can be challenging, especially in the construction industry where liability risks are high. That’s where BGES Group comes in. As specialists in construction insurance, we understand the unique needs of contractors, developers, and business owners across the Tri-State area. Whether you require workers’ compensation, general liability, or specialized coverages, we are here to provide expert guidance and competitive rates.
For more information on how we can help protect your business, contact BGES Group today:
• Website: www.bgesgroup.com
• Phone: 914-806-5853
• Email: bgesgroup@gmail.com
Let BGES Group ensure you have the right coverage to safeguard your projects and your business.
BGES Group is one of New York, New Jersey, and Connecticut’s Construction Insurance Specialists representing 50+ companies, including all the BEST general & umbrella liability programs. We offer all the coverage needed, including property, builders’ risk, inland marine, general liability, umbrella liability, auto, bid & performance bonds, workers’ compensation, N.Y.S. disability, and group health. Our commitment to you goes beyond the policies we provide. We are always just a call, text, or email away, ready to assist you, even on weekends. We understand the importance of your business and are here to help you navigate any insurance challenges.
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