The Narrowing of Additional Insured Coverage and Its Impact on P3 Projects

Additional Insured coverage is a common method of risk transfer used in construction projects. In 1985, the standard form of the additional insured endorsement used in insurance policies conferred much broader protection than the forms subsequently published in 2004 and 2013.

The net effect has been a narrowing of the risk transfer that can be achieved through standard form additional insured endorsements. In addition, some recent court decisions have limited the reach of additional insured coverage available under the current standard forms. This narrowing of additional insured protection can have a significant impact on P3 projects where the projects are expensive, the risks are significant and the parties have great need for risk transfer.

Even where a project involves a project specific insurance program like an OCIP, CCIP or other wrap-up, some form of additional insured coverage is likely to still be needed because some participants and some risks will be excluded from the project’s insurance program. Risk managers and others in the construction industry should pay close attention to the risk transfer process to avoid disappointment in the event of a loss.

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