Part Two: Fixing Gaps in Your Liability Insurance Policies

9 out of 10 restoration companies have policies with a fatal flaw

You’ll recall in July, I explained a problem you may have within your master services agreements – specifically related to additional insureds. This month, I want to show you a specific policy that clearly illustrates the problem. It uses the most common wording out there, which proves there’s no coincidence 90 percent of the insurance companies use this basic outline for additional insured coverage and the 90 percent failure rate in our compliance audit mentioned last month.

The contractor in this example agreed in their contract to make both the manager of a master services agreement (this could be a franchisor or a network) and the insurance company granting the master services agreement additional insureds under the contractor’s general liability insurance policy. It is a requirement in the master services agreement that the additional insurance status for both of these parties must apply to the ongoing operations and completed operations of the contractor.

I will refer to the contractor performing the work under the master service agreement as Bob’s Restoration. Bob owns the company. 

Actual Additional Insured Language in the General Liability Insurance Policy

(f) Any person or organization with which you have agreed above to provide insurance, but only with respect to liability arising out of “your work” performed for that additional insured by you or on your behalf. (Fatal Flaw#1)  A person or organization’s status as an insured under this provision of this endorsement continues only for the period of time required by the written contract or agreement, but in no event beyond the expiration date of this Coverage Part. (Fatal Flaw #2)  If there is no written contract or agreement, or if no period of time is required by the written contract or agreement, a person or organization’s status as an insured under this endorsement ends when your operations for that insured are completed. (Fatal Flaw #2 again)

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