Part of the huge crowd for the October Meeting

With the dynamic Randy Maniloff, Esq. as speaker and the topic of emerging issues on the additional insured landscape, members and guests were treated to a blockbuster combination for the Philadelphia Chapter of the CPCU Society October Breakfast Meeting.
Speaking to the greatest turnout in recent memory, Randy provided the attendees with an explanation of the new ISO Additional Insured endorsement, the Vendors endorsement, and the legislative proposals which may affect claims in the future.
As an attorney in the Business Insurance Practice Group at White and Williams, LLP in Philadelphia, Randy concentrates his practice in the representation of insurers in coverage disputes over primary and excess policy obligations for many types of claims. He is a contributor to Mealey’s Litigation Report: Insurance and FC&S Bulletins. He is a frequent speaker at industry seminars and well known in the Philadelphia area for his enlightening presentations.
Randy cites the additional insured endorsement as the second most complex insurance issue he has ever encountered. Having recently returned from a trip which required him to rent a car, he has identified the optional rental car coverage in a car lease as the most complex insurance issue he has had to face, despite the fact that additional insured claims usually have a complex set of facts, contractual relationships and differing policy language to complicate them.
In July 2004 ISO changed the additional insured endorsement in an attempt to clarify whether the endorsement was intended to provide coverage for the vicarious liability of the named insured (when negligent) or to provide coverage for the additional insured’s own negligence, as so many courts have ruled.
Randy believes some courts have ruled in this manner because of the “arising out of” language in the endorsement which provided coverage for liability arising out of the named insured’s operations. These courts have relied on the fact that the additional insured’s negligence was not specifically excluded and that the endorsement did not address fault.
In changing the endorsement, ISO has stated that the endorsement was never intended to cover the additional insured’s own negligence as some courts have ruled. The July 2004 change added a fault based standard to the form. It provides coverage to the additional insured for vicarious liability, for contributory negligence when shared with the named insured and attempts to eliminate coverage for the sole negligence of the additional insured.
However, Randy does not believe that the changes address all of the issues. Areas that will still be in dispute include:
· Suits brought by an employee of the named insured, who can not sue the named insured due to the W.C. statute, In these situations, the named insured is not part of the suit against the additional insured so there are no allegations made against the named insured to trigger the provision of a defense for the additional insured
· Suits which name parties who have no negligence at all but where the additional insured will want a defense
· An artfully drafted complaint that can find a way to manipulate the endorsement language, since the endorsement uses “acts or omissions” without prefacing it with “negligent”
· “Other insurance” clause considerations such as when the additional insured has a policy that says if the named insured on the policy is an additional insured on another policy, the named insured’s policy is excess


In addition to the Additional Insured endorsement changes, ISO also changed the Vendor’s Endorsement in July 2004. A vendor’s endorsement provides additional insured status to a vendor under a manufacturer’s policy, for liability arising out of the manufacturer’s products which are distributed or sold by the vendor. ISO added language to the endorsement excluding coverage for liability “arising out of the negligence of the vendor.” ISO did not eliminate the “arising out of” language in this endorsement, which will leave this endorsement open for court interpretations which may provide coverage to vendors for their sole negligence.
Several state legislatures have taken up the fight for limiting coverage of additional insureds. These states have bills in the pipeline that would preclude an insurer from providing defense and indemnity to an additional insured for its own negligence, even when the additional insure is not solely negligent. These bills are an attempt to plug up the “public policy” loophole. Many states have anti-indemnity statutes that regulate the use of hold harmless agreements by general contractors when written into subcontracts but few states put similar restrictions on the use of additional insured contract requirements. This allows general contractors to use additional insured arrangements to achieve the result that is forbidden in the anti-indemnity statutes, in essence forcing the subcontractors to provide coverage for the general contractor’s negligence.
If these bills pass, they can force additional insureds to turn to their own liability policies for coverage for their portion of negligence. These bills may also put the “other insurance” clause in jeopardy as well. The additional insured may be required to seek coverage from their own insurer for indemnity and defense costs paid by the additional insurer, for that portion of the loss attributable to their own negligence.
Because of the lag time in the filing of law suits that will interpret the July 2004 changes to the additional insured endorsement and the vendor’s endorsement, Randy foresees substantial litigation over the next five years, attempting to clarify the language of these endorsements. And we foresee a return visit from Randy Maniloff to explain them all to us.


* Portions of Additional Insured Endorsements: ISO’s Revisions, written by Randy Maniloff for FC&S, Casualty & Surety Volume, Public Liability, May 2004 and Coverage for Additional Insured-Vendors: Recent Markdowns by ISO and New York’s High Court, written by Randy Maniloff for Mealey’s Litigation Report: Insurance, vol 19, #36 July 26, 2005, were used in this summary.