Liability Issues to Worry About – Indemnity Agreements and Additional Insureds E. Stuart Powell, Jr. CPCU CIC CLU ARM ChFC AMIM AAI ARe CRIS Vice President of Insurance Operations & Technical Affairs Independent Insurance Agents of North Carolina

Indemnity Agreements Definition – “A contractual or equitable right under which the entire loss is shifted from a tortfeasor who is only technically or passively at fault to another who is primarily or actively responsible.” – Black’s Law Dictionary

Indemnity Agreements Indemnitor Indemnitee

Indemnity Agreements Types of Agreements – Three Categories – Limited Negligence of indemnitor – Broad Negligence of indemnitor Joint negligence of indemnitor and indemnitee Sole Negligence of Indemnitee – Intermediate Negligence of indemnitor Joint negligence of indemnitor and indemnitee

Indemnity Agreements Limitations on Indemnifications – Exculpatory Clauses – common law – Anti-Indemnity Statutes – NC General Statute § 22B-1

Indemnity Agreements Example of an Indemnity Provision – AIA A201

Contractual Liability The CGL Contractual Liability Exclusion – Breach of Contract vs. Contractual Indemnification – Absolute contractual exclusion – Coverage granted by exception to exclusion Liability in absence of a contract “Insured Contracts”

Contractual Liability “Insured Contracts” – Covers B.I. and P.D. assumed in the contract – Includes legal fees incurred by the indemnitee if those fees are also assumed in the contract. Definition of “Insured Contracts” – One party assumes the tort liability of another to pay B.I. or P.D. to a third party

Contractual Liability CG – Contractual Liability Limitation – Restores contractual liability to pre-simplified wording – Removes paragraph f. from “insured contract” definition CG – Amendment of Insured Contract Definition

Contractual Liability Indemnity Agreement vs. CGL Contractual Coverage – Breadth of the indemnity agreement – Breadth of the contractual liability coverage – Contractual liability disclaimer

Additional Insureds Types of Insureds – Named Insureds – Insureds by Definition – Additional Insureds

Additional Insureds ISO CGL Additional Insured Endorsements – More than 30 endorsements – Reasons for multiple endorsements

Additional Insured Endorsements CG (07 04) – Additional Insured – Owners, Lessees or Contractors – Scheduled Person or Organization CG (07 04) – Additional Insured – Owners, Lessees or Contractors – Automatic Status When Required In Construction Agreement With You CG (07 04) – Additional Insured – Owners, Lessees or Contractors – Completed Operations

Types of Insureds Named Insureds – Broadest benefits under policy Insureds by Definition – Basic benefits under policy Additional Insureds – Benefits specified by endorsement