Every construction contract has an insurance section, and many contractors sign it without understanding what it asks for. Phrases like "additional insured on a primary and non-contributory basis, including completed operations, with a waiver of subrogation" aren't boilerplate. Each one requires a specific endorsement on your policy, and missing one can put you in breach of contract or leave you paying a claim your policy doesn't cover.
This guide explains the key concepts for general contractors, subcontractors and property owners.
Commercial general liability (CGL) basics
A CGL policy covers claims for bodily injury and property damage to third parties caused by your operations, plus personal and advertising injury. For contractors, two parts matter most:
- Premises/operations: injuries and damage while work is underway.
- Products-completed operations: claims that arise after your work is finished, such as a deck collapse or water intrusion months later. Construction defect claims can surface years after completion, so the completed operations aggregate and how long it lasts are critical.
Most CGL policies use standardized forms developed by ISO, though insurers also write their own. The Insurance Information Institute summarizes small business liability coverage.
Additional insured (AI) endorsements
An additional insured is a person or organization, such as the owner, general contractor or developer, added to your policy so they're covered for claims arising from your work. Key points:
- Ongoing vs. completed operations. Separate endorsements usually cover the AI during work and after completion. Many contracts require both.
- Blanket vs. scheduled. A blanket AI endorsement automatically adds anyone you've agreed in a written contract to include; a scheduled endorsement names specific parties. Blanket endorsements reduce administrative risk.
- Scope. Modern AI endorsements generally cover the AI only for injury or damage "caused, in whole or in part" by your acts or omissions, not for the AI's sole negligence. Some states restrict how far coverage and indemnity can extend.
- Edition dates matter. Contracts may require specific ISO form editions. Read them carefully.
Primary and non-contributory
When the contract requires your coverage to be primary and non-contributory, your policy must pay first for the additional insured, without seeking contribution from the AI's own insurance. This requires an endorsement; without it, your policy's "other insurance" clause may treat coverage as excess or shared.
Waiver of subrogation
After paying a claim, an insurer normally has the right to pursue (subrogate against) whoever caused the loss. A waiver of subrogation gives up that right against the parties named in the contract. Contracts often require waivers on CGL, auto, umbrella and workers' compensation. Waivers on workers' comp usually need a specific endorsement and may carry an added charge.
Indemnity agreements and anti-indemnity laws
Contracts also include indemnity clauses, which are your promise to defend and pay for others' losses. Your CGL's "insured contract" provision may cover some of this contractual liability. Many states have anti-indemnity statutes that limit how much indemnity can be required in construction contracts. California's Civil Code §2782 and following, for instance, restrict certain indemnity provisions in construction contracts: California Civil Code §2782. Have an attorney review indemnity language; your broker reviews the insurance language.
Certificates of insurance: what they are and aren't
A certificate of insurance (COI), usually on an ACORD 25 form, summarizes your coverage. It is not the policy and generally doesn't add coverage. Saying "additional insured" on a certificate doesn't make someone an AI unless the policy contains the endorsement. Several states have laws restricting certificate wording that misstates coverage. For owners and GCs: request copies of the actual endorsements, not just the certificate.
Managing subcontractor risk
General contractors are responsible for their subs in many ways. Best practices:
- Written subcontracts with insurance requirements that mirror (or exceed) what the owner requires of you.
- Collect COIs and endorsements before subs start work, and track expirations.
- Require subs to carry workers' comp. Otherwise their injured workers may be treated as your employees for premium and claims purposes. Your insurer will check at audit. In California, verify license and workers' comp status at the CSLB license check.
- Watch for policy exclusions in your own CGL that apply to subcontracted work or require subs to carry specific limits (sometimes called subcontractor warranty conditions).
- Residential and tract work exclusions. Some contractor policies exclude residential construction, condos, or work over a certain height. Make sure your policy fits the projects you bid.
Other policies contracts commonly require
- Commercial auto with hired and non-owned auto.
- Workers' compensation and employer's liability.
- Umbrella or excess liability at specified limits, which must "follow form" over the underlying AI and waiver endorsements.
- Builder's risk for the structure under construction (often the owner's or GC's responsibility).
- Contractor's pollution liability for mold, asbestos or contaminated soil exposures.
- Professional liability for design-build work.
- Contractor license bond where required by your state licensing agency.
Wrap-up programs (OCIP/CCIP)
On large projects, the owner (OCIP) or general contractor (CCIP) may buy one insurance program covering all enrolled contractors on site. If you enroll, you'll typically exclude the project payroll and revenue from your own policies, and you may still need your own coverage for off-site work and completed operations after the wrap ends.
Contract review checklist
- ☐ Required CGL limits (each occurrence, general aggregate, per-project aggregate?)
- ☐ Additional insured: ongoing and completed operations; blanket or scheduled
- ☐ Primary and non-contributory endorsement
- ☐ Waiver of subrogation on GL, auto, umbrella, workers' comp
- ☐ Umbrella following form
- ☐ Notice of cancellation requirements
- ☐ Completed operations duration required after project completion
- ☐ Indemnity clause reviewed by counsel
Send the insurance section of any contract to your broker before you sign. See our services overview and contractor workers' comp by trade pages, or contact us.
Frequently asked questions
What does additional insured mean on a construction contract?
It means the owner, general contractor or other named party is added to your liability policy by endorsement so they're covered for claims arising from your work, within the endorsement's terms.
Does a certificate of insurance make someone an additional insured?
No. A certificate only summarizes coverage. The policy must contain an additional insured endorsement for coverage to apply.
What does primary and non-contributory mean?
It means your policy pays first for the additional insured and won't seek contribution from the additional insured's own insurance. It requires a specific endorsement.
What is a waiver of subrogation?
It's an agreement, added to your policy by endorsement, that your insurer won't pursue recovery from the named party after paying a claim.
Why does completed operations coverage matter for contractors?
Construction defect and injury claims can arise long after a project ends. Completed operations coverage responds to claims from finished work.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.