An insurer denied coverage for a contractor. The carrier held that the contractor was not owed coverage as it was not explicitly shown under a written agreement to be an additional insured. The contractor, seeking reimbursement after being sued by a city for negligent work, sued the insurer for recovery.

Click here to see if the courts agreed whether the contractor was eligible for coverage.

Insurance policies are simply contracts and, when disputes arise, their wording is often relied upon to support arguments for or against coverage. This is a major reason why clear wording is very important. Court cases are a significant source that triggers changes in policy language. They may occur either through the impact of actual cases or indirectly through changes in the law that have their origins in addressing wider spread situations on how insurance responds to certain types of losses. Examples involve confusion over water-related losses, concurrent causes of loss and confusion over how the word "insured" is interpreted.

With regard to more parties being granted insured status, insurers recognize that coverage obligations should be extended under certain circumstances. However, carriers want to have sufficient knowledge of parties that they may be obligated to reimburse or defend against claims.

Click here for an excerpt of wording on "Who Is An Insured" found in the ISO Commercial General Liability's coverage analysis in PF&M.

One major reason to seek full prospect or client information is to, when necessary, secure proper premium for additional parties. This is typically achieved by adding endorsements. Endorsements allow coverage to be modified to fit situations that deviate from what is covered under a base policy form. Naturally, separate endorsements and, when applicable, additional premium allows for more precise coverage and pricing.

Click here for an example of an additional insured endorsement's wording under one commercial general liability's endorsements section in PF&M.

Another important reason for seeking more information is to gain enough knowledge to decide where the broader risk is still acceptable. Asking the right questions of a prospect or current client is a critical way to be aware of the total exposure presented by its operations. Ignorance of what risks are created by a client's work is not a shield against legal responsibility for injury or damage caused to others. So, ask plenty of questions.

Click here to see how a questionnaire permits exploration for information that helps identify contractual risks that may need to be addressed. It's from the Risk Survey - Commercial.