In most construction projects involving a general contractor (or developer) and multiple subcontractors, the general contractor prefers to shift risk and liability exposure by requiring that it be named as an additional insured on the subcontractor’s insurance policy for the project…
General Contractors and Forecast Homes, Inc.
General contractors (or anyone seeking additional insured status) should know that the California Court of Appeal in Forecast Homes, Inc. v. Steadfast Insurance Company, held that simply being named as an additional insured may not necessarily be enough to afford coverage to a general contractor. In Forecast, the subcontractor had an insurance policy that named the general contractor as an Additional Insured, but required a SIR (Self Insured Retention) be fulfilled before coverage could be triggered. The Court held quite simply, no SIR = no coverage + the general contractor could not pay the SIR for the subcontractor in order to trigger coverage.
After Forecast, general contractors need to take extra steps to make sure they are covered in the event of a claim arising out of a subcontractor’s work. Typically, the general contractor can specify the insurance requirements for a project, and should pay particular attention to how coverage is afforded on a project by project basis. In the face of Forecast, there are still several options for general contractors in terms of subcontract language and insurance requirements that help with effective risk allocation, and that can be evaluated before a project starts.