Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceMedium
A Florida construction company has a Commercial General Liability (CGL) policy. They are subcontracting a portion of a project to 'QuickBuild LLC.' To ensure 'QuickBuild LLC' meets certain insurance requirements and protects the construction company from liability arising from QuickBuild's operations, the construction company requires QuickBuild to name them as an additional insured. Which statement accurately describes the primary benefit of naming the construction company as an additional insured on QuickBuild LLC's CGL policy?
- AIt extends coverage to the construction company for liability arising from QuickBuild LLC's operations.
- BIt makes QuickBuild LLC solely responsible for all claims, regardless of fault.
- CIt provides direct coverage for the construction company's own negligent acts.
- DIt grants the construction company premium discounts on its own CGL policy.
Show answer & explanationAnswer & explanation
Correct answer: A. It extends coverage to the construction company for liability arising from QuickBuild LLC's operations.
Naming an entity as an additional insured on a CGL policy extends certain coverage to that entity for liability arising out of the named insured's (QuickBuild LLC's) operations. This provides a layer of protection for the construction company without them having to pay for a separate policy to cover QuickBuild's actions.
Why the other options are wrong
- B. Additional insured status does not absolve the construction company of all responsibility, especially for their own negligence, nor does it make QuickBuild solely responsible regardless of fault.
- C. Additional insured status primarily covers the additional insured for the named insured's negligence, not their own.
- D. Additional insured status does not directly result in premium discounts for the additional insured's own policy.
Additional Insured
An individual or entity, other than the original named insured, who is added to an insurance policy and granted coverage under its terms.
- Typically added by endorsement.
- Coverage is usually limited to liability arising from the named insured's operations.
- Common in contracts, particularly construction, to transfer risk.
Memory trick: AI adds a shield from others' deeds.