How Additional Insureds Can Negatively Effect General Contractors

Additional Insured Endorsements on Commercial General Liability policies work the same. The General Contractor cannot file suit against the Subcontractor and the Subcontractor cannot file suite against the General Contractor, as well. Where this gets complicated is when the Subcontractor is doing work for more than one General Contractor and is listing all the General Contractors on his Commercial General Liability policy. A broad example of how this could negatively affect a General Contractor is as follows: the Subcontractor does work for GC1 and is found liable for damages to the job's property owner who contracted the work with GC1.
The lawyer for the property owner discovers that the Subcontractor has GC2 listed on his Commercial General Liability policy as an Additional Insured. Tort law will allow the property owner's lawyer to file suit against all entities listed on the liable party's Commercial General Liability policy, this case, the Subcontractor, GC1 and GC2. The GC2, who has no interest in the contracted work for which the claims was brought against, could be named as a defendant in the lawsuit solely because he was listed on the liable party's insurance policy. Therefore, GC2 will have his Commercial General Liability insurance carrier represent him in this instance, unless, he is willing to hire his own representation and pay the cost out of his pocket. The GC2 will have lost productive time giving depositions and possibly attend any trial proceedings, depending on the circumstances. This is an Economic Cost that the GC2 will not be able to make up or recoup from the Subcontractor or GC1.