Construction Today - December 2017 - 9

it did not cause. The contractor itself could not be held liable to the
owner for those losses under the state's anti-indemnity statute. If a
contractor is aware that state law may allow the additional insured
loophole and allow the contractor to be responsible for procuring
insurance for the owner for claims arising out of the owner's errors,
the contractor can try to eliminate the requirement to provide this
insurance from its contract. The contractor can try to minimize the
insurance it agrees to provide by only agreeing to provide the owner
insurance for claims arising out of the contractor's negligence or
conversely, it can include sufficient money in its bid to address any
increase in premium and additional assumed risk relating to the
need to provide insurance for its customer's negligence.
Importantly, not all commercial policies are equal as to what
owner-caused claims will be covered. Some endorsements cover the
additional insured (the owner) for its own independent errors and
some only cover the additional insured for negligence arising out of
the negligence of the named insured (the contractor). Whether the
endorsement in place covers claims arising out of the independent
fault of the owner depends on the language in the endorsement and
how state courts interpret that language. If there is a requirement in
the construction contract to insure the owner or upper tier contractor for claims arising out of, for example, the owner's fault, and if the
contractor is operating in a state that allows the additional insured
loophole the contractor or subcontractor should verify with their
insurance broker, agent, or legal counsel that the right insurance
coverages are in place.

Jeremy P. Brummond
practices in the litigation
department at St.
Louis-based lawfirm
Lewis Rice, with a focus
on engineering and
construction. He can be
reached at jbrummond@
lewisrice.com.

statutes in
ยป Anti-indemnity
construction contracts can vary
based on the state.

9

DECEMBER 2017 CONSTRUCTION-TODAY.COM

LEGAL ISSUES

if caused by the owner's actions. Indeed,
many construction contracts include provisions requiring the contractor or subcontractor to name the owner or upper tier
contractor as an "additional insured." When
the owner or upper tier contractor requires
insurance be purchased by the contractor
or subcontractor to cover their own errors,
they have accomplished the very thing that
many anti-indemnity statutes were meant
to prohibit. They have received an agreement that someone else will be responsible
for losses and claims on the project, even
if they caused the losses or claims. That it
remains legally permissible (in some states)
for an owner to require their contractor or
subcontractor to purchase insurance for
claims resulting from the owner's errors, but
it is not legally permissible for an owner to
require a contractor or subcontractor, themselves, to indemnify the owner for losses the
owner caused is generally referred to as the
"additional insured loophole."
In some states, the additional insured
loophole is expressly allowed by statute. In
other states, the law expresses that requiring a contractor to provide insurance for
claims arising out of the owner's errors is not
allowed. In many states, however, the additional insured loophole is not addressed in
the state's anti-indemnity law (or other statute), so the courts have been left to address
whether the additional insured loophole
is permitted or whether it should not be
permitted as being contrary to the purpose of
the anti-indemnity statute.
It is important for contractors to be aware
of the possibility that state law may allow
the additional insured loophole for various
reasons. Many contractors' commercial
liability policies have very high deductibles
or self-insured retention. If a contractor
has a high self-insured retention and is
responsible for providing additional insured
protection to the owner for claims and losses
arising out of the owner's fault, the contractor could find itself paying significant
money "out-of-pocket" for claims and losses


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Table of Contents for the Digital Edition of Construction Today - December 2017

Contents
Construction Today - December 2017 - Cover1
Construction Today - December 2017 - Cover2
Construction Today - December 2017 - 1
Construction Today - December 2017 - Contents
Construction Today - December 2017 - 3
Construction Today - December 2017 - 4
Construction Today - December 2017 - 5
Construction Today - December 2017 - 6
Construction Today - December 2017 - 7
Construction Today - December 2017 - 8
Construction Today - December 2017 - 9
Construction Today - December 2017 - 10
Construction Today - December 2017 - 11
Construction Today - December 2017 - 12
Construction Today - December 2017 - 13
Construction Today - December 2017 - 14
Construction Today - December 2017 - 15
Construction Today - December 2017 - 16
Construction Today - December 2017 - 17
Construction Today - December 2017 - 18
Construction Today - December 2017 - 19
Construction Today - December 2017 - 20
Construction Today - December 2017 - 21
Construction Today - December 2017 - 22
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Construction Today - December 2017 - 24
Construction Today - December 2017 - 25
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Construction Today - December 2017 - 28
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Construction Today - December 2017 - 110
Construction Today - December 2017 - 111
Construction Today - December 2017 - 112
Construction Today - December 2017 - Cover3
Construction Today - December 2017 - Cover4
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