Illinois Association of Defense Trial Counsel

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IDC Quarterly | Volume 21, Number 4 (21.4.26)

Insurance Law
By: Seth D. Lamden
Neal, Gerber & Eisenberg, LLP

General Contractor Not Entitled to Additional

Insured Coverage on Sub-Subcontractor’s CGL Policy
Due to Lack of Direct Contract Between the Parties
and Disclaimer in Certificate of Insurance

It is a common practice on multi-party construction projects for general contractors to require all
subcontractors on a project to add general contractors as additional insureds on their CGL policies. It also is a
common practice for subcontractors to sub-contract portions of their work to sub-subcontractors. When this
occurs, the sub-subcontractor typically has no direct contractual relationship with the general contractor, and
the sub-subcontractor’s obligation to add both the subcontractor and the general contractor as additional
insureds on its CGL policy flows from its contract with the subcontractor. Moreover, it is often the case that
the general contractor’s only evidence that it has been added as an additional insured on downstream
subcontractor’s and sub-subcontractor’s CGL policies is a certificate of insurance that does not specify the
exact wording of the additional insured endorsement.
In Westfield Insurance Co. v. FCL Builders, Inc., 407 Ill. App. 3d 730, 948 N.E.2d 115 (1st Dist. 2011), a
general contractor unexpectedly found itself with no additional insured coverage in a situation like that
described above. The sub-subcontractor’s contractual obligation to add the general contractor as an additional
insured arose from its contract with a subcontractor, and not from a contract with the general contactor. The
Illinois Appellate Court, First District considered whether an “automatic” insured endorsement in the sub-
subcontractor’s policy entitled the general contractor to additional insured coverage. The appellate court held
that the general contractor did not qualify as an additional insured because it did not have a direct contractual
relationship with the sub-subcontractor. The court also held that a certificate of insurance stating that the
general contractor was an additional insured on the sub-subcontractor’s policy did not confer additional
insured status on the general contractor due to an express disclaimer on the certificate stating that the
certificate did not amend the coverage provided by the policy.
The Insurance Services Organization (“ISO”) has introduced several automatic, or “blanket” additional
insured endorsements that an insured can use to confer additional insured status on multiple entities without
having to request a separate endorsement from the insurer each time it wants to add a new additional insured to
its policy. (See Donald S. Malecki et al., The Additional Insured Book, Fifth Ed. 195 (IRMI 2004)). One of the
ISO automatic additional insured endorsements confers additional insured status by amending the definition of
“insured” in a standard CGL policy, in relevant part, as follows:

A. Section II -- Who Is an Insured is amended to include as an additional insured any person or

organization for whom you are performing operations when you and such a person or organization

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 have agreed in writing in a contract or agreement that such person or organization be added as an
additional insured on your policy . . . .

See ISO Form CG 20 33 07 04 (“Additional Insured-Owners, Lessees or Contractors-Automatic Status When

Required in Construction Agreement With You”). This additional insured endorsement was at issue in
Westfield Insurance Co., 407 Ill. App. 3d 730.
The underlying dispute in Westfield Insurance Co. arose from a construction project for which FCL
Builders, Inc. (“FCL”) was the general contractor. FCL subcontracted all structural steel work on the project to
Suburban Ironworks, Inc. (“Suburban”). See Westfield Insurance Co., 407 Ill. App. 3d at 731. The FCL-
Suburban subcontract required Suburban to obtain CGL insurance that covered both FCL and Suburban, and
also required that any sub-subcontractor with which Suburban subcontracted any of its work for FCL must
include FCL as an additional insured on the sub-subcontractor’s CGL policy. Id. at 731. Suburban, in turn,
subcontracted the steel erection work on the project to JAK Iron Works, Inc. (“JAK”). The Suburban-JAK
subcontract incorporated by reference a previously-existing Master Subcontract Agreement that required JAK
to procure CGL insurance that covered itself, Suburban and FCL for liability arising out of the steel erection
work. Id. at 731-32. JAK purchased a CGL policy from Westfield Insurance Company (“Westfield”). The
Westfield CGL policy contained the ISO 20 33 automatic additional insured endorsement quoted above.
One of JAK’s employees was severely injured when he fell from a steel beam. The employee sued FCL
and Suburban, alleging that they breached duties owed to him regarding safety at the job site. See id. FCL
tendered the employee’s suit to Westfield, which denied coverage and filed a declaratory judgment action
seeking a judgment that FCL was not an additional insured on JAK’s CGL policy because JAK and FCL had
not agreed, in writing, that FCL was to be added to the policy as an additional insured. See id.
The dispute between FCL and Westfield turned on whether the requirement in the Suburban-JAK
subcontract, requiring JAK to procure CGL insurance for FCL, qualified as a written agreement between JAK
and FCL as required in the CG 20 33 additional insured endorsement on the Westfield policy. Westfield
argued that it did not qualify because the plain language of the additional insured endorsement only extended
additional insured coverage to entities that had a written agreement with JAK. See id. at 732. In response, FCL
argued that incorporation of the requirement in the Suburban-JAK subcontract for FCL that JAK procure
insurance for FCL entitled FCL to additional insured coverage. See id. Additionally, FCL pointed to the
certificate of insurance listing FCL as an additional insured under JAK’s Westfield policy as further support of
its position. See id.
The trial court agreed with Westfield and held that FCL was not entitled to additional insured coverage
because the additional insured endorsement on the Westfield policy was “unambiguous” and required “direct
priv[i]ty in order for an entity to qualify as an additional insured.” Id. FCL appealed, and the appellate court
affirmed the trial court’s ruling that FCL did not qualify as an additional insured. See id. at 737.
The appellate court explained that the additional insured endorsement on the Westfield policy would
extend additional insured coverage to FCL only if the following two conditions were met: (1) JAK, the named
insured, was “performing operations” for FCL; and (2) JAK and FCL had “agreed in writing in a contract or
agreement” that FCL is to be added as an additional insured. See id. Observing that there was no evidence in
the record that JAK and FCL had agreed in writing that FCL was to be added as an additional insured to the
Westfield policy, the appellate court held that “FCL cannot be an additional insured under the policy and
Westfield is not obligated to furnish FCL with a defense or indemnification . . . .” Id. at 734. Thus, the
appellate court rejected FCL’s argument that the requirement in the Suburban-JAK subcontract that JAK name
FCL as an additional insured satisfied the “written contract” requirement in the Westfield policy. The court
reasoned that the “plain and ordinary meaning” of the phrase “such person or organization,” as used in the
additional insured endorsement refers to the person or organization for which JAK is performing operations
and cannot encompass any other person or organization. See id. In this case, JAK performed operations for the
subcontractor, Suburban, and not for FCL, the general contractor.

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 The appellate court also rejected FCL’s argument that it was entitled to additional insured coverage
because it received a certificate of insurance that listed it as an additional insured. The court held that the
certificate of insurance “does nothing to modify Westfield’s obligations under the contract” because: (1) the
certificate was not issued by Westfield; and (2) the certificate contained a disclaimer that stated:

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS

NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND,
EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.

Id. at 737.

Upon examining Illinois case law regarding whether a certificate of insurance confers additional insured
status on an entity the First District stated the following standard for reconciling conflicts between a certificate
of insurance and an insurance policy:

If the certificate does not mention the policy and the terms of the two conflict, then the terms of the
certificate generally controls coverage . . . . However, where the certificate refers to the policy and
expressly disclaims any coverage other than that contained in the policy itself, the policy controls.

Id. at 736-37 (citing United Stationer’s Supply Co. v. Zurich American Insurance Co., 386 Ill. App. 3d 88 (1st
Dist. 2008) and Pekin Insurance Co. v. American Country Insurance Co., 213 Ill. App. 543 (1st Dist. 1991)).
Because the certificate of insurance on which FCL relied fell into the latter category, the appellate court held
that it did not confer additional insured status on FCL. See Westfield Insurance Co., 407 Ill. App. 3d at 737.
This decision makes clear that a sub-subcontractor cannot comply with a contractual obligation to provide
insurance for all upstream contractors by simply adding blanket additional insured endorsement ISO Form No.
CG 20 33 07 04 to its CGL policy because additional insured coverage provided by that endorsement is limited
solely to parties with which the named insured is in direct privity of contract. The holding in Westfield
Insurance Co. can be limited to the interpretation of additional insured provisions containing the “have agreed
in writing in a contract or agreement” language at issue here. Nevertheless, that endorsement is commonly
used in the construction industry, and sub-subcontractors typically do not have any direct contractual
relationship with general contractors. Accordingly, the endorsement is no longer suitable for use in Illinois by
sub-subcontractors that are obligated to include general contractors as additional insureds on their policies
unless they enter into direct agreements with the general contractors.
With regard to the Westfield Insurance Co. court’s holding as to certificates of insurance, it is now fairly
clear that putative additional insureds should not rely on certificates of insurance as evidence of additional
insured status. Most certificates of insurance used today expressly reference the policy number and limits, and
contain disclaimers stating that the terms of the policy, rather than the certificate, controls.

About the Author

Seth D. Lamden is a litigation partner at Neal, Gerber & Eisenberg, LLP in Chicago. He concentrates his practice on representing corporate and
individual policyholders in coverage disputes with their insurers. In addition to dispute resolution, Mr. Lamden counsels clients on matters
relating to insurance and risk management, including maximizing insurance recovery for lawsuits and property damage, policy audits and
procurement, and drafting contractual insurance specifications and indemnity agreements. He obtained his B.A. from Brandeis University, and his
J.D., magna cum laude, from The John Marshall Law School.

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About the IDC
The Illinois Association Defense Trial Counsel (IDC) is the premier association of attorneys in Illinois who devote a substantial portion their
practice to the representation of business, corporate, insurance, professional and other individual defendants in civil litigation.
For more information on the IDC, visit us on the web at www.iadtc.org.

Statements or expression of opinions in this publication are those of the authors and not necessarily those of the association.
IDC Quarterly, Volume 21, Number 4. © 2011. Illinois Association of Defense Trial Counsel. All Rights Reserved. Reproduction in whole or in
part without permission is prohibited.

Illinois Association of Defense Trial Counsel, PO Box 3144, Springfield, IL 62708-3144, 217-585-0991, idc@iadtc.org

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