Commercial Insurance Clauses: Additional Insureds, Waivers, and Indemnity

Commercial contracts allocate risk twice. The indemnity clause says who pays for a loss. The insurance clause says who buys the funding for that payment. The two are drafted in the same negotiation, often by the same people, and they routinely fail to line up. The failure is invisible until a claim arrives, because the contract is enforceable between the parties while the policy answers only to its own terms.

This brief separates the three instruments that decide who pays — the contract, the endorsement, and the certificate — and identifies the points where the promise on paper exceeds the coverage in force.

Three documents, three different jobs

Start by refusing to treat these as one subject. The contract creates obligations between the parties: a duty to indemnification, a duty to procure insurance, and a duty to name someone as an additional insured. Breach of those duties is a contract claim against the counterparty, enforceable whether or not any policy responds.

The policy and its endorsements create rights against an insurer. Only this document produces a defense and a payment from a carrier. It is negotiated between the named insured and its carrier, not between the contracting parties, and the person demanding the coverage usually never reads it.

The certificate of insurance creates almost nothing. Standard certificate forms state on their face that the document is issued for information only, confers no rights on the holder, and does not amend or extend the policy. Risk teams collect certificates because they are easy to collect. They are evidence that a policy existed on a date, and little more. A contract that requires "a certificate naming us as additional insured" has asked for the wrong document.

Verify before relying: ask for the endorsement itself — the actual schedule page or blanket wording — not a certificate that describes it. If the endorsement cannot be produced, treat the coverage as unconfirmed.

What additional-insured status actually gives you

An additional insured is added to another party's liability policy by endorsement. The commonly demanded forms are the Insurance Services Office CG 20 10 endorsement, which addresses liability arising out of the named insured's ongoing operations, and the CG 20 37 endorsement, which addresses completed operations. They are different endorsements covering different periods. A contract that names only the first leaves the additional insured without coverage for claims arising after the work is finished, which is where a large share of construction and product claims actually surface.

Two limits in the current standard wording surprise people. First, coverage generally extends to liability caused, in whole or in part, by the named insured's acts or omissions. An additional insured sued for its own independent negligence — a hazard it created, a supervisory failure of its own — may find no coverage at all under that language. Second, endorsement editions issued in recent years commonly tie the coverage granted to what the written contract requires and add wording limiting the grant to the extent permitted by law. That means a contract asking for less than the endorsement could give will cap the coverage at the lower amount.

Two endorsements that decide who pays first

Additional-insured status answers whether a carrier owes you anything. The next two endorsements answer when and how much — and neither is created by contract language alone.

Primary, non-contributory, and the other-insurance fight

Every liability policy contains an other-insurance condition describing how it responds when another policy covers the same loss. Left alone, those conditions typically make coverage contribute pro rata or make it excess over other available insurance. When two carriers each read their own condition, the result is a coverage dispute layered on top of the underlying claim, with defense costs accruing while it is resolved.

The fix is an endorsement that amends the other-insurance condition to make the counterparty's policy primary and non-contributory as respects the additional insured. A recital in the services agreement does not accomplish this. The contract binds the parties; it does not bind a carrier that never signed it. When a broker responds to a primary-and-non-contributory requirement with a certificate box rather than an endorsement, the requirement has not been satisfied.

Waiver of subrogation

Subrogation is the insurer's right to stand in its insured's shoes after paying a claim and pursue whoever caused the loss. A waiver of subrogation removes that right as against a named party. Without it, the practical outcome is circular: the counterparty's carrier pays its own insured, then sues you as the responsible party, and the risk you thought had been transferred returns as a recovery action.

Two points are frequently missed. Waivers usually need to be endorsed onto the policy — a contractual waiver alone may be ineffective against the carrier, or may be honored only where the policy contemplates pre-loss waivers. And the waiver must be mutual to work as intended in most commercial relationships; a one-sided waiver simply relocates the recovery risk rather than removing it. Property policies, builder's risk policies, and workers' compensation policies each handle waivers differently, so a single clause covering "all policies" needs checking against each line.

Where indemnity outruns the policy

The most common structural defect is an indemnity obligation broader than any insurance behind it. Three gaps recur.

• Uninsurable loss categories. Indemnities routinely cover consequential damages, lost profits, contractual penalties, and fines. General liability policies generally do not. The obligation survives; the funding does not.
• Own-negligence indemnity. Clauses requiring one party to indemnify another for the other's own negligence run into state anti-indemnity statutes. Many states void or narrow such clauses, particularly in construction contracts, and some extend the restriction to additional-insured requirements that achieve the same result indirectly.
• Defense-cost exposure. A duty to defend is broader than a duty to indemnify and is triggered earlier. An indemnitor may owe defense costs on allegations that are never proven, with no insurance responding because the policy's contractual-liability coverage is narrower than the clause.

Anti-indemnity statutes are a state-law patchwork, and this is the point where general guidance stops being useful. Some states bar indemnity for the indemnitee's sole negligence but permit it for comparative fault. Others bar any indemnity for the indemnitee's negligence in covered contracts. A few address whether additional-insured requirements can be used to reach the same economics. The governing-law clause therefore does real work in an insurance exhibit, and a clause validated in one state should not be reused across a national vendor program without checking. For a related view of how entity-level protection is layered, see our brief on indemnification and D&O insurance — Delaware's corporation statute, for example, separately authorizes a corporation to buy insurance for its directors and officers whether or not it would have power to indemnify them, which is exactly the contract-versus-policy distinction in statutory form.

Verifying coverage before signing

• Name the endorsement forms and editions required, and require both ongoing-operations and completed-operations additional-insured coverage where work will be completed.
• Require delivery of the endorsements themselves, not certificates, before work begins and at each renewal.
• Require primary and non-contributory endorsement wording, expressly amending the other-insurance condition.
• Require waiver-of-subrogation endorsements on each line of coverage where a waiver is intended.
• State whether limits are per occurrence or aggregate, whether defense costs erode limits, and whether umbrella or excess layers follow form.
• Require notice of cancellation or material change directly from the insured, since carriers seldom undertake to notify certificate holders.
• Check the indemnity clause against the governing state's anti-indemnity statute before, not after, execution.
• Confirm the additional-insured requirement is matched by an insurance-procurement covenant, so a failure to obtain coverage is itself a breach with its own remedy.

That last item is the quiet one that matters most. If the counterparty never obtains the required endorsement, the additional insured has no policy rights — but it does have a contract claim for breach of the covenant to procure insurance, and in many disputes that claim is the only real recovery. Draft the covenant as an independent obligation with its own damages measure rather than as a condition attached to the indemnity.

Questions the desk gets

We hold a certificate of insurance. Are we covered?

Not on that basis. Certificates state on their face that they are issued for information only, confer no rights on the holder, and do not amend the policy. They confirm that a policy existed when the certificate was issued, which is useful for tracking and useless in a claim. The document that creates rights is the endorsement, and it is the document to demand and keep on file.

Does additional-insured status cover our own negligence?

Generally not under current standard wording. Most in-use endorsements extend coverage to liability caused, in whole or in part, by the named insured's acts or omissions. Where the additional insured is sued for a hazard it created independently, the endorsement may not respond at all. That gap is one reason additional-insured status supplements a party's own liability program rather than replacing it.

Is a broad indemnity clause enough on its own?

It is enough to create an obligation and not enough to guarantee payment. The indemnitor must be solvent, the loss category must be one insurance actually covers, and the clause must survive the governing state's anti-indemnity statute. An indemnity for fines, penalties, or purely economic loss is commonly enforceable between the parties and commonly uninsured, which converts a risk transfer into a credit risk.

Which endorsement covers claims after the work is finished?

Completed-operations additional-insured coverage, addressed by a different endorsement from the one covering ongoing operations. A contract that requires only ongoing-operations status leaves a gap for claims surfacing after the project ends, which is when construction and product defect claims typically arrive. Requiring both, and confirming both were issued, closes it.

How to use this brief

Read the insurance exhibit and the indemnity clause together, in one sitting, and ask a single question of each requirement: what document has to exist for this to be true? If the answer is "an endorsement," get the endorsement. If the answer is "a state statute has to permit it," check the statute. If the answer is "the counterparty has to be solvent," price that risk somewhere else in the deal.

Then close the loop operationally. Insurance requirements fail more often through administration than through drafting: renewals lapse, endorsements are not reissued, and subcontractors are onboarded without review. Build the verification step into the same diligence discipline used for commercial property diligence and for change-order documentation, where the same paper trail decides later claims. Where a dispute does mature, the coverage question and the underlying claim often proceed on separate tracks under the Federal Rules of Civil Procedure if either lands in federal court, and the federal judiciary's own overview of the court system is a reasonable starting point for understanding that structure.

ATLAS Legal Briefing is an independent publisher, not a law firm, and this material is general information rather than advice on any specific contract. Insurance wording, state anti-indemnity law, and policy forms change; confirm the current position before relying on any clause. Related transaction material sits in the Corporate Operations & Risk desk and in our brief on representations and warranties.