Primary and noncontributory endorsement: what it means

What primary and noncontributory means

The phrase has two parts. Primary means your policy responds to a covered claim against the additional insured before that party’s own insurance does. Noncontributory means your insurer will not ask the additional insured’s insurer to help pay, subject to the endorsement’s terms.

Without that wording, two liability policies covering the same claim can end up splitting it, which leads to disputes between insurers. IRMI explains that primary and noncontributory is about the order of coverage — whose policy pays first — not about dividing fault between you and your client.

It is not unlimited coverage. Your policy limits and exclusions still apply, and once your limits are used up, the additional insured’s own insurance can still be called on.

The standard endorsement forms

Insurance Services Office (ISO) introduced CG 20 01 for general liability with its April 2013 forms, in response to construction contracts that demanded the wording. Many insurers use their own proprietary endorsements or build the language into blanket additional insured forms instead, so the form number on your policy may differ from the one in the contract.

The two conditions in the ISO wording

CG 20 01 makes your insurance primary and noncontributory only when both of these are true: the additional insured is a named insured on the other insurance, and you agreed in a written contract or agreement that your insurance would be primary and would not seek contribution. If the contract is silent, the endorsement can sit on your policy and do nothing.

The written-contract trigger matters. The American Bar Association describes a common scenario: a subcontractor’s endorsement made additional insured coverage excess unless a written contract required primary and noncontributory status. The subcontract required additional insured status but not primary wording, so the insurer declined to defend the general contractor until the contractor’s own insurance was exhausted.

The first condition is narrower than it looks. Public agency contracts often require coverage “at least as broad as” CG 20 01 and make the agency’s self-insurance excess to yours, yet a self-insured agency is not a named insured on other insurance. If your client is self-insured, ask your broker whether your endorsement matches the contract.

Who asks for it

The request almost always arrives in a contract’s insurance section, next to the additional insured requirement. Common sources include:

• General contractors and project owners. IRMI notes the requirement appears in standard construction contracts such as the AIA A102 owner-contractor agreement, and contractors pass it down to subcontractors.
• Landlords, whose leases may require a tenant’s liability policy to respond first.
• Shippers, brokers and other clients of businesses that drive for work. Insureon notes contracts involving vehicles or transportation services may require primary and noncontributory auto liability.
• Corporate clients that hire vendors and service providers.
• School districts and other public entities, whose templates often extend the requirement to umbrella policies.

Primary and noncontributory vs. additional insured and waiver of subrogation

Contracts usually request all three together, and each needs its own endorsement or blanket provision. A certificate cannot prove the primary wording on its own: the ACORD 25 certificate has checkbox columns for additional insured and waiver of subrogation, but not for primary and noncontributory, so it can appear only as typed text in the description box.

Umbrella policies don’t follow automatically

If a contract requires, say, $5 million of coverage on a primary and noncontributory basis and you meet it with a $1 million general liability policy and a $4 million umbrella, the umbrella is the weak point. IRMI explains that most umbrellas have their own other insurance condition making them excess over any other insurance, so they do not inherit the CG 20 01 wording even when written on a follow-form basis.

Some umbrella insurers will amend that condition on a limited basis. Courts are split on which layer pays first when a claim exceeds the primary limits, so if your contract applies the requirement to all layers, get the umbrella endorsement in writing.

What it costs and how to add it

Pricing depends on the insurer. Total CSR notes some insurers include primary and noncontributory wording in blanket additional insured endorsements at no extra charge, while others add a fee. As one published example, Specialty Insurance Agency charges $100 per certificate or $250 for the policy term for the endorsement on its event-industry liability policy, plus surplus lines taxes.

To meet the requirement without paying for the same thing twice:

A broker such as Florin can compare your current endorsements against the contract and quote the missing pieces from several insurers.

• List which policies the contract names: general liability, auto, umbrella.
• Check whether your blanket additional insured endorsement already includes the wording before buying a separate form.
• If you work under many contracts, ask for a blanket version rather than paying per certificate.
• Ask for a copy of the endorsement itself; certificate wording does not change the policy.
• Sign the written contract before work starts, since the ISO trigger depends on it.