An agent starts noticing the following requirements becoming more common for their contractor clients:

1) Contractor shall delete the Care, Custody and Control exclusion from their commercial general liability policy. The agent is not aware of any underwriter who is willing to do this, and always recommends that clients take exception to this clause.

2) Contractor's GL coverage shall include contractually assumed defense costs in addition to policy limits. The only solution the agent can think of is recommending that the indemnitee agrees to all the conditions in the second paragraph of the CGL's Supplementary Payments section.

3) Contractor shall advise owner if the GL aggregate limit is reduced because of payment of claims. The agent sets up all contractors CGL policies with the Aggregate Per Project endorsement, and recommends that clients inform the owner that this clause is unnecessary because of the endorsement.

Q: How should we handle these contractual requirements?

A: 1) I haven't seen this request, because the Care, Custody and Control exclusion is a personal property exclusion rather than a real property exclusion. You’re correct—there is no way I'm aware of in the ISO world to remove this exclusion from the CGL policy. The only way to satisfy this request would be with some type of bailee coverage (an inland marine form).

2) Evidently the lawyers don't know how to draft the contracts. Again, you’re correct—the policy already addresses this request. If they aren’t additional insureds, all that is required for such indemnitee protection is to add them to the indemnity agreement and agree to specific requirements when they turn defense over to the lower tier/named insured. If they are additional insureds, it's not necessary. But don't address it on the certificate of insurance.

3) The contract doesn’t require you to notify anyone; the responsibility belongs to the lower tier. Don't volunteer to do anything or place anything on the COI. You’re doing the right thing with the per-project aggregate, but I would recommend against telling the client the provision isn't necessary. They are still required to comply with the contract even though you’ve done a good job with coverage.

Remember, too, that the per-project aggregate applies to ongoing operations only—not completed operations. That means the lower tier may still need to address a potential issue with the upper tier if other completed operations losses have lowered the aggregate. This is an ambiguous area in the contractual wording because it references “the GL aggregate limit,” but there’s more than one GL aggregate limit—there’s the general aggregate, and there’s the products-completed operations aggregate.

Chris Boggs is executive director of the Big “I” Virtual University (VU).