When providing an Insurance Certificate to a client, you may be asked to include your contractor general or vendor as the primary and non-contributory language.
Here is the technical explanation of Primary and Non-Contributory as it pertains to an “Additional Insured” on your general liability policy.
Primary & Non-Contributory language on a certificate of insurance means that your policy must pay before other applicable policies (primary) and without seeking contribution from other policies that also claim to be primary (noncontributory).
Still uncertain about the significance of this or the privileges you are surrendering by incorporating this language into your policy?
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What is Primary & Non-Contributory?
The language known as Non-Contributory & Primary, also referred to as an added endorsement to your general liability insurance policy, grants certain additional rights to a third party requesting party called “Insured” on your policy status.
This contractually based risk transfer offers wider safeguards to another party (your client) in the event of a liability lawsuit.
Tenants and landlords, general contractors and property owners, and subcontractors and general contractors establish the insurance connection between commercial general liability insurance endorsements that are noncontributory and primary in the input.
Depending on the state you are working in, you may also be asked to provide PNC language on worker’s compensation insurance and commercial auto policies.
Adding Primary & Non-Contributory verbiage to your general liability policy should not be underestimated.
To make this idea more clear, we will divide each component separately.
Primary
Primary refers to the precedence to which insurance coverage will respond in the event of a claim.
In the event that your client mandates the inclusion of primary and non-contributory language as part of an additional insured agreement, your insurance must be primary (respond first) and non-contributory.
Non-Contributory
Non-contributory implies that your insurance will not attempt to recover damages from your client’s insurance in the event of a claim.
In the event that there is a default in the relationship, the “Contributory” standard serves as the default insurance policy. This means that if both you and the injured party are liable, you both have the right to recover damages from each other’s insurance as well as your own insurance and the insurance of your client.
However, in the same situation, your insurance company will not seek contributions from you, as it offers non-contributory and primary insurance coverage.
Your insurance policy bears the full impact of the claim (and the consequences of insurance premium hikes).
The Rub
Including Primary and Non-contributory language expands the safeguards for your client and places greater accountability on you and your insurance provider.
The possible consequences of the Primary & Non-Contributory endorsement make monitoring Certificates of Insurance exceptionally significant.
Do you possess a documented Conflict of Interest (COI) procedure and monitoring system?
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