Owners and contractors typically who require firms they hire to have liability insurance, and name them as additional insureds in case they ever get sued for what the hired firm did wrong, but they can often get a rude awakening when the insurer says it won't cover the claim. The recent decision in Walsh Construction Company v. Zurich American Insurance Co., 73 N.E. 3d 957 (Ind. App. 2017) is a good example of how things can go awry. Walsh hired Roadsafe as a subcontractor in a highway project. Walsh was sued by a driver who claimed he was injured by an improper traffic pattern. Walsh turned to Roadsafe to defend the suit, as the subcontract required, and to Zurich to defend the suit because Walsh required Roadsafe to name Walsh as an additional insured on its liability insurance. Roadsafe, however, had a $500,000 Self-Insured Retention (SIR) on its Zurich policy, so Zurich told Walsh that it would not defend or pay any claims until that $500,000 was first satisfied. The court agreed that Walsh, as an additional insured, couldn't have any greater rights against Zurich than Roadsafe, the primary insured.

This is another example of why businesses should take the time to check out the insurance coverage for the companies they hire. Additional insureds often get caught up short when they learn that the form of Additional Insured Endorsement that the primary insured purchased didn't cover a particular claim (a common reason is that the claim came in after the contract work was completed), or when they learn that the policy had been cancelled without any notice even though they had a Notice of Cancellation requirement in the contract (usually because the actual policy didn't contain such an endorsement).

Of course, none of this matters unless a loss occurs and a business wants it covered. But since businesses can't prevent or predict when they will get sued, and they are paying for the insurance, it makes sense for them to take some steps to assure that you are getting what they are paying for.