There is a new and dangerous trend in Illinois that should have general contractors concerned — and re-evaluating their subcontracts. In 2014 and 2015, the Illinois appellate court has twice ruled that a general contractor was not entitled to coverage as an additional insured on a subcontractor’s Commercial General Liability (CGL) policy because the language of the subcontract did not clearly require the subcontractor to name the general contractor as an additional insured to the policy.

No Additional Insured Language? No Luck

A recent article “‘Additional Insured’: Are You Really Covered?” discussed additional insured provisions in general contracts and how to ensure you are covered. In that article, we discussed the recent case of Old Republic Insurance Co. v. Gilbane Building Co., in which Gilbane’s subcontract with Air Comfort required Air Comfort to list Gilbane and the property owner as additional insureds on its certificate of insurance. The subcontract, however, did not require that Gilbane be added as an additional insured to the policy. As such, Gilbane and the owner were not additional insureds under Air Comfort’s CGL policy.

Since then, the appellate court has again ruled against additional insured status for a general contractor. In West Bend Mutual Insurance Co. v. Athens Construction Co., the court similarly determined that the subcontract did not require the subcontractor, R. Carrozza Plumbing, to name Athens as an additional insured in the policy, but rather, only required Carrozza to state that Athens was an additional insured on the certificate of insurance. And where the certificate refers to the policy and disclaims any coverage other than that contained in the policy itself, the policy governs the extent and terms of the coverage.

In an attempt to circumnavigate the issue with the certificate of insurance, Athens made a creative but ultimately unsuccessful secondary argument for coverage. Athens argued that its prime contract and general conditions with the owner were incorporated into its subcontract with Carrozza — a classic flow-down provision –— and required Carrozza to name it and the owner as additional insureds. The court concurred, but only in part. The court agreed that the subcontract incorporated the general conditions of the prime contract, and the court agreed that the prime contract required Athens to procure CGL insurance. But the general conditions of the contracts did not require Athens to procure CGL insurance covering the owner. As such, there was no provision requiring Carrozza to procure CGL insurance for anyone other than itself.

When In Doubt, Spell It Out

The lessons we learn from this case are two-fold. First, you should ensure that your subcontracts (or your general contractor’s subcontracts) unambiguously require the addition of the general contractor and owner as additional insureds on the CGL policy. It is not sufficient to simply require a certificate of insurance with the parties listed.

Second, flow-down provisions incorporating the prime contract and general conditions can be a great tool if utilized correctly. Provisions regarding insurance, indemnity and other responsibilities can be passed on to the subcontractor, but the language needs to be clear as to what is being required. In West Bend, the court took the first step, ruling that Carrozza was required to procure CGL coverage, but the language did not require Carrozza to obtain coverage for others. The court’s statement of the facts, however, doesn’t mean that such statements couldn’t — or shouldn’t — be included in subcontracts.