Understanding General Liability Insurance Endorsements

Insurance endorsements play a crucial role in modifying the coverage of an insurance policy. These endorsements are additional provisions that can be added to an insurance policy to provide extra coverage or modify existing coverage. They are important because they allow policyholders to tailor their coverage to better suit their needs and protect against specific risks.

An insurance endorsement is a written document that is added to an insurance policy. It can add, delete, or modify coverage, terms, or conditions within the policy. Endorsements are typically requested by the policyholder or required by the insurance company to address specific needs or risks. They essentially act as amendments to the original insurance contract.

There are different types of insurance endorsements, including standard and non-standard. Standard endorsements are commonly available and are often used to adjust coverage limits or add additional insureds. Non-standard endorsements, on the other hand, are typically customized to address unique risks that are not covered under standard policies.

What’s the Definition of an Insurance Endorsement?

An insurance endorsement is a legally binding change to an initial insurance policy that modifies coverage. It can add, delete, or exclude specific provisions, terms, or conditions within the policy, allowing the policyholder to customize their coverage according to their specific needs or budget.

When you add an endorsement to an insurance policy, it becomes an integral part of the contract and carries the same legal weight as the original policy. This means that any changes made through an endorsement are binding for both the insurance company and the policyholder.

Why Are Insurance Endorsements Important?

Insurance endorsements are a vital aspect of customizing insurance policies to meet individual needs. They offer policyholders the flexibility to add or remove coverage, modify coverage terms, make administrative edits, and clarify policy language.

By allowing policyholders to customize their policies, endorsements ensure that coverage aligns with specific risks and circumstances. For instance, a business owner may require an endorsement to extend coverage for a particular liability, such as a specific project.

Endorsements also enable policyholders to modify coverage terms to better suit their requirements. These modifications can involve increasing or decreasing policy limits, adjusting deductible amounts, or extending coverage for specific periods, such as ongoing operations on a construction project.

Furthermore, endorsements can make admin edits to policies, such as updating contact information, adding additional insureds, or changing the named insured. They can also clarify policy language to eliminate any ambiguity or confusion.

How Do Insurance Policy Endorsements Work?

Insurance policy endorsements work by allowing policyholders to modify the existing coverage of their insurance policies. These endorsements serve the purpose of either removing, adding, modifying, or clarifying coverage to better align with the specific needs and circumstances of the policyholder.

You can add endorsements to a policy at the time of purchase or at any point during the coverage period. They offer the flexibility to tailor insurance coverage to individual requirements.

Additionally, endorsements can clarify policy language to eliminate any ambiguity or confusion. They can also modify coverage limits, deductibles, and terms, such as extending coverage for a specific period, such as ongoing operations on a construction project.

How Do Small Business Owners Use Insurance Endorsements?

Small business owners often utilize insurance endorsements to enhance their insurance policies and address specific needs. These endorsements allow them to add additional insurance protection, extend coverage in certain ways, and include different coverage terms. By doing so, they can address coverage gaps and protect against specific risks that may be unique to their business.

Insurance endorsements are crucial for small business owners as they help fill coverage gaps. Business owners may face risks that a standard insurance policy don’t fully cover. By adding endorsements, they can tailor their coverage to address these specific risks. For example, a small business owner may add an endorsement for cyber liability coverage to protect against data breaches or an endorsement for business interruption coverage to safeguard against income loss due to a covered event. You can add various types of insurance endorsements to policies. Standard endorsements are commonly available and widely used, providing additional coverage options such as extended liability coverage or increased coverage limits. Non-standard endorsements, on the other hand, address unique risks not covered by standard policies. Business owners can add voluntary endorsements based on the business owner’s discretion. On the other hand, the law or specific industry regulations require mandatory endorsements.

Types of Endorsements

Insurance endorsements come in various forms to address specific coverage needs of business owners. Standard endorsements provide additional coverage options and increased limits of liability, allowing owners to customize their policies to better suit their unique risks. These endorsements are widely available and commonly used by business owners. On the other hand, non-standard endorsements tailor policies to address risks not typically covered under standard policies, offering specialized coverage for specific industries or situations.

Voluntary endorsements, as the name suggests, are optional. Business owners can add them based on the business owner’s discretion to enhance their coverage. Alternatively, laws or regulations require mandatory endorsements to ensure compliance with legal or contractual obligations. Understanding the different types of endorsements allows business owners to select the right additions to their insurance policies, filling any coverage gaps and mitigating potential risks.

Occurrence Made Form

The occurrence made form is what identifies the coverage basis of general liability policies. With an occurrence made policy, claims can be filed during the policy period and after the policy expires. There is a certain time to report a claim based on the policy.

One key feature of the occurrence made form is that it allows for coverage of claims that business owners may not discover or report until years after the actual occurrence. This is beneficial for businesses that may face long-tail liability claims, such as construction companies or healthcare providers. For example, if a construction contractor completes a project and years later, a defect in the workmanship causes property damage, the occurrence made form covers the claim even if business owners report it several years after the policy period.

Another benefit of the occurrence made form is that it provides ongoing coverage for claims that arise from ongoing operations. If a business changes insurers or cancels its policy, it would still have protection against claims during the policy period.

Claims Made Form

The claims made form is an alternative to the occurrence made form in general liability insurance policies. While the occurrence made form covers claims that occur during the policy period, regardless of when business owners report them, the claims made form provides coverage for claims reported during the policy period, regardless of when they occurred. Some claims made policies give some extension to report a claim – often 60 or 90 days.

One important feature of the claims made form is the retroactive date. This is the date when the coverage starts. It is crucial because it determines whether or not insurers will cover a claim. If a claim arises from an incident that occurred before the retroactive date, insurers won’t cover it. It is essential for businesses to carefully review and understand the retroactive date to avoid any coverage gaps.

Another key feature of the claims made form is the extended reporting period, also known as the “tail coverage.” This is an additional period of time after the policy expires, during which you can still report claims for coverage. Insurers typically offer the extended reporting period as an endorsement. You must carefully consider it to ensure that coverage for claims occurring during the policy period continues after it ended.

What Are Some Common Examples of Insurance Endorsements?

Not all general liability policies include all the required endorsements. Some carriers include them as a blanket of options within the policy while others offer then on an individual basis. Some common examples of insurance endorsements frequently used by small business owners include:

1. Ongoing Operation Endorsement (CG20 10): Covers liability for risks associated with a contractor’s ongoing work on premises until work is either completed or ceases.

2. Complete Operation Endorsement (CG 20 37): Protects against liabilities that arise from the contractor’s finished product once operations cease.

3. Vendors Endorsement (CG 20 15): Adds vendors as additional insured to the policy to extend coverage to them for their role in daily operations.

4. Waiver of Subrogation Endorsement: Says that clients or subcontractors are responsible for their own liabilities and parties will not be held responsible for loss. Clients may want your business to waive your right of subrogation so that they will not be held liable for damages if they are partially responsible for a loss. When you waive your right of subrogation, your business (and insurance company) are prevented from seeking a share of any damages paid.

5. Primary Non-Contributory Endorsement: Typically used with additional insured, this endorsement makes a specific insurance policy the primary policy and will not contribute first. The policy must pay in advance of other relevant policies (the primary) and not require any contribution from additional policies which may claim to be primary (non-contributory).

6. Per Project Endorsement: Lists each project by name so it has coverage by the insurance policy. Non-listed projects do not have coverage. When the endorsement is added, the policy limits directly apply to the scheduled project rather than on the entire policy.

7. 30 Days Notice of Cancellation Endorsement: Requires the insurance company to provide at least 30 days written notice of cancellation.

8. Contractual Liability Endorsement: Protects business owners from claims arising from contracts. These can be a blanket endorsement or a per-project basis.

9. Cross Suite Liability Endorsement (Cross Liability Exclusion): Excludes coverage from one named insured against another named insured.

10. Explosion Collapse Underground Exclusion XLU Endorsement: Rare coverage that excludes underground exclusions including explosion and collapse. If you want this coverage, you can get an endorsement if available by the carrier.

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Sam Meenasian
Sam Meenasian
Sam Meenasian is the Operations Director of USA Business Insurance

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