Primary and noncontributory wording in contracts

Primary and noncontributory wording says your liability policy pays first for the party your contract protects, and that your insurer will not ask that party's own insurance to chip in. In ISO terms, it is the CG 20 01 endorsement, Primary and Noncontributory, Other Insurance Condition. It is a separate endorsement from additional insured status: one decides who is covered, the other decides whose policy responds first.

Two ideas in one phrase

Primary means the policy pays up to its limit before any other policy on the loss is touched. Noncontributory means the policy will not seek contribution from other insurance, which is the claim one insurer makes against another when two policies cover the same loss. Together they keep a loss on the policy of the party whose work caused it, so the owner or general contractor's own carrier, retention and loss history stay out of it. Who is protected is a separate question; see additional insured endorsements explained.

The default rule in the CGL

The ISO CGL form (CG 00 01, 04 13 edition) has an Other Insurance condition in Section IV. In summary:

• The policy is primary unless the excess provisions apply. If another primary policy also applies, the insurers share.
• The policy is excess over certain other insurance. The list includes builders risk and installation coverage on your work and fire coverage on premises you rent. It also includes, in the 04 13 edition, any other primary insurance available to you for premises, operations or products-completed operations liability for which you have been added as an additional insured.
• When the policy is excess, the insurer has no duty to defend if another insurer has that duty.
• When policies share, the method is equal shares if every policy allows it, and otherwise by limits, in proportion to each policy's limit.

That default looks helpful, and sometimes it is. A general contractor on an ISO form that is an additional insured on the subcontractor's policy may find its own CGL already excess. But the default depends on both policies using similar wording. Carriers' proprietary forms often differ, an umbrella may behave differently, and the subcontractor's insurer may take the position that the contractor's policy shares. Contracts demand the endorsement so the answer does not rest on which forms happen to be in play.

What CG 20 01 04 13 says

A public copy of the 04 13 edition adds a paragraph to the Other Insurance condition that overrides any contrary provision. It makes the insured's insurance primary to, and not seeking contribution from, any other insurance available to an additional insured under your policy, provided that:

1. the additional insured is a named insured under the other insurance, and
2. you have agreed in writing in a contract or agreement that your insurance would be primary and would not seek contribution.

Those two conditions do real work.

• A written contract is required. Without a signed agreement that asks for it, the endorsement gives the other party nothing. The ISO form is a blanket one: no schedule is needed, because the contract is the trigger.
• The additional insured must be a named insured elsewhere. The form defeats contribution from the policies the additional insured buys for itself, such as its own CGL. It does not reach every other source of recovery.
• Editions differ. Later editions exist, and carriers use proprietary versions. Read the edition printed on the endorsement, not just the form number.

What it does not do

• It does not add additional insured status. The policy must also carry CG 20 10, CG 20 37 or another additional insured form for the party to be an insured at all.
• It does not enlarge the limits. The additional insured still shares your limit.
• It does not widen the scope of the additional insured coverage. If the additional insured form covers liability only when your work caused the injury, primary wording does not change that.
• It does not waive subrogation. See waiver of subrogation: what it is and when contracts require it.
• It does not bind the insurer to a promise you did not make in the contract. If the contract never asked for primary and noncontributory wording, the condition's second requirement fails.

Other policies

• Umbrella and excess. Contracts often require primary and noncontributory treatment to apply to the umbrella also. Umbrellas usually carry their own other-insurance language, so ask your broker whether the policy has wording that matches the contract. Whether excess layers stack above the contractor's primary and the contractor's own excess is a technical question; see commercial umbrella insurance.
• Commercial auto. Under the ISO business auto form, a covered auto you own is generally primary while an auto you do not own is generally excess over other collectible insurance. A contract that wants primary coverage for hired or non-owned autos needs endorsement wording. See Hired and non-owned auto (HNOA) coverage: what it covers and who needs it.
• Workers' compensation. Comp is statutory, and an employer's own policy responds to its employees' injuries, so primary and noncontributory language is not the tool for comp. Waivers and alternate-employer arrangements are separate subjects.
• Property. Leases and construction contracts sometimes require the tenant's or contractor's property or builders risk policy to be primary for specified property. Read the property clauses separately from the liability ones.

Reading a typical clause

Contractor's commercial general liability and umbrella policies shall be primary and noncontributory with respect to any insurance or self-insurance maintained by Owner.

• "Commercial general liability and umbrella" names the policies. Note whether the clause also covers auto.
• "Primary and noncontributory" is the ask. For the CGL, CG 20 01 or an equivalent answers it.
• "With respect to" limits the protection to the other party's own coverage.
• "Insurance or self-insurance maintained by Owner" takes in the Owner's insurance and its self-insured retention programs. Check that your wording does too, because some endorsements mention only other insurance.
• "Shall" is a covenant. If your policy is silent, you are in breach even if no loss occurs.

A worked example (hypothetical)

Say a subcontractor's employee falls through a roof opening and sues the general contractor, who is an additional insured on the subcontractor's CGL. The subcontractor's CGL has a $1 million limit, and the general contractor has its own $1 million CGL. The settlement is $400,000.

• If both policies are written so that each is primary, the insurers may share, equally or by limits. The general contractor's carrier pays part, the claim shows on the general contractor's loss history, and it may face a deductible or retention.
• If the subcontractor's policy has CG 20 01 and the subcontract required it, the subcontractor's insurer pays the $400,000 within its limit, subject to the additional insured wording, and does not look to the general contractor's policy for a contribution.

The real result depends on each policy's actual forms, the state's rules and how the claim is characterized, so use this as a pattern only.

Getting it right

1. Quote the contract language to your broker and ask for the specific endorsement or equivalent.
2. Confirm that the contract is written and signed, since the ISO form is triggered by it.
3. Check that the endorsement reaches the policies the contract names, including any umbrella.
4. Ask for the endorsement pages, not just a certificate. See certificates of insurance: what they prove and what they do not.
5. Align it with the other asks in the insurance section. how to review the insurance requirements in a contract shows how to review them together, and managing subcontractor insurance and certificates covers passing them down.

Key takeaways

• Primary means your policy pays first; noncontributory means it will not seek help from the other party's insurance.
• CG 20 01 applies when you agreed in writing to the arrangement and the other party is a named insured on its own coverage.
• The CGL's default Other Insurance rules sometimes produce the same result, but they depend on wording in both policies.
• Primary and noncontributory wording is not additional insured status, does not raise limits and does not waive subrogation.
• Make the umbrella, auto and property clauses match the contract; each has its own wording.