1. Primary Non Contributory Endorsement Vs Waiver Of Subrogation

More Primary Non Contributory Endorsement Isotonic images. Primary and Noncontributory. In those cases in which the damages have far exceeded primary insurance. Waiver of subrogation endorsement is almost certainly.

Recently I wrote about the Primary & Non-Contributory Wording Endorsement. It was a nice article, and all true.

What I want to tell you today is that the Primary & Non-Contributory Wording endorsement is worthless. It doesn’t mean you won’t ever have to have one, but rest assured, it is worthless. Why is it worthless? In short: because it doesn’t provide any additional coverage. It merely re-states what your General Liability policy already says.

It adds nothing. You don’t need it because you already have it built in. Let me clarify. As mentioned in the blog linked above, the purpose of a Primary & Non-Contributory wording endorsement is to make sure that when you list an entity on your General Liability policy as an Additional Insured with the purpose of covering that entity for incidents in which that entity can be held vicariously liable for your actions, your insurance policy will be primary – that is, be the first one to pay for the loss – and not seek contribution from that entity’s insurance – that is, not try to get that entity’s insurance to also pay a portion of the loss. I know, thus far, the Primary & Non-Contributory endorsement sounds pretty great, like a noble and important thing to require someone to have. But as mentioned, the Primary and Non-Contributory Wording is already built in to the policy that the vast majority of insurance companies use.

Take a look below. This is an excerpt from the CG 00 01 04 13, the Commercial General Liability policy created by the Insurance Services Office (ISO). The vast majority of insurance companies use ISO’s policy as their own. Those that don’t use the ISO version, usually borrow heavily from ISO. What that excerpt says is that this insurance policy is primary for any Additional Insured (4.a.) and is excess to any policy that you are listed on as an Additional Insured (4.b.(b)).

Once it’s established that this insurance policy is the first to pay, then it follows that it can’t seek contribution from any other insurance policy, rendering a Primary & Non-Contributory Wording endorsement unnecessary. So why does this requirement for Primary & Non-Contributory Wording endorsements persist? Simply put, those who write contracts for others (lawyers) that include insurance clauses aren’t educated on insurance. If they were, they would know that ISO has included Primary & Non-Contributory wording in their policies since 1997 which would mean – as if it needs to be stated again – the need for a separate Primary & Non-Contributory Wording endorsement is unnecessary. Of course, ISO knows that compliance personnel for the entities that are requiring Primary & Non-Contributory endorsements from others aren’t always up to date on their insurance knowledge, so just to keep the peace they’ve penned the Primary & Non-Contributory Wording endorsement that merely re-states the policy wording.

And since insurance companies know that there’s still a heavy demand for Primary & Non-Contributory Wording endorsements, they sell them, usually for a nice little sum, even though they know they’re worthless. And so, vendors, subcontractors, commercial tenants, and all other businesses entering into contracts will continue to pay the cost for these worthless endorsements just as they have since 1997.

Have you – a business owner – ever had to get a Primary and Non-Contributory Wording endorsement on your general liability policy? Have you – a business owner – ever wondered what Primary and Non-Contributory Wording actually means? Primary and Non-Contributory Wording is one of the least understood insurance concepts in existence. I know because I frequently talk to contract givers – those who require others to have the Primary and Non-Contributory Wording endorsements – and they often have no idea what they are, although they absolutely require them.

Before I explain what they are, here are a couple of things to know: First, you will only need a Primary and Non-Contributory Wording endorsement from the entity that has also required you to add them as an Additional Insured on your policy. (If you want to know what an Additional Insured endorsement is, check out my previous blog post ). Second, insurance companies can charge you for them. Pricing can be around $100 per year per Primary and Non-Contributory Wording endorsement. But sometimes, if you’re lucky, they’re free.

So, what is this Primary and Non-Contributory Wording thing? It is an endorsement that makes your insurance policy the first one to pay and prohibits your insurance policy from seeking contribution from another insurance policy. That begs the question: what is contribution? It is simply sharing in the payment of a claim. Let’s say that you – a business owner – have a home based business selling gourmet artisan alcohol-infused marshmallows online.

(Yes, these really exist and they’re incredible – see ). You have a business owner’s policy that covers your inventory. And of course, you have a homeowners policy on your home. One day while making s’mores (for a little R&D, of course), your bonfire gets out of control and burns your home to the ground, including your entire marshmallow inventory. You file a claim on your business owner’s policy to recover the loss.

The claims adjuster is ready to pay for the loss, but just before writing the check, asks a curious question: “Do you have a homeowners policy?” “Yes, of course,” you say. “Thank you,” says the claims adjuster, as he and his calculator slither out the door. Why did the claims adjuster ask this question? Because he knows that homeowners policies often cover limited amounts of business personal property. If this is true, then both policies have a duty to pay, and the business owners claims adjuster will see to it that both policies will their fair share. That is contribution. The Primary and Non-Contributory Wording endorsement is meant to prevent contribution from happening.

Primary Non Contributory Endorsement Vs Waiver Of Subrogation

The Primary & Non-Contributory Wording endorsement says “this insurance will be the first one to pay (primary), and will not seek contribution from any other source (non-contributory).” Lastly, the reason the Primary and Non-Contributory Wording endorsement accompanies an Additional Insured endorsement is because the entity that requires you to have them both knows that your insurance company knows that it has its own insurance. And if your insurance company pays a claim on that entity’s behalf, that entity believes your insurance company is likely to seek contribution from that entity’s insurance, defeating the purpose of the additional insured endorsement.

And that is it. Since 1997 there have been reasons to eliminate the Primary and Non-Contributory Wording endorsement altogether, but that is a different post for a different day.