ALLOCATING EXTRAORDINARY RISK lN LEASES

147 Pages·2012·8.94 MB·English

ALLOCATING EXTRAORDINARY RISK IN LEASES:

Indemnity/insurance/Releases and ExculpationsiGondemnation
[Including a Review af the Risk Managomeni Provisions af the
‘Texas Real Estate Forms Maruals Office Lease)

Prasented by:

WILLIAM H. LOCKE, JR.
Graves, Dougherty, Hearan & Moody
[email protected]

401 Congress Avenue
‘Suite 2200
Austin, Texas 78701-3687
512-460-5796

Stale Bar of Texas
27” ANNUAL ADVANCED REAL ESTATE LAW COURSE
‘June, 2008

San Antonie, Texas

CHAPTER 48
coucaTION:

BOGRAPHICAL INFORVATION

Witham H. Locke, Jr
Graves, Buuyhetty, Fearon & Muy,
‘A Pretessional Corporation
401 Cirgiess Ave, Suite 2200
‘Avsiin, Texas. 78701
512-400-5725,

FAX [phone]
ocke tush can

B.A, The University ef Tecan
41.0. wih Honors. The Unworsity of Texas

PROFESSIONAL ACTIVITIES:
‘ourd Corte in Real Estat Luv: Commercial Restentil un Farm and Ranch
Lite Fellow, lexas Bar Founaation
Falher of Cull of Lue of Stale Ba of Texas 20+ Year Mairtsining Member
Past Sector, Texas Golege of Real Estate attorneys,
Past restart, Corpus Const 3a Association
Pasi Chait an. Zoning and “ienning Go-nission of Gly of Corpus Chis

LAW RELATED PUDLIGATICNS AND IIONORS:
‘Ca-author nf State Bar of Texas publication Texas Foreslos.re Manusl 2" Ea. 2006.

‘Author

Aho,

author

Auto:

Author:

ulnar
‘author.

Slate Bar of Texas, danced Real Estate Law Colrze on “Ins and Outs of Deed of Trust
Foroclosurss- Praca! Tips fr tne Pracnion” (2008),

Slate Bar nf Texas Aivanced Real Eslate Lav Gnu on "Fil Gui fr Due Dilger
{00 income Producing Fropertics” (2000) and “Papcang The Coat From Land Acgustion
a ewsinpmenr’ (2

‘Lalo Bar of Texas, Advanced Real Eslale Dating Course on “Documestion fa ihe To
‘Be-Buut Ofice Condominian” (2035;

Shire Bir uf Taxa, Annual Awaneat: Reo Estate Crating Court anil the Arua
‘Advanced Real Estee Law Course on *RIsk Management’ "Shing of Exnaardiaary
Fiske Contractual Provisions to indemnity, Additional tsurcds, Waiver of Subrowation
‘and Excapacon'

SIA Surnmur School un "Risk Alou i the AIA Genera! Goneltins - An Examination
‘ofthe AIA A207 sn Light af Texan Law’ (2008),

“Tenas Gocioly al CPAS ar “Real Esato Law for GPAs” (2008),

Advanced Real Estate Law Course: Leases |Deptx of Souther Methodist Un versity
fn “Cin Foresure Achons” end al lo Anal Monigago Londing Inst le on “Soteure OF
Tender's Coates! Uneier Nong Fatorsaman bas"

“The Best Layers in Ameuica (esl Estar) (2000 2008),
vyono's vano n Bmerica (1398 - 2008) and vmo's wo in Amer can Law £1985 - 2006).
“Texas Manet, Supt Lawyer - Real Estar (2001-2008),

ACCOMPLISHMENTS: Established the Pal nec Drun Aause Program in Corpus Christin 1973 ard in
‘Auslin in 2900 as programs “elping leens and yeung adults recover rom alcool and drug abuse,
CCance ved of snd participated ix abtanion designations 9° the Corpus Chris Aquacim as the

oftcal
Fics

‘Acuatium of the State of Texas and the Mexie Ate Museum of usin. Texas a5 the
Mexican snd Maxiean Aruriay “ne Am Musoury of Texas: urd cungubiny and

aricipaing in the inglementation a3 chainman of the carpus Christi Zoning) and Plann
CCumnmission ofthe neightoruved zoniny pls procuss forthe city uf Conus Chis.
Ch.45 ALLOCATING EXTRAORDINARY RISK IN LEASES Page i

Table of Gontents

‘THE BASIC PRINCIPLES

Page
INTRODUCTION 1
I INDEMNITY 2
A. Terminology 2
B. Requirements for Enforceability 2
1. Fair Notice. 2
2. Express Negligence. 2
3. Overcoming the Worker's Compensation Bar. 3
4. Corrparative Indemnity 3
5. Strict Ligsilty 3
IIL INSURANCE. 3
A. Contractually Assured Lisolliy Insurance: Coverage fer the
Protecting Party 8
4. Exception to an Exclusion 2
2. Natred Insured Not Insured fo~ all Cont-actually Assumed
Liabilities - No Coverage for Indemnified Person's Sale
Negligerce. 4
B. Additional Insurance: Coverage for the Protected Party. 4
1. Purpose. 4
2 Automatic Coverage o” ky Endorsement s
3. Endorsements: ISO or Manuscripled ors. 5
4. Covered Matters, 5
a. Ongoing Operations. 5
b. — Complated Overations. 5
& Premises. 5
5. Covered Liasiltise, 8
3. Negligerce. 8
(1) Adgitional Insurect's Vicarious Liability for
Narred Insured's Negligence. 8
(2) Adciticnal Insurects Own Nagligance. B
b. Interpretation af Adkitional Insurance Covenants B

(1) Express Negligence Test Not Agplicable ta
Page i

Ch. 48 ALLOCATING EXTRAORDINARY RISK IN LEASES

Insurance Covenant 8
(2) 2004 Revision to ISO Fors 8
Manuscript Additional insured Endorsement to Limit
Coverage fa Indemnified | iatiltias 2
6. Ligbilty tor Fallure to List Otner Party as Additional Ingured 9
7. Caveat 40
©. Prolecled Parly’s “Other Insurance” 10
1. Generally All Policies Are *Primary’ and *Contibutory”
Unless Amended, 10
2. Endorsing Named Insuredts Policy to be Prirrary Net the
Solutien. "
a. Primary vs. Sole Contributing "
b. Endorsing the Additional Insurec's Policy to Be
Faces Coverage “"
Iv. RELEASES AND EXCULPANONS u
V. CONDEMNATION 12
‘A. Allocalion in the Event Lease is Silent 12
1. Value of Tenant's Interest. 12
a. Loss af Tonant's “Leasehold Advantage" 12
b. No Award Allocated to Tenant for He Last Busingse or
Personal Prapety 12
& — Movng Expenses Compensable 12
d. Tenants Improvements and Fixtures Corrpensable.... 13
2 Interplay with Other I ease Clauses 13
a. Penmited Use Clauses 13
b. Renewal Clauses. 18
3. Effect 1 Tevanl's Obligation lo Pay Rent, 13
a. Rent Abated 07 Total Condemnation, 13
b. Rent Not Proportionally Abated if a Po-tion of Loasad
Premises Taken 1B
B. Contractual Apportionment of Award 14
1. Value of Tenant's Use is Less than Highest and Best Use at
Time of Taking, 14
2 Value of Tanant’s Improvements Noi Fully Amarlized at
lime ot Laking, 14
©. Contractual Allccation cf Award te Landlord 14
1. "Tetinination-on-Condeinaation” Clauses. 16
a. Automatic, Optional and Mixed 18
(1) Automatic termination clauses. 18

(2) Optional termination clause. 15
Ch.45 ALLOCATING EXTRAORDINARY RISK IN LEASES Page i
(3) Mixed termination clause 18
b. Coupling with a clause for rent abatement or partial
fet adjustmert or partial rant aoatement 7
© Coupled with a Disclaimer of Claim ar Assigamant af
Glam Clause. uv
d. "Ownership of lrprovements at End of Lease Term"
Clauses. 18
2. Types of Allocation Clauses. 18
a. Allocation of Sot Amount to Tenant or Establiscing a
Mechod of Valuation af Tanant's Interest in Tenant's
Improvements: 18
b. Assign Rights to In-pravement Value to Landiard 18
Permit Remova of Improvernants at Cnd of Lease
‘Term due fa Candernation 18
d. State Landlord Owns Leasehold Irproverents at
End of Lease Term 18
Beller to Revognice Tenant's Righl lo Improvement
Value a5 Opposed to Being Silent 18
3. Protesting Tenant's Lender. 18
HYPOTHETICAL 20
I. FORMS. 28
AI, Texas Real Estate Forme Manual Gh, 11 Leases - Mlancal's Commentary
‘on Risk Alloeations. a
AZ. Fens Wanual Form 11-2 Office Lease, 26
AS. Foams Manual Form 41-35 Tenant rp-ovements Rider to Lease or Work
Leter at
44, Fears Wanual Form 11-34 Ineurance Addendum to Lease 2
AS. Supplament to ins.ranea Adeendum to Lease 26,12
B. Office Lease - Tenant's Certificates of Liabilly and Property Insurance... 46, 49
6. Office Lease - Landlord's Certticates of Lisilly and Property Insurance... 53, 85
D. —Terant’s Contractor's Caificates of Liability and Property surance. 59
Endorsement to lenants Insurance Holey Making Landlord! Adehtonal
Insured: GGL Endoreement - CG 20°" Of 86 Addiional Insured
Managers or Lessors o* Premises er
T. Cdorsement fe Landlord's Insuranoe Meking Tenant Adltional Insured:
GG_ Endorsement - CG 20 26 07 04 Addtional Insured-Designated
Pargo1 or Organization: on
G. Endorsement to Contracer's Insurance Poly Making Tenant and

Landlord Adektinal Insured

CBL Endorsement - CG 20 10 os 04
Page iv (Ch. 48 ALLOCATING EXTRAORDINARY RISK IN LEASES

Additonal Insured — Oumers. Lessees or Contractors — Scheduled

Perso1 or Organizatin. 7
H. CG_Waiver of Suorogation Erdorse nent - C% 24.04 19 92
{Wa ver of Transfer of Rights or Recavery Against Others To Us, 78
Endorsement to Tenant's Business Aulo Policy Makng Landlord
‘Adiftonal Insured: TE 99 018 (BAP Texas) Acttional Insured 80
J. Endorsement to Tenan’s Business Auto Poly Walving Insurer's

‘Subrogation Rights as te Claims Against | andior TF 20 48a (RAP
‘Texas) Changes In Trans‘ar OF Rights Df Racovery Against Others To Js

[Waiver Of Subrogaticr) 82
K. Endorsement to Tanant’s Workers Compensation Policy Waiving
Insurer's Subrogation Rights As to Claims Against Landlord: WC 42 03
(04 & Workers Compensation And Emplayers Liability Insuranca Policy. a4

DETAILED ANALYSES OF THE BASIC PRINCIPLES

FOOTNOTES (Sesarate Table of Contents) 80
Ch.45 ALLOCATING EXTRAORDINARY RISK IN LEASES

| INTRODUCTION

Fisk alocaticn provisions sre contained in al
contrasts. They are used i1 an atlernpl to assure
the intended economic objectves of the "deal. The
‘mast comaren methods by which risk is shifted in a
contrast are by the use of representaions are
‘warranties, insuranoe covenants. express
assuirgtion of liabilias, indemnity, excuipatian,
Felease and limitation af ably provisions

Fveny provision a a contact is either restating the
rule that would be supplied ty the cour in the
absarca of the pravisian ors axpresaly shfing a
fiskfor one party tothe ache.

‘This Aricle concems lease provi ens dealing wit
the shiting cf certain ‘exracrdinary” risks trem ane
pary i the other inching ircernnities
‘exollpations and releases and supporting liabliy
insurance, This Aricle does not acres casually
loss at proparty oF property insurance, which top
's being addressed by an Arte atts sernar

tndemnity' ‘is, “| agree te be fable for your
wrongs. Indemnity is ashing of tha isk of 3 lass
from a lable persan fo anaiher. However, many
times serieners use ar Indermily provision wher
they do not know whether the Indemrified Person is
2 potential lisble person. Sometimes. ar
indermity Frovisior is no more than 2 restatement
of existing duties, "I wil indermify you for-my
‘wrongs "ou wil indemnity me for your wrongs.

“<Bxeupation’ |, “1 ar not liable to you for my
wrongs.” An exculsa:ory provision is dasignod te
exclude, as botwsen tha parties 10 a contract,
‘erfsin dasignatad cuties abiitie cr costs due to
the ocourrenas or non-cocurrance of events

*Rtesse” “lis, “You ara no able to me for your
wrongs A release is an agreement in which one
party agrees fo hold the ofver wihout responsibilty
for demage or other billy arising out of the
transaction involved

Each contracting party's rskrelated goals are (1:0
‘gezopt 70 ma’e fick than i can reasonably bea’ or
insure and (210 transfer the balance ofthe rik :0
the ethar party. he following factors aro. nvolved
in tha usimata determination as to Fow much ris =
patty raca vas or tranafars: (A}whieh party isin te
bast positon ta canal the extent of tha aca. rence
‘of the risk?; {B) does cne party have specialized
kngaledge of the type of risks mest likely © o2cur
‘and how to prevent or identity them? (G) custom
and practice in the particular industy {for example.

Paget

sellers 70 buy2's: landlords to tenants; owners to
Santractars; conractors fo subcontractors) 1D) he
aargaiing srengih of the respective parties and
{E) statutory and common law public palcies.

Tha Article exa-nines how iabilty ing rance can be
“ed to protect an indemnifying. paty through
average for lis contractualy assu"ed labiltes
‘and a protect an indemnifad pary by bang an
addtional sured on tha indammifying party's
‘ability inauranes, Generally, tha indennitying
arty Is reqiirad by the indarmified party ta cary
Eammercial general iahlly CGE). insurance
‘iaming tha indemniiad parly as zn adlional
nested on the nlernifying partys CL poling. In
such c2se, the indemnifying pany is the "named
Insuret ‘and the indemnlied party is the
‘additions? insured" In this. arte the
ndemniying pary and the named! insurec are
sometimes referred iain hs article as he
‘protecting party’ and the indevnnfied party and
the adetional nsurad are semehimas ratered fo 28
Ihe ‘protected party." Insurance is also a form of
dems. Rowever, lexae cours on publi paley
grounds sonsinie the ime “arisng 22 af"
Indernnity tiggarirg language used ir bath “ypes af
ndernnityabiclly agenst overage of an
ndemnified party's negligence by a contract and
sroadly in favor of coverage of an additonal
nsured's negligence in additional insured
andoreerments, issued pursuant to the same
‘cantract.'® 1" Indamnity agreements are sfictly
‘canstued in ‘avor ef the indemn fying pay.

Tha mest canwnen method of sick maragament is
through contactual provisions for insurance. The
‘suceass af an anitys appraach to contractual risk
‘ransfer can ba considered succetehul f i meals
the following enters,

+ Risks retained are appropriate ancl
sfordable

+ Risk as an element of the overall
‘transaction and negotiation is ineo-porated at the
onset,

+ Indemnity, insurance, and athor
erticant conditens aro not so ancraus thal centact
egotiations drag an unecassafly de aying the
‘ranzaction or nacassiating tha usa of second-rate
sarvioe providers ta accomplish the contacts
supose,

+ Contractual contitions allocating
“isk ere not so onerous that @ court disallows their
‘operation at fulure point inte.
Page 2

+ Insurance vequirements ere car
using recognized terns that can be interpreted a0:
al Te time the contract is negolated and. n
Possible future deputes,

+ Insurance and other suppor for ste
indernaiyis in place when a loss occurs.

+A thorough insurance manitoring
process keeps che Wranstavee in camplanca wi
the insurance requirements

+The performance of the cantact is
monitored are regulaly evaluated

Grteria_ quoted from CONTRACTUAL _ RISK
TRANSFER Strategies for Contra
Insurance “Provisions “(Internatanal isk
‘Manageme Insitute, re. 2005).

Is Artee contarns 2 dssussian of certain ask
manageinay. gronsions im tre lease toring
contained in the texas Haat Estate Loves Maria!
ff the State Bar of Texas, Accompanying #=th of
these forms is 8 commarery natire the bias (he
protected parly) and a ciscussion of the risk
allocations and the rrethods by which the risk is
allocated. Also, inchided are the insurance
endorsement forms cormmonly referenced in the
‘isk management provisions avd a commentary 85
ta risk coverage and exclusions to coverage
addressed ay these insurance endorsements
Each of these fms has been annotated wih
footnotes identifying relevant cass law are
containing addiional commentary explaining the
Fisks being addrecsed by each form and cartan
‘gens im coverage not addraceex or postibly
inadverently bang micaddeesad,

H.INDEMaTY
A. Terminology

indemnity’ 7 ig. t agree f0 be fable for your
terongs” Indemnity isa siting ofthe fisk of aos
froma liable person to another. Itis ike insurance
between the paries. Someimes, an indemnity
provision ia na more than a ros'stomant cf exiting
dali, "ul inonity you for ayy wetrga, “You
val indernnty ie for your enon"

cy

‘The Texas Supreme Court has imposed csrtan
contrast drafing requirements. in order for
negligent party to shift labiry t another person,

Ch. 48 ALLOCATING EXTRAORDINARY RISK IN LEASES

Tear rarmnrthabace aru onvtendsnrn

1. Fair Notiee

The concept of fair notice was introduced ino
Texas incemnty law in 1963 by the Texas Supreme
Sout in Spence @ Hows Const So. v. Sui OF
Corp. 385 8:N.2d 651 (Tex. 1963}. The far notice
‘equirement focuses on the appearance and
Sacement of tha p'osision as opposed fo is
‘ortani” “he supreme caurt in Spence reasoned
that

{he obvinus pumpons of this rule is to
event injustioe & coniracting party
should be upon fr motice thal under hs
agreertent and torough no fault of his awn,
‘lage and ru nous awva"d of damages ay
32 assessed against him solely by reason
‘of negigence attributable 10 the opposte
‘contracting party. ti at B64

2 Express Negligence.

In 18/ the eras Supreme Cour expressing
frus:raian with the virting syle and c-aft of Taxes

myare in Ethy! Corp. v Oanie! Const, Co. 728
5W.2d 708, 707 (Tex. 1587) adopted the "axpress
‘egigence” requirement. “In Ethyl the court
observed

‘As we have moved closer to the express
‘egigence doctine, the sctiveners of
ndemnnity agreements have devised novel
says of tfing provisions whicn fall to
expressly sto the tive inert of those
‘revisions. Tha intent of the eerivanors sto
rdemify the indamnitae for its negligence,
yal ba just ambiguous enaigh fo cancaal
{hot rua intent fram tha inda-nitor. Tha
wee. has agen a plathora of lawsuits to
sonstrue those ambiguous contrasts. "We
‘old the beter policy is to cul througn the
amnbiguity af those provisions and aciopt the
‘express negligence doatrne. The express
‘egigence test replaced the ‘clear and
anequivocal’ test.

The xpress nealigonce roqaircuremt is a rule of
contract interprotation are thercfere is ta be
‘termined by the court as a matter of law. Fisk
Electric Ca, v, Constructors & Associates, In, 825
SW.2d 813, 814 (Tax. Tea) ha indemnity must
{zxpressly alata that i indemnifias the incemn fied
2etson fer lisilles caused in whole or in par by its
‘egigence and not leave it to inference. For
stance, "xl indemnity y for al loss arising out of
the acts or omissions afy except for loss caused by
Ch.45 ALLOCATING EXTRAORDINARY RISK IN LEASES

the gross negligence or wilful misconduct of y* ill
not be enforced ta indemnity y for loss caused by
is regigence.

3. Qvereoming the Worker's Compensation
Bar

Unless trere is an enforceable written indemnity
covering an emplayar's negigance, a landlord,
tenant, er@ cantractar san find itsaff fable ta en
amplayar's injurad eima cyaa, ret anly for its own
patton af the negligaly anusad injury tat alsa for
{he proportionate pa attibiable ta the employers
negligence thot the ability fo elaim beck against
the employer for contibulton. Tas. Workers!
‘Cempensation Act bars contribution actions by ire
Parties unless the emplayer has executed before
the injury a writen indemn ty agreement for injuries
ta its employees arising out of the employers
Negligence. Texas Workers’ Compensaten Act,

Tesyipee® Onoc An. § 417-004 Vernon 1886).

4. Comparative Indemnity

‘Tha Texas Suprarne Court in Ethy! faund that the
fallowing indemnity provision nat protect =n
indemnified’ party ether “or ts negligence or the
indern fying party nagligence for ineies causec te
the indemnfying party's employes:

Contactor (Daniel) shall denny and
hold Owner (Ey) harmless against ary
logs of damage 1 pe-tors or property as a
rosult of operations growing oLt of the
performance ofthis contract and caused by
tho negligence or earclossness af
Contactor, Cantracta"s amplayaes,
subcartractars and agents er licensees.

12. a1 108, 11 ne court termed ths claim aa one
{or “comparative indemnity The court Feld that
the indemnity provision dil not meat the express
nagligence tex! inthis respect. “he cout stated

Indemntees seeking indemnity for the
consequences af their own negigence
‘which proximately causes injuy jortly ere
concurenly with the indemnitor's
negligence ust also meet the express
negligence test .. Paties may contract for
comparative indemnity so long as. they
comply with tha express negligence
doctrine eet out heen

Pages

5. Stet Liability

In *99¢ the Texas Suprene Court in Houston
Lighting & Power Co. v. Atchison. Topeka, & Santa
Fe Raityay Co, 881 SW 2d 455 (Tex 1994)
expanded. the axprese negligence doctrine ta
“equire indermniy’ agreements imending to cover a
croteted pary/s stil laaliy expressly state
‘hat eovers such atric ably, 1"

INSURANCE

There are two insurance “ethods ta effectuate
votection: (1) cirecty. either by purchas ng a CGL
‘aliey raming the protected pany as the named
nsured ar by the protecting party sausing is insurer
fo fst tha protected party a8 an additonal insured
‘on tha a’otaating party's CGL policy and 22)
ndiracty, ty the protecting pary insuing its
caniractually assert ably is indemnity!

A Contractually — Aeeumed Liability
Insuranea: Coverage for the Protecting
Party

1. Exesption to an Exelusion

Most but not all CL policies cover the protecting
arty for ably for “Bodily Inury’ and “Property
LLamage™ using under an “sured contract
‘sometimes referred to as “contractually aseumed
liabiity ineuranca”, Coverage is accarnplished
thraugh the addition to the CGL Policy of an
exception to an exclusion fiom coverage.
Standard forn CG. policies (ISO CG 00 0°)
arovide as to Coverage A the f9 low ng except ens
fo the exclusion from coverage of contractually
assumed abit.

overage A under stardard ‘ern OGL policies is for
ess ansing oul of "Bodly juny! or “Properiy
Damage." "Bodily ivy" isin such policies defined
8 "bodily injury, sickness or disease sustairee by a
‘argon, includire death “esuling form any of thase
‘a ary time." “Property Damas" in such palcia is
defined a=. “physical injury 10 -ereibla praparty,
nekiding all teeusing lors of use af that property
ar loss of use of tangibla proparty thal ie rot
anysially injured: The exceptior te excision from
Coverage A reacts
Page 4

iis ineurance does nat apply to “Bodily
Injury” or "Property Camage” “or wich the
insured Is obligated w pay damages by
eason of the assumption lability in a
fcantract or agresmen! This exclusion
‘does not apply to lily for damages:

4. assumed in a contractor
agreement that isan. "Insured
Contract’. provided the “Bodily

Inury or “Broperty Lamage’ accure
subsaq.ent to the execution af the
‘cantract ar agreemar: er

2 that the insured woue have in the
absence of the coniracl oF
agreement. (Emphasis added)

‘Au “Insured Gontract’ is defined in the standare
1S0.CGL policy form as including

That pan of any othe= contractor agreement
pertaining to ycur husiness (inclucirg an
Indemnification of a mmunicipaly in
‘connection ‘with work for a municipal)
Under wihita you assume the tort lability
cof another party o pay tor" ody Injury” af
‘Properly Dairags* to a thd person or
organization [2004 endorsamant CG 24 26
1 provided the ‘bodily injury” or ‘property
‘damage’ ia ceusad, in whole of in part,
by you or by those acting an your
ealf|, Tor labiliy means a liability thal
‘would be mposed by law in the abserce of
any contract or agreement. (Emphasis
sete,

Note that ISO hes publishec the talcized languege
forincusion ir CGL policies by an evdorsement CS
24-25, 181 This introduces imo the ‘insure
‘contract’ definiion a “centritutory neglige ce
condition equivalent 10 the ane contained in the
2008 revisions 10 ISO's addtional insurec
‘endorsements viscussed below in Section I
BSb(2). Inclusion of this type lar guage into a CGL
policy ettacively eliminates coverage for the named
inaxrac's indemnification of a third party for sole
negligence Care therefore must be taken by
named irsurads in coordinating and nagatating the
farms. of thar CGI polinies and indemnity
agreements. Its possible for a ramed insured tc
be “unooveree” in such okcunstances “or ar
indemnity of nether party's sole negligence. IT this
is coupled with an exclusion frarn adeonal inauree
coverage for an additional ingured’s sole

Ch. 48 ALLOCATING EXTRAORDINARY RISK IN LEASES

Tear rarmnrthabace aru onvtendsnrn

vegigence. the named insured may find self
acing as the insurer or in reach of ts covenants 19
‘he additional insuredindemniied pary!

2 Named_Insured_Not_Insured_for_all
ontraciually Assumed Lisbiliies Ne
Coverage for Indemnified Person’s Sole
Negligence

Lnti 2394, he standard CL patcy rom publishes
ay 150. insurad Rs named insured fa" is
intractually assumption of lability for He
Iiderniten's sole negigenes ¢*)" 192 fsuad in
200d an endorsement CG 24 25 O7 DE. wich
‘modifies the definition of “nsueed comact ta
iminats coverage forthe sole negigenn> of an
imemiiee. Thus, an infermifing persen should
“pview is GGL pelny to cetermine whether il
2xtendo protest should it deride to Indemnity the
‘rer panty tits contract forthe ater party's sole
‘egigence. See Forms 6-6 this Aricle

8 Additional Inguranee: Coverage for the
Protected Party

1 Purpose

‘Another commrenly employed risk transfer

fechnique is to require the protecting party to
arrange for is nsurance 10 cover the protected
darty a8 an geaitional insured. '***' An adcivonal
neured endorsement is equivalent to an insurance
solicy write for the acditional insured. The
strongest rationale for this request isthe perce ved
‘aimess of making the procecing party's neuraiioa
‘airiet responsible for tha inereased exposure to
8 created for te additional insurad due to the
.-otacting party's operations, work ar contra of tha
Semeee " lscuanea 2° additonal insured
andorsemente is routine and inexpensive a2
‘Sompared tc a separate poly beirg issued to
cover the expesure of the pary to be protected
The ‘sk of loss hae been factored into the named
nsured's presi,

‘An addtional insured designation seeks to acrieve
‘he following results: it provides a limited form of
Dimers coverage far the addianal insured. W wray
“emave tho possibilty of subrogation againet tho
addtional iraured for covered habilties. It prov ece
‘he addltianal naured with dract paloy ightswthin
the primary insureds aalicy, ineluding. separata
defense cost coverage for claims invalving the
ackitional irsured. Il provides a ‘safety ref’ should
the inderanity. provisior be unenforceable or
stepwise be deficient, Ardltional insured
‘endorsements generally do not carve cut from the