The errors and omissions claim described here did not happen to a PAR insured; it is from another of the E&O programs of Fireman’s Fund. One aspect of the claim (not having the policy endorsed) is atypical of PAR firms. Nevertheless, valuable lessons can be learned from this story.

FFIC’s insured agency had a contractor client who performed rough concrete and framing services. The general contractor for a residential job on which the client was working as a sub-contractor was to be an additional insured under the sub-contractor’s general liability (GL) policy.

The agency did issue a certificate of insurance indicating the general contractor was an additional insured. However, the insured agency did not request an additional insured endorsement, either blanket or specific, to the sub-contractor’s GL policy. The agency also failed to send a copy of the certificate to the managing general agent (MGA) which had placed the general liability policy.

The property owner stated there was a defect in his home’s construction. The sub-contractor’s GL insurer refused to pay any legal expenses (legal is all that’s available under the general liability policy when construction defect is alleged), since the general contractor was not an additional insured on the sub’s policy. Furthermore, the MGA stated the agency did not have the authority to issue certificates of insurance in the first place!

Ultimately, the construction defect claim settled for $2M. The maximum attorney fees that may be due on behalf of the FFIC insured are $130,000.

The insured agency should have obtained written authority from the MGA to issue certificates of insurance, and forwarded a copy of any certificate it prepared after that. (Sending a copy might have allowed Fireman’s Fund to bring the MGA into this E&O case.) And, the agency should have had the general liability policy endorsed with either a blanket or specific additional insured endorsement. Instead, the agency relied solely upon the ineffective wording about additional insured status it put on the certificate.