Ohio Decision Creates Loophole for Additional Insured Endorsements
Kegler Brown Construction Newsletter February 1, 2002
Ohio has long had an anti-indemnity statute finding indemnity provisions in a construction contract unenforceable to the extent they try to hold one responsible for another's negligence. O.R.C. §2305.31.
On the basis of an earlier 1997 case it was thought that an additional insured endorsement could not be utilized to try to get around the anti-indemnity statute. However, a new Cuyahoga Court of Appeals decision has opened a loophole to allow "additional insured" endorsements to be used to circumvent the anti-indemnity statute. Stickovich v. Cleveland (2001), 143 Ohio App.3d 13.
In that case, the city by contract required that it be named as an additional insured by the contractor on his commercial general liability (CGL) policy. When the contractor's employees were injured in an electrocution arising from crane operations and sued the city for its negligence, the city demanded that the contractor's CGL policy cover the loss. The Court of Appeals ruled that the CGL insurance contract was not subject to the anti-indemnity statute concerning construction contracts and ordered the contractor's insurer to cover the city's liability.
This case means that owners or contractors named as "additional insureds" to a contractor's or subcontractor's CGL policy will have protection from their own negligent acts at the cost of the innocent contractor or subcontractor (or its insurer).
As a result, shrewd owners, contractors, or others insisting upon additional insured status will be able to accomplish indirectly what the anti-indemnity prohibits — the obligation to protect someone from their own negligence.
The end result should be greater risk and higher insurance premiums for subcontractors or others agreeing to provide additional insured status to those upstream on the "construction food chain."