CG 24 26: Amendment of Insured Contract Definition

Legal purpose and coverage scope

In CG 00 01, paragraph f of the insured contract definition covers that part of any other contract or agreement pertaining to the named insured's business under which it assumes the tort liability of another party to pay for bodily injury or property damage to a third person. Tort liability means liability that would be imposed by law in the absence of any contract. That paragraph is what insures a subcontractor's promise to indemnify the GC and owner.

CG 24 26 replaces paragraph f with a version that adds a proviso: the injury or damage must be caused, in whole or in part, by the named insured or by those acting on its behalf. The 04 13 edition adds that the agreement is an insured contract only to the extent the assumption of tort liability is permitted by law. Because Supplementary Payments for indemnitee defense depend on the insured contract definition, the narrowing reaches defense costs as well as indemnity.

How CG 24 26 behaves in a tender or claim

Consider a fall at a jobsite where the injured worker sues the owner and GC, and the subcontract's indemnity clause applies to claims "arising out of or resulting from performance of the Work." If the facts show the sub's crew contributed to the hazard, the CG 24 26 proviso is satisfied and the indemnity is insured. If the fall resulted from a condition the GC created and the sub's only connection is that the injured person was its employee working on its scope, the indemnity may still be enforceable under the contract and state law, but the sub's carrier will argue it is not an insured contract because the sub did not cause the injury.

That leaves the sub personally exposed for the indemnity, and a sub that cannot pay leaves the GC with a judgment it cannot collect. Additional insured coverage and contractual indemnity are meant to work together; CG 24 26 weakens the indemnity half.

How it compares with CG 21 39 and anti-indemnity laws

CG 21 39, Contractual Liability Limitation, deletes paragraph f altogether, so no tort-liability indemnity is insured beyond the narrow categories in paragraphs a through e. CG 24 26 is narrower than the standard definition but far broader than CG 21 39, and underwriters sometimes offer it as the compromise in contractor classes where they would otherwise attach CG 21 39.

Many states restrict construction indemnity by statute, voiding agreements that indemnify a party for its sole negligence and, in some states, for any of its own negligence. Where the subcontract's indemnity is already limited to the extent of the sub's fault, CG 24 26 may track what the contract can enforce anyway. Where the indemnity is broader and enforceable, CG 24 26 leaves the gap described above. The answer is specific to the state and the contract, which is why Pikorua Security treats it as a review item rather than an automatic pass.

What to require or prohibit in the contract

Prohibit any endorsement that modifies the insured contract definition, and name CG 21 39 and CG 24 26 specifically. If a trade's market makes CG 24 26 unavoidable, approve it by exception with a documented rationale tied to the project state's anti-indemnity law and the subcontract's indemnity wording.

• Prohibit: CG 21 39, CG 24 26 and any carrier endorsement limiting the insured contract definition.
• Allow by documented exception: CG 24 26 where the subcontract indemnity is already limited to the subcontractor's fault under governing law.
• Require: Supplementary Payments for indemnitee defense to remain in force.

How Pikorua Security verifies or flags CG 24 26

Pikorua Security reads every forms schedule and midterm change endorsement for CG 24 26, CG 21 39 and carrier contractual liability limitations, and marks any of them deficient by default against an exhibit that prohibits them. The flag cites the exact paragraph of the insured contract definition that changed.

A risk manager can approve CG 24 26 by exception per project or per vendor. The approval, the reviewer, the governing state and the reason are logged and travel with the vendor's file into the tender defense vault, so the decision is documented if the indemnity is ever tested.