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What is primary & non-contributory insurance?

When more than one liability insurance policy may respond to a claim on behalf of the insured, the policies will define the order in which each needs to pay claims and defence costs.

An insurance policy that states it is both primary and non-contributory is obligated to respond first in the event of a claim. When seeking insurance coverage from another party's insurance policy as an indemnitee in a hold-harmless agreement, it has been common to require the other insurance be both primary and non-contributory.

Other Insurance

Liability insurance policies contain wording known as the "other insurance clause," which defines how the policy intends to respond to a claim in the event other insurance is available to the insured. While the standard commercial general liability insurance policy form states that it is primary, there are numerous endorsements modifying this wording. Other non-standard general liability policies specifically that are in excess of other insurance or simply exclude coverage completely in the event of any other coverage may be available.

Primary Insurance

The commercial general liability insurance policy form issued by the Insurance Services Office (ISO) is commonly used as the standard of policies in the insurance industry. ISO regularly updates its insurance policy forms. The current version of the commercial general liability policy is clear that the policy is primary over any other insurance, including those that state they also are primary.

Additional Insured

Common contractual relationships require one party to hold harmless or indemnify another in the event of a claim arising out of the operations covered in the contract.

For example, contractors are generally required to indemnify and make project owners additional insureds on their general liability policy. However, in the past, the additional insured status sometimes generated confusion for the owner if the contractor's insurance policy was unclear as to whether or not it was primary to the owner's policy in the other insurance clause.

Non-contributory Insurance

Prior to the current version of the ISO commercial general liability insurance policy, the other insurance clause stated the policy was primary except when another policy also stated it was primary.

Additional insureds hoping to rely upon other insurance found their own policies required to share in the claim when the intent was to have their own policies act as excess insurance. A common solution was to require other parties' insurance to not only be primary but also specify it would not seek any contribution from the indemnitee's own policy.

Current Usage

It is common to find hold-harmless wording that requires parties to a contract to provide insurance that is both primary and non-contributory. While there is no specific policy section using the words "non-contributory," current ISO general liability policies have been updated to clearly state they are excess over any other primary insurance and specifically in the instances where the insured is an additional insured on another party's policy.