What does primary and non-contributing really mean in regards to general liability insurance coverage?


When a policy is worded as "primary and non-contributing", it means that the general liability insurance policy (or any kind of policy for that matter) is first in line to pay when there is a claim. It also means that it will pay the claim until the policy's maximum limits are maxed out.

For instance, a client commissioned a contractor to erect a building and required that the contractor have a primary and non-contributing general liability insurance. When there is a claim (say, an accident happened at the construction site and resulted in bodily injury), the contractor's liability insurance will pay for the damages first until the limits for the policy's coverage are exhausted. In most cases, the client's own insurance does not need to contribute or pay for a portion of the loss.

If the contractor's general liability insurance was purchased without the "primary and non-contributory" clause or wordings, having this added to the policy can be very expensive. Usually, an insurance underwriter will only agree to add the clause if it also includes the words "limited to the operations of the insured".

The "primary and non-contributing" clause also means that the primary insurance will pay for the claim regardless of who was at fault. Thus, if it was the client who was really at fault in the accident, the contractor's insurance will still be the one to pay.

This is an attractive setup for the client, since it makes the client less liable for any damage done to the construction project. Thus, most clients require a contractor with a "primary and non-contributing" general liability policy. This is one way of transferring the risk to the contractor. Depending on the laws of the state or of the city where the construction is done, this may or may not be permitted. Please note that in some states, one cannot transfer the liability or negligence to another party by contract.

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