What Does Primary & Non-Contributory Mean in Construction?
In the world of construction, Primary & Non-Contributory language is a crucial part of managing insurance coverage between multiple parties. If you’ve ever seen this term on a Certificate of Insurance (COI), you might wonder what it means and why it’s important. Simply put, it’s a way to ensure that one party’s insurance policy takes priority over another’s, offering broader protections in the event of a claim.
Let’s break it down!
What Does “Primary” Refer To?
In an insurance context, primary refers to the order in which coverage is triggered when a claim is made. In other words, it determines whose insurance policy will respond first if something goes wrong.
For example, when a general contractor requires a subcontractor to add primary and non-contributory language to their COI, the contractor is essentially saying, “If a claim arises, your insurance needs to handle it first—before mine even gets involved.”
This is particularly important in construction because projects often involve multiple parties, each with their own insurance policies. By requiring the subcontractor’s insurance to be primary, the general contractor is ensuring that the subcontractor’s policy will take the lead in covering the claim.
And What Does “Non-Contributory” Refer To?
The non-contributory part is about how insurance policies share the burden of paying for a claim. Normally, when two or more insurers are involved in covering the same loss, they can each contribute to the payout proportionally. This is called contributory insurance—everyone chips in their share of the cost.
However, non-contributory means that one party’s insurance (in this case, the subcontractor’s) is solely responsible for covering the loss. The subcontractor’s insurer cannot ask the general contractor’s insurer to help pay for the claim, ensuring the general contractor’s insurance doesn’t have to contribute.
In short: non-contributory coverage ensures that the subcontractor’s insurance handles the full claim without asking the general contractor’s insurance for help.
Why is Primary & Non-Contributory Important in Construction?
In construction, risk management is key. By requiring primary and non-contributory language in insurance agreements, general contractors and project owners protect their own policies from being involved in claims unless absolutely necessary.
This means:
Shifting the Risk: If the subcontractor causes an accident or damage, their insurance takes on the full responsibility. The general contractor’s insurance only gets involved if the subcontractor’s coverage is insufficient.
Preserving Policy Limits: By ensuring that a subcontractor’s insurance is primary and non-contributory, general contractors and project owners can preserve their own policy limits for other potential claims. This keeps their insurance costs down and reduces the risk of premium increases.
Simplifying Claims: With a primary and non-contributory agreement in place, there’s less confusion about which insurer should handle a claim. It clearly states that the subcontractor’s insurer will take the lead, simplifying the claims process.
How Does it Work in Practice?
Let’s say a subcontractor is doing electrical work on a construction project and accidentally causes a fire. The general contractor has required the subcontractor to add primary and non-contributory language to their insurance policy as part of the contract. In the event of a claim, the subcontractor’s insurance will step in to cover the damages, and the general contractor’s insurance won’t be asked to contribute.
If the subcontractor didn’t have this primary and non-contributory requirement, both the subcontractor’s and general contractor’s insurers might share the costs, which could affect the general contractor’s insurance premiums or future claims.
In construction, requiring primary and non-contributory language on a subcontractor’s or vendor’s insurance provides key protections:
Primary means the subcontractor’s insurance is the first to respond to claims.
Non-contributory ensures the general contractor’s insurance doesn’t share in paying for the loss.
This type of contractual risk transfer helps keep the financial burden on the party directly responsible for the work (the subcontractor) and protects the general contractor’s policy from unnecessary involvement in claims. It’s a smart way to manage risks and protect everyone’s interests on the construction site!