The Fourth Circuit in APAC-Atlantic, Inc. v. Owners Insurance Co. recently endorsed expansive coverage for additional insureds, interpreting “arising out of” broadly under North Carolina law to extend coverage to a repaving company under its subcontractor’s commercial general liability insurance policy. The court held that an additional insured’s liability “arising out of” a named insured’s work in an additional-insured endorsement means liability “relating to” or “causally connected to” the named insured’s operations, rather than liability defined more narrowly as “caused by” or “the fault of” the named insured.
This expansive interpretation aligns North Carolina with the majority view. That view affords broader coverage to additional insureds, even where the additional insured is found independently liable, so long as that liability is causally connected or incidental to the named insured’s scope of work.
Significance of Indemnitee Provisions to Trade Industries
Additional-insured provisions allow access to someone else’s insurance. Those insurance protections are also backstopped by indemnity obligations where one company assumes the risk of loss suffered by the indemnitee. Adding the indemnitee as an additional insured confirms that, even if the indemnitor is unable to indemnify, the indemnitee is still protected through insurance.
While broad additional-insured coverage is important across industries, it is especially important in construction, where indemnity clauses are one of the most common methods of risk transfer. Stakeholders invariably encounter indemnity provisions in trade contracts between owners, general contractors, and subcontractors for residential and commercial projects of every scale.
Owners typically will enter into a project contract with a general contractor that sets out the agreed-upon requirements, obligations, specifications, and scope of work for the parties. An owner’s contract generally requires the general contractor to indemnify the owner for certain liabilities stemming from the project and the general contractor’s work.
While indemnity provisions vary, most say that the general contractor has to procure certain insurance limits or types to cover a construction project. Some may even specify particular forms, terms, or conditions. Contracts often require that the general contractor name the owner as an additional insured on these insurance policies. In turn, general contractors often enter into their own contracts with subcontractors, employing similar indemnity and insurance provisions in those agreements to transfer risk related to the subcontractors’ work to that trade contractor. After these provisions are included in the contract, the next consideration is the contractual, and permissible, scope of indemnity.
Restrictions on scope of indemnity clauses.
The purpose of contractual indemnity obligations is to limit the additional insured’s exposure to liabilities associated with the project. While the general presumption favoring freedom of contract gives companies a lot of leeway in entering into these indemnity arrangements, state statutes and law can restrict how much liability is allowed to be transferred. For instance, many courts will not enforce an indemnity provision that transfers an additional insured’s sole and independent liability to the named insured.
Several states have enacted “anti-indemnity” statutes to limit the enforceability of certain trade contract indemnity clauses, and many of these statutes prohibit or limit risk transfer of another party’s sole negligence.
Other states permit contractors to transfer even more risk, including for the contractor’s own sole or partial negligence, so long as that transfer is explicitly and unequivocally stated.
As a result, states with anti-indemnity statutes demanding clear allocation of risk may not enforce an indemnification provision that is ambiguous or merely silent as to whether the indemnitor contemplated protecting the other party for its sole negligence. The language used in a contract and a policy is significant to allocate risk in a way that avoids a gap in risk transfer between the two, as well as to ensure agreed indemnity is not voided by applicable law.
Role of additional-insured endorsements in indemnity and coverage.
Additional-insured coverage helps fill the gaps in risk transfer. The coverage is in part responsive to the proliferation of state anti-indemnity statutes limiting the enforcement of indemnity clauses in trade contracts—an additional-insured endorsement in an insurance policy may allow a contractor to still transfer risk and obtain defense and indemnity protection, depending on applicable law, even where state statute voids or limits direct indemnitee provisions.
Additional-insured endorsements work to extend a named insured’s coverage, or parts of that coverage, to another entity. The named insured is typically the primary policyholder and the entity that procures the insurance coverage. The additional insured under a policyholder’s policy is granted coverage for certain risks and liabilities under that policy.
Additional-insured coverage can be a useful tool for first- or third-party claims. For instance, if a named insured’s plumbing work causes water damage to a renovation but also seeps into an owner’s adjoining building not under renovation, the insured might seek coverage from its own insurer, with additional-insured coverage responding to any damage sustained in the adjoining structure. The coverage could also protect a company in the event of a third-party claim. Consider the scenario where an owner or general contractor is named an additional insured on a subcontractor’s policy. In the event the subcontractor’s employee is injured on the job and sues the owner or general contractor, additional-insured coverage may step in to cover the employee’s claims against either additional insured.
Additional-insured coverage is applicable for different types of insurance. An additional insured named in a builder’s risk policy, for example, may have coverage for property damage on a job site connected with the named insured’s work. Or an additional insured named in a commercial general liability policy may be afforded coverage under the named insured contractor’s policy for third-party bodily injury or property damage resulting from an incident like a collapsed wall or an injured employee. We discuss below important additional-insured coverage developments under liability policies like those at issue in APAC.
Evolution of ISO Additional-Insured Endorsements
Pre-2004 ISO additional-insured endorsement.
The language of the Insurance Services Office, Inc. (ISO) standardized additional-insured endorsement has changed over time. Although use of standardized ISO form language is not universally required—and many times coverage is manuscript and customized for a particular transaction or project—ISO forms are used often when coverage is underwritten.
ISO has issued many different, evolving versions of additional-insured endorsements. The pre-2004 ISO form reads, in part, that coverage includes “liability arising out of your work for that insured by or for you.” This pre-2004 ISO endorsement employed the “arising out of” language that the Fourth Circuit analyzed in APAC. It granted cover to additional insureds for liability “arising out of” the work of a named insured, which most states have interpreted expansively to mean an additional insured is covered so long as its liability was causally connected to the named insured’s work.
2004 ISO additional-insured endorsement revision.
In July 2004, ISO revised its form additional-insured endorsement to extend coverage for liability “caused, in whole or in part, by . . . [y]our acts or omissions.”
This marked a material shift in wording—from “arising out of” to “caused . . . by”—that also corresponds to the majority of jurisdictions finding that the pre-2004 ISO “arising out of” language should have broad application and provide more coverage to additional insureds. It has been reported that ISO changed the language in the endorsement in part to limit courts’ more expansive interpretation of “arising out of,” to focus additional-insured coverage on liability caused by the named insured.
Case Studies
The distinction between “arising out of” and “caused by” language in additional-insured endorsements can have an outsized impact on potential coverage. We discuss three cases below demonstrating the differences in court interpretation of additional-insured endorsement language.
Majority approach: APAC.
The Fourth Circuit in APAC concluded that North Carolina follows the majority approach of broadly construing “arising out of.”
In APAC, the North Carolina Department of Transportation (NCDOT) retained a contractor, APAC-Atlantic, for highway repaving work. That work involved grinding down the roadway and replacing the top layer with new asphalt. The removal of existing asphalt made the roadways uneven, creating a potentially dangerous situation for motorists. The contractor hired a subcontractor to set out highway signs to warn motorists of the uneven pavement. Two motorcycle accidents ensued, resulting in separate personal injury suits. The contractor was sued for failure to place warning signs at locations in advance of the uneven lanes. The contractor settled and sought coverage from the subcontractor’s liability insurer. The insurer refused, and the contractor filed suit seeking a declaration in favor of coverage under the subcontractor’s policy.
The subcontractor’s additional-insured endorsement required the insurer to indemnify the contractor if the contractor’s liability “arose out of” the subcontractor’s signage work. Relying on the Court of Appeals of Ohio in Davis v. LTV Steel Co., Inc., the trial court found the endorsement’s “arising out of” language required the subcontractor to cause the liability for there to be coverage. The trial court concluded that the contractor’s liability was direct for its own conduct and not vicarious for work it delegated to its subcontractor to place signs as required by NCDOT.
The Fourth Circuit reversed, holding that North Carolina expressly rejects treating “arising out of” as synonymous with “caused by.” The court reasoned that “arising out of” is broader, requiring only some “causal connection” to the named insured’s work to entitle the additional insured to indemnification. It found that the contractor’s failure to place warning signs in advance of the highway project was connected to the subcontractor’s work to install signs. APAC also noted the distinction, agreed with by the majority of jurisdictions, that while “arising out of” when used in the grant of coverage extends coverage and should be interpreted broadly, that same language when used in an exclusion should be interpreted more narrowly to require “proximate cause” to exclude coverage.
The Fourth Circuit rejected the lower court’s reliance on Ohio precedent because North Carolina does not construe the operative language in the same way it is construed in Ohio’s fault-based analysis in Davis. Many jurisdictions follow this broader trend, with most finding that “arising out of” an insured’s work requires liability that is less than “proximately caused by” the insured but instead requires a causal connection between the insured’s work and the additional insured’s liability.
Minority approach: Davis v. LTV Steel.
While many states interpret “arising out of” language in additional-insured endorsements broadly, that is not always the case. Under Davis, for example, Ohio interprets “arising out of” the named insured’s operations narrowly to encompass only liability for the tortfeasor’s tortious conduct.
The owner in Davis sought coverage as an additional insured under its subcontractor’s commercial general liability policy. At issue was liability in connection with injuries that one subcontractor employee sustained while cleaning tar sumps at a coke plant. The endorsement covered “liability arising out of your operations or premises.” The owner argued that “arising out of” protects it from liability connected to the subcontractor’s work, regardless of who was at fault for the incident. The court disagreed, holding that the endorsement’s purpose was to “protect the additional insured . . . from being vicariously liable for the tortious acts of the named insured.”
Davis represents the minority view that interprets “arising out of” an insured’s work to limit additional-insured coverage to only that arising from the fault of a named insured.
The Fifth Circuit in Edwards v. Brambles Equipment Services, interpreting Louisiana law, also found that “arising out of” “insured’s work” endorsement language would not cover sole liability of an additional insured. However, Edwards is distinct from Davis in that the holding relied on a fact-specific determination that the additional insured’s liability had no “direct relationship” to the insured and the endorsement also contained specific exclusionary language that coverage did not encompass independent acts or omissions of the additional insured.
In addition, some courts distinguish interpreting arising out of “operations” or “work” differently from arising out of “negligence,” as used in these endorsements, with the latter often being interpreted narrowly to require fault of the named insured, much like “caused by” language in endorsements.
“Caused by” interpretation: Burlington Insurance.
Other jurisdictions, like New York, have taken a different approach since ISO’s 2004 revision—interpreting “caused by” language in an additional-insured endorsement to limit coverage to that arising from the fault of a contractor.
In Burlington Insurance Co. v. NYC Transit Authority, the New York City Transit Authority (NYCTA) entered into a trade contract with concrete contractor Breaking Solutions, Inc. (BSI) to perform tunnel excavation work on a New York subway project.
NYCTA’s contract with BSI required that it be named an additional insured and that BSI use language from the ISO’s “latest” form in the endorsement. The endorsement included the ISO’s post-2004 “caused by” language. The additional insureds sought coverage for liability associated with an incident. The Appellate Division found that BSI was not negligent for an explosion on an excavation site but that the explosion was a cause of an employee’s injury. As a result, the insurer argued that the additional insureds were not covered—the insurer argued that the additional insureds’ liability was not “caused by” the fault of BSI because BSI was not the proximate cause of the injury.
The New York Court of Appeals agreed that the endorsement was “limited to those injuries proximately caused by BSI.” While the “caused by” language did not compel the “negligence of” or “proximate cause of” the named insured, the court explained, it nevertheless meant more than a “but for” causation.
Burlington shows that the “caused by” language arising from the 2004 ISO modification to additional-insured endorsements can be construed narrowly. However, note that courts in New York still interpret “arising out of” language broadly even where “caused by” is interpreted more strictly, although the likelihood that they will do so is lessened by the fact that earlier ISO forms will not be in wide usage.
Pay Attention to Language and Applicable Law
These cases—which span a variety of outcomes that turn on a careful assessment of the facts, including policy language and governing law—show that special attention should be given to additional-insured endorsements to ensure that expectations mesh with the reality of how that coverage will actually operate in practice. Boilerplate indemnity clauses in a trade contract requiring only that a contractor be added as an additional insured may not cut it to fully protect that contractor in the event of a claim.
All project stakeholders—from owners and consultants to general contractors and subcontractors—should consider what law will govern a coverage dispute. Jurisdictions interpret additional-insured endorsements differently, and liability covered in one state may not be covered in another. Industry stakeholders seeking additional-insured coverage, especially risk managers and other professionals tasked with enacting robust and cohesive risk transfer solutions, should give careful attention to how contract and policy language may affect claim outcomes under additional-insured endorsements. Assessing policy language in tandem with governing law is important, both when procuring insurance programs and when negotiating trade contracts. Limits and sublimits should also be considered where multiple potential insureds may seek coverage for a single project or incident.
Further, while ISO forms establish standardized policy language, insurers do not always use them. Nor are policyholders always bound by an insurer’s proposed forms, which are often subject to negotiation during the underwriting process. Keep in mind that insurers often use their own manuscript or proprietary language, including additional-insured provisions, when placing and renewing policies. These manuscript versions sometimes can broaden or restrict coverage in unexpected ways and should be reviewed closely.
The Fourth Circuit’s APAC decision reaffirms that the majority of jurisdictions are still of the opinion that “arising out of” language found in an additional-insured endorsement demands a broader application of coverage.
1 APAC-Atlantic, Inc. v. Owners Ins. Co., No. 24-1969, 2026 LX 40204 (4th Cir. Feb. 18, 2026).w
2 See generally International Risk Management Institute (IRMI), additional insured (AI) (“In liability insurance, additional insured status is commonly used in conjunction with an indemnity agreement between the named insured (the indemnitor) and the party requesting additional insured status (the indemnitee). Having the rights of an insured under its indemnitor’s commercial general liability (CGL) policy is viewed by most indemnitees as a way of backing up the promise of indemnification.”).
3 See, e.g., Nat’l Union Fire Ins. Co. v. Nationwide Ins. Co., 69 Cal. App. 4th 709, 717 (1999) (finding California Civil Code section 2782 voids indemnity clauses for sole negligence as they disincentivize contractors from undertaking “accident-prevention measures involving [their] own negligence to avoid risk of harm to third parties”).
4 See, e.g., Cal. Civ. Code § 2782; Conn. Gen. Stat. § 52-572k; Colo. Rev. Stat. § 13-21-111.5; D.C. Code § 27A-202 (2023). For example, the states that comprise the Fourth Circuit—Maryland, Virginia, West Virginia, North Carolina, and South Carolina—have all adopted anti-indemnity statutes prohibiting indemnification for sole negligence as against public policy, void, and unenforceable. See Md. Code Ann., Cts. & Jud. Proc. § 5-401 (noting the statute does not affect the validity of any insurance contract); Va. Code Ann. § 11-4.1 (same); W. Va. Code § 55-8-14 (same); N.C. Gen. Stat. Ann. § 22B-1 (same); S.C. Code Ann. § 32-2-10 (same).
5 See, e.g., Reyburn Lawn & Landscape Designers, Inc. v. Plaster Dev. Co., Inc., 255 P.3d 268, 274 (Nev. 2011) (enforcing indemnity clause language transferring one party’s sole negligence to another party, which in Nevada requires “an express or explicit reference to the indemnitee’s own negligence”); Doster Constr. Co., Inc. v. Marathon Elec. Contractors, Inc., 32 So. 3d 1277, 1283 n.2 (Ala. 2009) (requiring clear and unequivocal language); Keystone Specialty Servs. Co. v. Ebaugh, 267 A.3d 1250, 1256 (Pa. Super. Ct. 2021) (citing Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 7 (1991)) (same); Emery Waterhouse Co. v. Lea, 467 A.2d 986, 993 (Me. 1983) (allowing transfer of sole negligence if clearly stated, but such provisions are disfavored by Maine courts).
6 See, e.g., Reyburn, 255 P.3d at 274 (indemnification of the indemnitee against “any and all claims” was not sufficient to find the parties explicitly agreed to protect the indemnitee for its own negligence); Gunka v. Consol. Papers, Inc., 179 Wis. 2d 525, 531 (Ct. App. 1993) (indemnification for sole negligence of indemnitee permitted only if unambiguous).
8 ISO is a national advisory organization that provides the insurance industry with nationwide standardization for insurance policy language, including for additional-insured endorsements. ISO form coverages, endorsements, conditions, and exclusions are used across the insurance industry to provide some level of uniformity to insurers, policyholders, regulatory agencies, and the legal system.
10 Compare APAC, 2026 LX 40204, at *3 (majority of jurisdictions find “arising out of” extends coverage not only to vicarious liability for a subcontractor’s work but also to independent liability connected to that work), with Davis v. LTV Steel Co., Inc., 716 N.E.2d 766 (Ohio Ct. App. 1998) (interpreting “arising out of” language narrowly to cover only vicarious liability arising from the fault of the named insured).
13 Davis v. LTV Steel Co., Inc., 716 N.E.2d 766 (Ohio Ct. App. 1998).
14 APAC, 2026 LX 40204, at *5.
15 APAC, 2026 LX 40204, at *6–7.
16 APAC, 2026 LX 40204, at *6 (citing Affinity Living Grp., LLC v. StarStone Specialty Ins. Co., 959 F.3d 634, 641 (4th Cir. 2020)).
17 See, e.g., Fed. Ins. Co. v. Am. Hardware Mut. Ins. Co., 124 Nev. 319, 324 (2008); Cas. Ins. Co. v. Northbrook Prop. & Cas. Ins. Co., 150 Ill. App. 3d 472, 475 (1986); Container Corp. of Am. v. Md. Cas. Co., 707 So. 2d 733, 737 (Fla. 1998); Acceptance Ins. Co. v. Syufy Enters., 69 Cal. App. 4th 321, 328 (1999).
19 Davis, 716 N.E.2d at 737.
20 See also Edwards v. Brambles Equip. Servs., No. 01-0892 Section “L” (2), 2002 U.S. Dist. LEXIS 16718, at *19 (E.D. La. Sept. 4, 2002), aff’d, 75 F. App’x 929 (5th Cir. 2003).
21 Edwards v. Brambles Equip. Servs., 75 F. App’x 929 (5th Cir. 2003).
22 Edwards, 2002 U.S. Dist. LEXIS 16718, at *17.
23 See, e.g., Harbor Ins. Co. v. Lewis, 562 F. Supp. 800, 802 (D.C. Pa. 1983).
24 See Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313 (2017).
25 Burlington Insurance Co., 29 N.Y.3d at 317.
26 Burlington Insurance Co., 29 N.Y.3d at 320.
27 Burlington Insurance Co., 29 N.Y.3d at 321–24.
28 See also, e.g., Maldonado v. Kiewit La. Co., 146 So. 3d 210, 219 (La. Ct. App. 1st Cir. 2014); James G. Davis Const. Corp. v. Erie Ins. Exch., 226 Md. App. 25, 43 (2015).
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