Claims & Tender Defense
How to Build an Ironclad Tender Defense Package When a Subcontractor Gets Sued
When a claim names you and your subcontractor's work, the first weeks after service decide whose policy pays. This is the document package that gets a tender accepted, and the timeline for sending it.
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In this article
What a tender asks for
A tender is a written demand that another party, or its insurer, take over your defense and pay any resulting liability. When a claim involves a subcontractor's work, a general contractor usually has two separate rights to tender, and they should be pursued separately.
The first is additional insured coverage on the subcontractor's policy. That is your own right as an insured, owed by the subcontractor's carrier, and in most states the carrier's duty to defend is measured by comparing the allegations in the complaint with the policy. If the allegations could fall within the coverage, the defense is owed.
The second is contractual indemnity from the subcontractor under the subcontract. That obligation belongs to the subcontractor, and it is usually funded by the insured contract coverage on the subcontractor's CGL. Tender to both, in writing, at the same time. Getting it right matters: when a subcontractor's carrier successfully denies an additional insured tender, the general contractor's average out-of-pocket litigation and retention loss runs $150,000 to $450,000 (Commercial Casualty Actuarial Study).
Assemble the package
A tender succeeds or fails on documents. The adjuster needs to see, without asking, that you are an insured, that the claim falls within the grant and that the contract required it. The package should include:
- The complaint or claim letter, with every allegation that ties the injury or damage to the subcontractor's scope.
- The executed subcontract, its insurance exhibit and its indemnity clause, signed before the date of loss.
- The certificate of insurance in force on the date of loss, plus the actual additional insured endorsements with edition dates (CG 20 10 and CG 20 37, or blanket equivalents).
- Primary and non-contributory and waiver of subrogation endorsements (CG 20 01, CG 24 04).
- Proof of the work: daily logs, sign-in sheets, photos and the scope of work showing the sub was performing the operations at issue, and whether the work was ongoing or complete.
- The incident report and witness statements.
- The carrier's name, NAIC number and policy number, plus the retail broker's contact details.
Write a letter the adjuster cannot misread
Adjusters handle volume. A tender letter that makes them search for the basis of coverage gets a reservation of rights or a request for more information. One that lays out the basis on the first page tends to get a decision. Have defense or coverage counsel review the letter before it goes out, because careless wording can concede facts you will want to contest. A strong letter does five things:
- Identifies the policy by carrier, NAIC number and policy number, and identifies you as an additional insured under a named endorsement and edition.
- Quotes the contract clause that requires additional insured status, and the indemnity clause.
- Quotes the complaint allegations that tie the injury or damage to the subcontractor's operations.
- Demands defense and indemnity on a primary and non-contributory basis and asks for a written coverage position by a specific date.
- Goes to the carrier's claims address, the subcontractor and its broker, with notice to your own carrier under your own policy.
Timing rules that change the outcome
Send the tender as soon as the claim arrives. Most policies condition coverage on prompt notice, and a late tender gives the carrier a defense it did not have before. Notify your own carrier at the same time. Your policy has its own notice condition, and a denied tender sends the claim back to you.
Some states add rules that work in the additional insured's favor. In New York, Insurance Law Section 3420(d)(2) requires an insurer disclaiming coverage for bodily injury arising from an accident in New York to give written notice as soon as is reasonably possible, and courts have required that notice to go directly to additional insureds. The Court of Appeals has held a 48-day delay unreasonable as a matter of law where the insurer already had the facts it needed. In Illinois, the targeted tender doctrine lets an insured choose which of its available insurers will defend it.
These rules vary by state and shift with case law, which is one more reason to bring counsel in early.
Why tenders get denied
Most denials trace back to something that was visible in the file long before the loss:
- The endorsement covers ongoing operations only, and the loss happened after the work was completed.
- The Named Insured on the policy is not the entity that signed the subcontract.
- The blanket endorsement requires a written contract directly with the named insured, and you are an owner or upper-tier contractor with no direct contract. New York's Court of Appeals enforced that requirement in Gilbane Building Co. v. St. Paul Fire and Marine (2018).
- The endorsement uses "caused, in whole or in part, by" wording, and the complaint alleges only your negligence.
- The subcontract was signed after the date of loss, or the policy had expired or been cancelled.
- An action over or contractual liability limitation endorsement removes the coverage that funds indemnity.
Build the vault at intake, not after the claim
Every item in the package is easy to collect while the subcontractor is onboarding and hard to find years later, when a completed operations claim arrives and the subcontractor may no longer be in business. The answer is to build the packet as you go: date-stamped versions of every certificate and endorsement, linked to the subcontract and the project, and retained for the life of the statute of repose.
Pikorua Security's tender defense vault exports that packet per vendor and per project, indexed, with an audit trail showing when each document was received and verified. Across Pikorua Security customers, claims tendered with a verified endorsement packet have had a 100% tender acceptance rate. The point is not the software. It is that the evidence existed before anyone needed it.
Related reading
- Endorsement guideCG 20 10: Additional Insured, Ongoing Operations
- Endorsement guideCG 20 37: Additional Insured, Completed Operations
- Endorsement guideCG 20 01: Primary and Noncontributory
- Endorsement guideCG 24 04: Waiver of Transfer of Rights of Recovery
- ProductRisk Transfer Engine and tender defense vault
- CalculatorEstimate your un-tendered claim exposure
About the author
Kavya Reddy, ARM, CRIS
Head of Risk Engineering, Pikorua Security
Kavya leads Pikorua Security's risk engineering team, which writes the contract rules and endorsement checks behind the product. She spent 11 years in US construction risk transfer before joining Pikorua Security and holds the ARM and CRIS designations.
The Risk Transfer Brief explains insurance and contract concepts in general terms. Pikorua Security is software, not a law firm, insurer or broker. For contract drafting, or a coverage position on a specific claim, work with your coverage counsel.