Additional Insured Status - The basics
Additional insured status runs in one of two directions: asking for additional insured status from someone or providing additional insured status to someone.
Many clients ask to have another party named as an additional insured on their liability policy. This is often requested when one party engages another to do work for them. It may also be part of a lease or rental agreement or a special event at a venue.
Are you being asked?
If you are being asked to name another party as an additional insured, you now share your limits with that party. Your insurance policy will respond and protect both your liability and the liability for the other party that you assumed in the risk transfer process. The protection for your company is diminished, as you are sharing the general liability per occurrence maximum limit on your policy with the other party once they become an additional insured.
The addition of another party to your insurance program should include the following:
A written agreement should be in place that creates the requirement for additional insured status. Verbal agreements or handshakes may not be accepted by an insurer.
Within this agreement, the degree of risk that is being transferred should be stated. See an earlier post concerning risk transfer basics to review the different levels of risk transfer.
Are there any other insurance related provisions that you want to be part of the process? Waiver of subrogation, primary and non-contributory and notice of coverage lapse are common requests and should be reflected on the certificate along with the additional insured status.
You need to confirm that your liability insurance policy has provisions for adding additional insureds. Your policy may have to be endorsed to provide this coverage to another party. Your policy may have a blanket additional insured provision to address this request. Consult with your Driehaus Insurance Group partner to be sure this coverage is present.
Are you asking?
If you are requesting to be named as an additional insured, you are expecting to have the other party’s insurance respond to a claim. This request should be part of a written agreement. This agreement should define the degree of risk transfer and any other issues such as whose coverage is primary and any waivers of subrogation that may apply. Your legal counsel should offer guidance on the appropriate wording.
Once you receive the certificate from the party providing protection, be sure to review the certificate closely. Our article on certificates of insurance can provide details on this process. You want to be sure that you have the protection you were expecting.
You should always ask what is driving this need? Is the concern you have actually covered by the insurance contract? Being named as an additional insured or naming someone as an additional insured is hollow protection if the loss sustained is not covered by insurance. Read before you sign remains the best risk transfer advice we can provide.
Risk transfer, certificates of insurance and additional insured status are all parts of the risk transfer process. Driehaus Insurance Group manages these requests and requirements for our clients every day. Reach out to us at 513-977-6860 or www.driehausins.com for professional assistance.