Additional insured

What Is Additional Insured?

An additional insured is an individual or entity, not originally named in an insurance policy, who is granted coverage under that policy at the request of the primary policyholder, also known as the named insured. This designation is common in the realm of insurance and risk management to extend the protective umbrella of a primary policy to other parties who may face potential liability arising from the named insured's operations or activities. By becoming an additional insured, the party receives certain rights under the policy, such as defense costs and coverage for specified claims, effectively mitigating their own exposure to risk. This status is often secured through an endorsement added to the original policy, particularly for a Commercial General Liability (CGL) policy.¹⁹, ²⁰

History and Origin

The concept of an additional insured largely evolved with the standardization of commercial general liability insurance forms by the Insurance Services Office (ISO). Early additional insured endorsements, such as the 1985 CG 20 10, were broad, stating that coverage would apply to liability "arising out of" the named insured's work. This broad language often led to litigation years after projects concluded, as it did not clearly distinguish between ongoing and completed operations.¹⁷, ¹⁸

In response, ISO began introducing revisions to these endorsements. A significant change occurred in 1993, which aimed to restrict coverage to ongoing operations by excluding completed operations. Further revisions in 2001 explicitly excluded coverage for bodily injury and property damage from completed work. The 2004 revisions marked a major shift, replacing the "arising out of" language with "caused in whole or in part" by the acts or omissions of the named insured. The intent behind this change was to prevent additional insured coverage from applying to losses caused solely by the additional insured's own negligence, while still providing coverage for vicarious liability or where the named insured's actions played a partial role.¹⁴, ¹⁵, ¹⁶ These continuous refinements reflect the ongoing efforts to clarify and limit the scope of protection afforded to an additional insured, making the specific language of the endorsement and the underlying contractual agreement increasingly critical.¹³

Key Takeaways

• An additional insured is a party granted coverage under another entity's insurance policy, typically via an endorsement.
• This status extends specific protections, such as defense and indemnity, to the additional insured for claims related to the named insured's operations.
• It is a common requirement in contracts, particularly in construction, real estate, and vendor agreements, to manage and transfer risk.
• The scope of coverage for an additional insured can be limited by the specific language of the endorsement and the underlying contract.
• Understanding the distinction between an additional insured and a named insured is crucial for proper risk management and compliance.

Interpreting the Additional Insured

Interpreting the scope and application of additional insured status requires careful review of the specific endorsement wording attached to the insurance policy. Not all additional insured endorsements provide the same level of coverage. The protection afforded to an additional insured is typically tied to the named insured's acts or omissions. For example, a property owner named as an additional insured on a contractor's policy would generally be covered for liabilities arising from the contractor's work on the property, but not necessarily for liabilities solely caused by the property owner's own negligence.

Recent changes by ISO, particularly those implemented in 2004 and further refined in 2013, emphasize that coverage for an additional insured is generally limited to the extent that the named insured's actions "caused in whole or in part" the injury or damage. Furthermore, the specific wording of the contract requiring additional insured status can dictate the limits of the insurance provided, meaning the insurance may not provide broader coverage than what was contractually agreed upon. Therefore, parties requesting or granting additional insured status must ensure that the endorsement's language aligns precisely with the contractual requirements to avoid potential gaps in protection.¹¹, ¹²

Hypothetical Example

Consider a scenario involving "Construction Innovations Inc." (the named insured), a general contractor hired to build a new commercial office building. To fulfill their contractual obligations with the building owner, "Skyline Properties LLC," Construction Innovations Inc. is required to name Skyline Properties LLC as an additional insured on their Commercial General Liability (CGL) policy.

During the construction, a worker from Construction Innovations Inc. accidentally leaves equipment unsecured, causing it to fall and damage an adjacent public sidewalk. A pedestrian is injured and sues both Construction Innovations Inc. and Skyline Properties LLC.

Because Skyline Properties LLC is an additional insured on Construction Innovations Inc.'s CGL policy, they can seek defense and coverage under that policy for the claim, even though they did not directly cause the accident. The claim "arises out of" or was "caused in whole or in part" by the operations of Construction Innovations Inc. The additional insured status allows Skyline Properties LLC to leverage Construction Innovations Inc.'s insurance to cover legal fees and potential damages related to the incident, rather than relying solely on their own liability insurance.

Practical Applications

The use of an additional insured endorsement is prevalent across various industries and contractual relationships, primarily to facilitate risk transfer and ensure appropriate coverage.

• Construction: General contractors frequently require subcontractors to name the general contractor and the project owner as additional insureds on the subcontractor's Commercial General Liability (CGL) policies. This protects the higher-tier parties from liabilities arising from the subcontractor's work.
• Real Estate: Landlords often mandate that tenants name them as additional insureds on their property insurance and liability policies, especially in commercial lease agreements. This ensures the landlord is covered for incidents occurring on the leased premises due to the tenant's operations.⁹, ¹⁰
• Vendor and Service Agreements: Companies hiring vendors, consultants, or service providers may require them to add the hiring company as an additional insured. This is common when vendors operate on the company's premises or perform services that could lead to liability for the hiring entity.⁸
• Events: Organizations hosting events at a venue may be required to name the venue owner as an additional insured on their event liability policy. This protects the venue from claims related to the event's activities.

These applications underscore the importance of additional insured status in managing complex liabilities in contractual relationships, allowing entities to share or transfer specific risks.⁷

Limitations and Criticisms

While providing significant protection, additional insured status comes with important limitations and criticisms. The scope of coverage is not always as broad as perceived by the additional insured. Modern additional insured endorsements from ISO and individual carriers have been drafted to limit coverage, particularly after the 2004 revisions that changed the trigger from "arising out of" to "caused in whole or in part" by the named insured's acts or omissions. This means that if the additional insured is solely negligent, coverage may not apply.⁵, ⁶

Another limitation stems from the contractual nature of these endorsements. Many policies now stipulate that the coverage provided to an additional insured will be no broader than what is explicitly required by the written contractual agreement between the named insured and the additional insured. This emphasizes the critical importance of reviewing both the insurance policy's specific endorsement language and the underlying contract. Overlooking discrepancies can lead to significant gaps in expected protection. Legal interpretations have also varied, especially concerning "blanket" additional insured endorsements, where the additional insured is not specifically named in the endorsement but covered by a general clause. Courts may strictly interpret such clauses, requiring a direct written agreement between the parties for coverage to apply.³, ⁴

Furthermore, the process of verifying additional insured status often relies on a certificate of insurance. However, a certificate of insurance merely provides evidence that a policy exists and does not, by itself, confer additional insured status or guarantee its scope. Actual coverage relies on the specific endorsement attached to the policy. Businesses must actively review and track these endorsements to ensure compliance and adequate protection.¹, ²

Additional Insured vs. Additional Named Insured

The terms "additional insured" and "additional named insured" are often confused but carry distinct implications for coverage and responsibilities under an insurance policy.

An additional insured is a person or organization added to an insurance policy by endorsement, typically to receive protection against liabilities arising from the acts or omissions of the primary named insured. The additional insured generally benefits from the policy's liability insurance coverage for specific risks related to their relationship with the named insured but does not have the full rights or responsibilities of a named insured. Their coverage is usually limited in scope, tied directly to the operations of the named insured, and they typically cannot make changes to the policy.

An additional named insured, on the other hand, is a person or organization explicitly identified in the policy declarations or by an addendum, with nearly the same rights and responsibilities as the first named insured. This means an additional named insured has broader rights, including the ability to request policy changes, receive notices of cancellation, and potentially share in responsibilities such as premium payments, though this varies by agreement. The key distinction is the extent of control and the breadth of coverage: an additional named insured is essentially treated as another primary policyholder for most purposes, whereas an additional insured's rights are typically more constrained and specific to liabilities related to the named insured's actions.

FAQs

Who typically requests to be an additional insured?

Parties that have a contractual relationship with a named insured and face potential liability from the named insured's operations commonly request this status. Examples include property owners, general contractors, lenders, or municipalities in agreements with contractors, tenants, or vendors.

Is an additional insured covered for their own negligence?

Generally, modern additional insured endorsements are designed to not cover the sole negligence of the additional insured. Coverage is typically limited to liabilities that arise from or are "caused in whole or in part" by the acts or omissions of the primary policyholder.

What is the difference between an additional insured and a certificate holder?

A certificate holder simply receives a certificate of insurance as proof that an insurance policy exists. This certificate does not grant any coverage or rights under the policy. An additional insured, however, is actually granted specific coverage under the policy through an endorsement, providing them with direct protection.

How is additional insured status typically added to a policy?

Additional insured status is usually added to an insurance policy through an endorsement. This is a written amendment to the policy that modifies its terms and conditions to include the additional party.