Protecting Your Firm as an Additional Insured

IN THE course of doing business, you may sometimes find yourself entering into contracts requiring that your business be named as an additional insured on another party’s insurance policies.

This is often done to make sure that your own insurance is not depleted by defense and indemnification costs for losses for which you may be legally liable as a result of the business relationship you have with the other party.

An additional insured is defined as an individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insured’s policy provides a certain degree of protection.

When It’s an Appropriate Arrangement

  • If you are a building owner, you may want to be an additional insured on your tenants’ property and general liability insurance in case one of them damages your building or if a visitor to the property is injured.
  • If you are the owner of or a contractor on a construction project, you will want to be an additional insured on the general liability insurance of your contractors and subcontractors in case there is an injury to one of their employees.
  • If you are a distributor or a retailer, you may want to be an additional insured on the insurance policies of the manufacturers of the products that you sell.
  • If a contractor comes onto your property to perform work of any type, you will want to be named as an additional insured on their policy in case someone is injured due to the work they are performing.

Additional insured status is effectively conferred through an additional insured endorsement to the other party’s original insurance policy.

An endorsement may specifically name a particular additional insured, while a general endorsement may identify a class of parties as additional insureds.

If there is ever a dispute about your company’s status as an additional insured, you will want to have in hand not only the other party’s certificate of insurance, but also a copy of the policy itself and the endorsement that makes your company an additional insured.

Best practices

There are a few best practices that you can implement to help make certain your firm’s status as an additional insured has been properly secured:

  • At a minimum, always insist on receiving a copy of the relevant additional insured endorsement, as this is the instrument that establishes additional insured status.
  • An additional insured endorsement does not, however, state an insurance policy’s terms and conditions. In order to avoid being surprised by unexpected policy terms (such as strict notice requirement or unfavorable notice of cancellation provisions), you should ask for and receive a copy of the entire insurance policy, and be sure to read it.
  • Retain additional insured endorsements and relevant insurance policies for as long as there is any potential for that could trigger those policies.