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Finally, a Helpful Guide to Additional Insured

With any written contract there are certain obligations that must be met by both parties, including work to be performed, timelines and requirements for a smooth working relationship.  This is true whether it is a contract for work being done or space being occupied.

Most contracts today now have certain insurance requirements that must be met.  One of those usually requires the second party of the contract to include the first party as an additional insured.

So what is an additional insured, and why does everyone want it?

 

Additional Insured is NOT a Co-Insured

The first additional insured endorsement added to a General Liability policy was the CG 2010 1185 (Additional Insureds – Owners, Lessees or Contractors).  This form was intended only to add an additional insured to the policy for notification purposes in the event of a policy cancellation.

However, due to the vague nature of the form, courts began awarding coverage to the additional insured under the named insured’s policy.  This effectively made the additional insured a co-insured or an additional named insured under the policy and covered the additional insured’s operations, as well.  This was not the intention of the endorsement.

 

Additional Insureds Do NOT Get (Much) Coverage

The Insurance Services Office created several endorsements later that were intended to correct this issue.  Subsequent endorsements were designed to offer notification and limited legal representation to additional insureds.

One endorsement that replaced the CG 2010 1185 was the CG 2037 0704 (Additional Insured – Owners, Lessees or Contractors – Completed Operations).  This endorsement allows for notification of the additional insured.  It also offers some legal defense to the additional insured “but only with respect to liability for ‘bodily injury’ or ‘property damage’ caused, in whole or in part, by ‘your work’”.

Operations of the additional insured were never intended to be covered by the policy of the named insured.  This endorsement was created to eliminate any confusion about who is covered, when and why.

 

Not All Endorsements Are Created Equal

There are several endorsements for additional insured available.  The executor of the contract will always be looking for that gold standard CG 2010 1185 because of its broad wording, but most, if not all insurance carriers no longer use this form.

Some additional insured endorsement requests may include things such as waiver of subrogation, primary and noncontributory language and more.  These only add to the complexity of who is covered, for what and why.

Your insurance carrier does not want to insure anyone but you on your policy.  The intention of the additional insured endorsement is to provide notification in the event of cancellation, and legal defense in the event that you, as the named insured, caused the claim or damage.

If an additional insured endorsement is requested, you can expect your insurance carrier to ask about the legal insurable interest of the party requesting coverage.  This information will determine what additional insured endorsement may be offered, if any.

 

The most important thing you can do is read your contract carefully and bring it to your insurance broker for review before signing.  Hayes Brokers offers risk management services including contract review for current and prospective clients.  Please call for more information.

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