Certificates of Insurance: Understanding “Additional Insured”

The term “additional insured” is a common designation in insurance policies and Certificates of Insurance (COIs). It refers to a person or entity added to an insurance policy, extending coverage to them under specific conditions. The additional insured status is widely used in business relationships to allocate risk and protect parties involved in shared operations, projects, or agreements.

Knowing what it means to be an additional insured and why this designation matters is essential for both policyholders and those requesting it.

What Is an Additional Insured?

An additional insured is a person or organization that is not the primary policyholder but is added to an insurance policy to receive some level of protection under the policy. This status is typically granted through an endorsement to the policy, specifying the scope and limitations of the coverage extended to the additional insured.

For example, in a construction project, a general contractor might require subcontractors to add the general contractor as an additional insured on the subcontractor’s liability policy. This ensures that the general contractor has coverage for liability arising from the subcontractor’s work.

Why Is Additional Insured Status Important?

1. Risk Allocation Adding an additional insured shifts some of the liability exposure from the additional insured to the primary policyholder. This protects the additional insured from having to rely on their own insurance in certain situations.

2. Contractual Compliance Many contracts require one party to name another as an additional insured as a condition of doing business. For instance, landlords often require tenants to add them as additional insureds on liability policies to protect against claims arising from the tenant’s use of the property.

3. Direct Coverage Additional insured status provides direct access to the named insured’s policy. In the event of a claim, the additional insured can seek coverage without needing to rely solely on their own insurance.

4. Reduced Financial Exposure For additional insureds, this designation minimizes their financial exposure by ensuring that the primary policyholder’s insurance is the first line of defense in applicable claims.

Key Features of Additional Insured Coverage

• Scope of Coverage: The coverage granted to additional insureds is often limited to claims arising from the primary insured’s actions or negligence. It does not necessarily provide full coverage for all risks.

• Policy Limits: The policy limits are shared between the named insured and the additional insured, which can reduce the total coverage available.

• Endorsement Requirements: An additional insured endorsement is typically required to formalize the status. Without it, a COI alone does not guarantee coverage.

Common Uses of Additional Insured Status

1. Construction Industry Contractors and subcontractors frequently require additional insured status to protect higher-tier contractors or property owners from claims related to the subcontractor’s work.

2. Landlord-Tenant Relationships Landlords may require tenants to add them as additional insureds to protect against liability for injuries or damages occurring on leased property.

3. Vendor Agreements Businesses that use vendors or suppliers often require additional insured status to protect against claims resulting from the vendor’s operations.

4. Event Planning Venues hosting events often require organizers to name them as additional insureds to shield against claims arising from the event.

Practical Considerations for Additional Insureds

• Review the Endorsement: Ensure that the additional insured endorsement aligns with the specific risks and liabilities you want covered.

• Verify Policy Terms: Additional insured coverage often has exclusions or limitations. For example, it may not cover the additional insured’s sole negligence.

• Obtain Proof: Request a COI that explicitly lists you as an additional insured and confirms the endorsement.

Conclusion

The additional insured designation is a critical tool for managing liability and protecting business interests in multi-party agreements. Whether you are adding someone as an additional insured or requesting this status, understanding the implications and ensuring proper documentation can help reduce risk and foster stronger partnerships.

Disclaimer

This article is for informational purposes only and is not intended to stand alone as insurance or legal advice. Individual circumstances may vary, so when in doubt, contact Partridge-Zschau directly to discuss your specific needs.