Additional Insureds vs. Named Additional Insureds

question-template3_05ADDITIONAL INSUREDS: Our clients call frequently asking for certificates of insurance where another party they are doing business withrequest to be named an Additional Insured under their policies. This is usually the case when our named insured agrees to indemnify another party in a contract (for example when leasing office space, renting out space for a function, holding a meeting in a place other than the usual office space rented, etc). The purpose of this endorsement is to specifically name someone we agree to indemnify in case of loss. Doing this actually reinforces the obligation which undoubtedly has already been established by indemnity agreements which provide the additional insured with direct rights under a Businessowners, Package or Liability Policy.

What does this mean?
By naming someone an additional insured, the person to whom the original policy was issued, is now extending their own protection to an additional insured with direct rights under our named insured’s policy.

Still need clarity? Here is an example:
The Local Woman’s Club decides to have a dinner at a local restaurant and they are asked to provide a certificate of insurance naming the restaurant as an additional insured. In order to “seal the deal” and get the contract signed, the Woman’s Club must ask their agent to issue a certificate naming the restaurant. Each lady brings a guest to the affair and a guest trips over a chair leg and breaks her ankle. The Restaurant, as an additional insured, can utilize the policy of the Woman’s Club to indemnify the injured patron as the injury occurred at the Woman’s Club function and as a direct result of their operations.

It is important to note that the certificate, guarantees that the restaurant has been named as an additional insured, as well as that the policy for the Woman’s Club will respond to the injured because of the connection between the activities of the Women’s Club and the dinner held in the restaurant. It also guarantees that the policy will assist in defending the restaurant if the guestdecides to sue the establishment as defense is one of the rights under the insurance policy.

ADDITIONAL NAMED INSURED:

Additional Named Insureds, however, must invariably have a much closer relationship to the policyholder to begin with. The operations of the First Named Insured must be linked closely with those of the Additional Named insured on the policy.

For example:
Many public entities have investors whose operations nearly always involve the first named insured. By adding an entity as an additional named insured, the first named insured is, in essence, extending coverage under its liability policy to all of the operations of the additional named insured entity. It is important to note that additional named insureds; however, aren’t entitled to either the rights or the obligations of the first named insured who is responsible to pay premiums, cancel coverage, and receive a cancellation notice.
To summarize, regardless of whether someone is named an additional insured or an additional named insured, they actually become an entity which is insured under the policy. In so doing, they become entitled to the same right of defense in a suit seeking coverage for damages that the first named insured is entitled to per the terms and conditions of the policy.

The most significant difference, however, will derive from the language in the additional insured endorsement which can limit coverage extended to an additional insured to “liability arising out of the operations performed by or on behalf of the named insured.”

By Karen Skoler, CPCU

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