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Additional Insured Endorsements
Bulletin – Tuesday, October 28, 2008
Requests to name or add an Additional Insured to a policy have become very commonplace in today’s insurance market. Here is some basic information about the use and limitations of this coverage endorsement.
Before any entity can be named as an additional insured, they must have an insurable interest. This relationship is typically defined in a contract between two parties. However, just because you add someone as an additional insured does not mean the insurance policy meets all the different conditions of the contract. Always make sure that the liability being transferred contractually is being picked up under the additional insured endorsement.
There are numerous ISO endorsements to address nearly every relationship between an insured and an additional insured. For instance, a risk management technique frequently used to help protect a building owner is to request that the building tenants carry liability insurance. This is probably going to be part of the lease agreement, which may also require that the tenant name the building owner as an additional insured on their policy. The CG2011 (Additional Insured-Managers or Lessors of Premises) is a commonly used form to name the building owner as an additional insured.
Carriers may also use a “manuscript” endorsement and designate an additional insured using language reflective of specific contract requirements. There are many types of insurable interest relationships that occur in today’s business marketplace: Vendors, State or Political Subdivisions, Contractors, Architects, Engineers or Surveyors are a few of the more common ones.
Most carriers charge a nominal amount to add an additional insured to the policy. Why? The insurance company making a charge for adding this coverage recognizes the potential for increased exposure - not because there is more potential for claims but rather if both parties are sued, each would have different interests and would need separate defenses. The additional insured also shares the insured’s policy limits. Specialty carriers usually charge a flat amount that is non-auditable and fully earned to provide additional insured coverage.
Before any entity can be named as an additional insured, they must have an insurable interest. This relationship is typically defined in a contract between two parties. However, just because you add someone as an additional insured does not mean the insurance policy meets all the different conditions of the contract. Always make sure that the liability being transferred contractually is being picked up under the additional insured endorsement.
There are numerous ISO endorsements to address nearly every relationship between an insured and an additional insured. For instance, a risk management technique frequently used to help protect a building owner is to request that the building tenants carry liability insurance. This is probably going to be part of the lease agreement, which may also require that the tenant name the building owner as an additional insured on their policy. The CG2011 (Additional Insured-Managers or Lessors of Premises) is a commonly used form to name the building owner as an additional insured.
Carriers may also use a “manuscript” endorsement and designate an additional insured using language reflective of specific contract requirements. There are many types of insurable interest relationships that occur in today’s business marketplace: Vendors, State or Political Subdivisions, Contractors, Architects, Engineers or Surveyors are a few of the more common ones.
Most carriers charge a nominal amount to add an additional insured to the policy. Why? The insurance company making a charge for adding this coverage recognizes the potential for increased exposure - not because there is more potential for claims but rather if both parties are sued, each would have different interests and would need separate defenses. The additional insured also shares the insured’s policy limits. Specialty carriers usually charge a flat amount that is non-auditable and fully earned to provide additional insured coverage.