Additional Insureds and Reduced Coverage Limits!

Commercial general liability (CGL) claims involve three parties: 1) the insured(s); 2) the insurer; and 3) the injured. CGL coverage part “A” is designed to protect all insureds against the financial consequences of “bodily injury” or “property damage” claims made by an injured party.

Four classifications of “Insured” are contained in or endorsed to the commercial general liability policy. Protection extended from the CGL to each class or level of insured varies based on relationship and responsibility. The four “insured” classifications are:

1. Named Insureds (first named and additional named) – considered “You;”
2. Extended Insureds (equal to a “You”);
3. Automatic Insureds; and (sometimes)
4. Additional Insureds.

Additional insureds are provided the least amount of protection and are always added by endorsement. Restrictions on coverage are a function of the endorsement wording.

Liability protection extended to the additional insured is often limited to protection against the additional insured’s vicarious liability arising out of the actions of the named insured. There are, however, relational exceptions allowing the additional insured to garner the same breadth of protection as that granted to “automatic insureds.” Further, some classes of additional insureds are protected against joint liability where both the named insured and additional insured are considered or are held liable for injury or damage.

Does Additional Insured Status Reduce Coverage?

Injured persons or entities are entitled to and should expect indemnification from the party or parties negligent in causing and legally liable for those injuries. If the events or actions leading to those injuries are not excluded by the CGL, the at-fault party’s (or parties’) insurance carrier will pay the loss subject to the limit of coverage. So the, as of yet, unanswered question remains: Does naming an additional insured (or several) reduce the limits of coverage available to the named insured or in any other way negatively affect the named insured’s protection?

This question is addressed and answered in the Academy’s upcoming webinar, “The Real Effects of Granting Additional Insured Status.” More background on insured status is provided as is the answer to the question of reduced coverage for the named insured. Join the Academy on September 3, 2015, for this informative webinar. Register today.