Who Is An ‘Insured’ – Are You Sure?

Who is an “Insured?” Not as basic a question as it may sound. Status as an insured must exist before ANY question of coverage can be tackled – if the correct “person” is not named as an insured or extended insured status, there is no reason to go any further researching a loss. The best-designed insurance program does little good if the person or entity who is financially responsible for injury or damage is not an “insured.” Knowing who is, is not, and who can be an “insured” will lead to a great program being made better by avoiding any unintended gaps in insured status to be avoided and exposing and correcting gaps before loss occurs.

Insured Status – It’s All in the Name

Liability policies extend four levels of “insured” status, and each level is granted a different degree of protection. Understanding these four levels and each one’s relationship to the coverage provided allows improved preparation and planning in the initial design and implementation of the insurance program. Secondarily, fully comprehending the protection provided to each level promotes better arrangement of the overall risk management strategy. The four levels of insured status are:

1. Named Insured;
2. Extended Insureds;
3. Automatic Insureds; and
4. Additional Insureds.

Named Insureds are granted the greatest breadth of coverage. Named insureds qualify as a “You” and a “You” always has the broadest protection offered by any policy. “It’s always best to be ‘You’.” The first named insured on the schedule is given special rights and responsibilities. The first named insured is the only insured with rights to make changes to the policy; further, this insured is empowered to make the decisions for and speaks for all other scheduled insureds. The first named insured is also responsible for paying the premium and cooperating with the insurance carrier in all matters. Planning insurance protection with multiple named insureds requires care to assure that the correct person or entity is listed first and is capable of managing the insurance protection for all other insureds.

Extended Insureds are granted coverage by specific reference in the policy and differ based on entity type. Extended insureds are “related to” the named insured and are generally granted insured status to protect them from being held financial responsible for loss or damage resulting from their own actions committed while performing duties relating to the named insureds operation; or simply as a result of their relationship with and to the named insured. Extended insureds are granted the same breadth of protection as named insureds.

Automatic Insureds are individuals or entities who or which perform a service for or in some way act to benefit the named insured but are not “related” to the named insured. Protection is extended to this class of insured due to their relationship with and to the named insured. Automatic insureds are often subject to exclusions not applicable to named insureds and extended insureds.

Additional Insureds are always added by endorsement. Coverage provided to this class (level) of insured is commonly restricted to vicarious liability for the actions of the named insured, extended insureds, or automatic insureds. Coverage for this class is the most restrictive and the need to endorse such additional insureds onto a policy most commonly arises out of a contractual relationship.

Detailing Insured Status

Insured status in the commercial general liability policy (CGL) and the Business Auto Policy (BAP) is detailed in the Academy’s upcoming webinar. Attendees to this session will:

• Understand the four levels of “insured” as they relate to the CGL and BAP;
• Learn what endorsements alter the definition of “insured;” and
• Learn when to properly use some of these endorsements.

Register today for this coverage-altering session.