I don’t know what’s more ubiquitous in insurance, the veiled claim report that starts with, “So, would there be coverage if…” or the request to add an additional insured. When I was an underwriter, working with fire departments, it seemed like those requests came in every day and in some parts of the country spring time became road construction and additional insured season. Once the snow melts volunteer fire departments hold fund raisers and parades and with those activities come requests to add everyone and their uncle’s dog as additional insureds.
The biggest problem with additional insured requests is that we generally leave these requests to the lease experienced among us. The requests may come in and get reviewed by someone with experience, or they may be sent directly to the additional insured person. You know, the one that we all push these tasks to because we don’t want to do it ourselves? I remember that when I was learning to be an underwriter, the new guy (that would be me) got a ton of them to handle and it was more about processing the requests than making sure that they made sense.
Let’s look at some hints from a common additional insured endorsement (CG 20 10 04 13) that may help us to make sense out of those requests and maybe we will look just a little more closely at the next batch of requests.
Hint #1: The insured must be doing something for the additional insured.
The endorsement gets pretty specific here by telling us:
Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by: your acts or omissions; or the acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above.
This part of the endorsement reminds us that the CGL provides coverage for three types of damages as defined in the policy, therefore for the additional insured to seek coverage here, there must be damages that qualify under one or more of those three definitions. It also reminds us that there is coverage for the additional insured’s liability as it relates to what the named insured is doing. That means that the additional insured cannot find coverage here for their own liability if the named insured’s operations aren’t related to the damages that are being claimed.
This is important because it requires that the additional insured and the named insured have some kind of relationship where the named insured is doing something for the additional insured. By the way, did you notice that it requires knowing where the operations are happening? The endorsement wants to know where the named insured is working for the additional insured. So it has limited coverage to ongoing operations in known locations for that additional insured. That means that if there is an exposure at locations that aren’t known or if there is a completed operations exposure, this additional insured’s exposure isn’t covered here.
Hint #2: The policy is potentially limited by other documents.
Look again at the endorsement.
The insurance afforded to such additional insured only applies to the extent permitted by law; and if coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured.
Now there is a little more to it than just what is the insured doing and why does this other party want to be additional insured. Now we have to be able to explain this bit of policy language to the named insured so that they are aware of these limitations because they impact coverage for the additional insured.
It’s important to note that no matter what the contract states, the policy only provides the coverage as defined within it. It’s worth making sure that the contract isn’t asking for $5,000,000 occurrence limits when your insured has a $1,000,000 policy.
Local, or state, law may limit the amount that the insured (or additional insured) is liable for. This limitation often occurs when you are dealing with municipalities, or other government entities, but may extend to other parties in certain jurisdictions. The contract itself may limit the policy by requiring certain limits or coverage in certain situations. If there is a contract in place, it’s worth noting what it requires so that everyone is on the same page and that any gaps between the contract requirements and the policy provisions are addressed before the claim happens.
Take those two hints with you and maybe next time you have an additional insured request (did I hear your email chime?) you will find out if you know what you need to know before issuing the endorsement. By the way, other additional insured endorsements have similar language so make sure you’ve read the endorsement before you’ve added it.