We get this question frequently, and the answer varies based on the policy. There are many reasons someone might need to add an additional insured (AI) to a policy; the cost and terms differ based on the situation.
Let’s dive into what an additional insured is and the reasons for an additional insured endorsement.
Since most additional insured endorsements are issued on the Commercial General Liability (CGL) policy, let’s discuss the three types of insureds on the CGL policy to create a better understanding.
1. Named Insured: Person or organization named on the Declarations and any other person or organization qualifying as a named insured according to the CGL coverage form.
2. Automatic Insureds: Any person or organization qualifying as an insured according to the “Who Is an Insured” provision in the CGL Coverage Form.
3. Non-Automatic Insureds (referred to as Additional Insured): Intended to signify those persons or organizations that generally are not automatically included as insureds under the liability policy of another but for whom the name insured desires or are required to provide a certain degree of protection under its liability policies.
There are two ways to achieve additional insured status under the CGL policy.
1. Add by endorsement, or
2. By a provision in the coverage form and not by endorsement.
What are the reasons other persons or organizations request Additional Insured status?
1. May assure better safety in risk transfer.
The additional insured provides a safety net for a hold harmless or indemnification agreement in the event the agreement is not enforceable.
2. Grants direct rights under the named insured’s CGL policy.
Example: A subcontractor adds a general contractor to their CGL policy. A pedestrian is injured while visiting the job site and sues both the GC and the subcontractor. In this case, the subcontractor’s insurer has a right and duty to provide defense and pay any settlements and judgments.
3. Protects the Additional Insured from subrogation.
Normally, insurers do not subrogate against insureds.
Example: The CGL policy insurer for a tenant pays the judgment awarded to an injured customer. Upon investigation, it was determined that the landlord was partially responsible. Since the landlord was added as an additional insured under the tenant’s CGL policy, the landlord may be protected from any subrogation by the tenant’s CGL policy insurer.
4. May provide for higher total limits available.
5. It may reduce direct insurance costs.
Better loss experience as a result of using another party’s insurance.
Why would a named insured agree to add others to their policy as additional insured?
1. Close relationship with the named insured
2. Contractual relationship requires the named insured to comply.
a. Tenant – Landlord
b. Subcontractor – General Contractor
c. General Contractor – Project Owner
d. Lessee – Rental Company
e. Manufacturer – Vendor / Distributor
Problems with additional insureds may arise for the named insured and additional insured, but we will not get into those today. Please look out for a future blog post regarding the issues that may arise.
What are some commonly used additional insured endorsements with the CGL policy?
This post discusses commonly used ISO endorsements to provide additional insured status. Remember that many carriers utilize proprietary forms to grant AI status, but we will not discuss those in this post.
The following forms are used to provide additional insured status on a scheduled basis:
· CG 20 10 12 19
· CG 20 37 12 19 (completed operations)
· CG 20 11 12 19
· CG 20 26 12 19
· CG 20 28 12 19
Other endorsements are designed to provide additional insured status on an “Automatic Basis” based on a contractual obligation.
· CG 20 33 12 19
· CG 20 38 12 19
· CG 20 39 12 19
· CG 20 40 12 19
Waiver of subrogation, primary or non-contributory wording, and per project aggregate endorsements
Like the forms we discussed, the waiver of subrogation, primary or non-contributory wording, and per-project aggregate endorsements may be scheduled or issued automatically. We have other videos and resources on our website and YouTube channel discussing these commonly utilized endorsements. Don’t hesitate to search for that information if you have questions regarding these forms.
What is the cost of adding an additional insured?
The cost associated with an additional insured is relatively low compared to the existing premium. Insurance providers often consider the risk marginal, but the AI broadens coverage in some cases, so the carrier will sometimes charge.
In the case of automatic forms, they usually come on the policy and are included in the premium. But don’t be surprised if you incur additional costs for scheduled endorsements.
What other policy types can you add as additional insured?
Of course, general liability is the most common. But you can secure additional insured status from the following policy, sometimes at a cost and others without.
1. Business Automobile Liability (not to be confused with a loss payee on the physical damage portion of the business automobile policy)
What policies do not provide additional insured status?
1. Employer’s Liability (workers’ compensation)
2. Professional Liability
3. Management Liability (EPLI, D&O, CRIME)
So how do you add someone as an additional insured?
The first step is contacting your insurance agent and identifying who they are and the level of coverage they are requesting. In some cases, adding an additional insured may require an endorsement to the policy, and an additional premium may be charged.
Also, it is essential to note that not all policies can be endorsed to include additional insureds; you should check with your insurance company or agent for the specific policy you have to see if it is possible.
If you have any questions about your current policy or how you can add someone as an additional insured, please call or text us at 858-384-1506. We’d be happy to answer your questions.