Additional insured coverage is associated with general liability, property insurance,
and other insurance policies that provide additional coverage to individuals or
groups that were not initially named in the policy. Through an additional insured
coverage policy, the additional insured will be afforded protection under the policy
holder’s name.
In order to protect a business in the event of litigation claims as a result of
a hired contractors work, a business may require a contractor to add them as an
additional insured under his general liability policy. This may be a temporary situation
until the contractor has completed his projects.
On the other hand, additional insured coverage may be permanent. For instant, in
the real estate business a tenant may add a landlord as an additional insured, which
will remain with the policy until its terminated or the tenant moves. In this way,
if there is a loss or accident, like a fire or fall, then the landlord will be covered
under the tenants coverage for additional insured.
Additional insured coverage can work two ways: First, if another company adds your
business as an additional insured on their policy, then that company is providing
you with protection against their negligence. Second, you can protect another company
from your negligence by adding them as an additional insured.
For example, suppose you run a landscaping company, but you contract with Stone
Paver Services to build a retaining wall for a client. In the course of the job
— and due to Stone Paver Services negligence — a pedestrian trips over a paver
and gets hurt. The pedestrian sues both you and Stone. If Stone was added as an
additional insured on your policy, then Stone would be covered under your party
as an additional insured.
When added through an endorsement, it’s wise to obtain copies of the certificate
or endorsement to ensure there is proof of the additional insured coverage. Being
an additional insured doesn’t mean that you don’t need insurance. It simply means
that the additional insured has become involved in controlling the risk associated
with another party’s negligence.
Keep in mind, additional insured are generally not parties in the insurance contract;
their protection is narrowed through qualifying and limiting language in the policy.
Additionally, know that additional insured coverage and indemnity agreements vary
by state. It’s recommended that you work with an attorney and insurance professional
to decide if additional insured coverage is right for you, particularly if your
business involves the use of other businesses, like contractors, sub-contractors,
or independent contractors.
