Insureon Blog

Want Additional Insured Status? Start with These 3 Things

19. August 2015 07:29

woman reading a contract

At face value, being an additional insured sounds like a pretty good deal. An additional insured is simply anyone other than the policyholder who is covered by an insurance policy. For example, say you own a commercial building and you rent it out to a business. Your lease might require that the business owner name you as an additional insured on its General Liability Insurance policy in case one of the business's visitors tries to sue you over bodily injuries that happen on the property.

In other words, you reap some of the policy's benefits without having to pay for it. What's not to love?

As the attorney Robert M. Frey points out, people often take refuge in their additional insured status, but when it's put to the test in a lawsuit, the coverage is often challenged or inapplicable. That could be because…

To stave off potential disappointment, let's review three things you should do when you want your business to be named as an additional insured on a client's or business partner's insurance policy.

1. Make your additional insured contract clause as specific as possible.

Imprecise contracts make it difficult to enforce an additional insured status. For example, if your contract clause only requires the other party to promise to carry General Liability Insurance and name you as an additional insured on the policy, you can't be sure what kind of coverage you will be afforded.

To make this clause as specific as possible, request that the coverage isn't limited to vicarious liability, which can only address claims when you are held partly responsible for the policyholder's actions. The problem with this kind of coverage is it doesn't address the realities of your risk. If an injured party thinks they will get more monetary mileage out of suing you directly, vicarious liability coverage won't help.

For more tips on using contracts effectively, read "When an Arbitration Clause Might Not Actually Help Your Business Avoid a Lawsuit."

2. Get a copy of the full General Liability policy.

Don't be satisfied just to see your name on the certificate of liability insurance (i.e., the document that proves your client or partner has commercial liability coverage). Request a copy of the actual General Liability policy to ensure it names you as an additional insured. This extra step may save you the heartache (and major legal expenses) a couple general contractors received when they tried to draw on their additional insured coverage offered by a subcontractor's policy.

According to The National Law Review, the general contractors' contracts only required they be additional insureds on the certificate of liability insurance – not to the actual General Liability Insurance policy. Because they weren't named in the policy, the insurer didn't have to pay out on the claim.

3. Read the policy and consult an insurance agent for clarification.

Do more than just scan for your name when you get a copy of your partner's insurance policy. See what kind of coverage your additional insured status offers. If you have questions about what the terms mean, ask an insurance agent to explain the policy provisions to help you understand the limitations of the additional insured coverage.

In short, your additional insured status isn't full body armor. While it can afford you some extra protection, it may not apply in every situation, which is why it's still a good idea to carry your own small business insurance.

If you have questions about your additional insured status, feel free to talk to an Insureon agent at 800.688.1984.


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