Every day we receive phone calls from our insureds requesting additional insured certificates and / or endorsements. In today’s business world, it is a common practice to add another entity on to your Commercial General Liability policy. While this is a common request, adding an additional insured on your policy should be carefully considered as there can be financial consequences. Some additional insureds require specific wording which can further complicate the intent of coverage.
A potential problem that can arise from an additional insured is that the liability policy can apply separately to each insured (Organization and additional insured) against whom a claim has been brought. In other words, general liability coverage applies separately to each insured and can deplete your liability limits. Depending on how broad the endorsement is written, the additional insured may be able to obtain general liability coverage for their own activities and exposure. Furthermore, under certain circumstances, an additional insured may have direct access the insured’s policy.
There have been changes in the wording of the additional insureds endorsements which help limit the coverage for additional insureds. The language “caused in whole or in part by your (the named insured) acts or omissions” was added to help reduce coverage for additional insured’s sole negligence. The language, however, has its potential drawbacks and should be reviewed by your attorney.
Above are just a few potential liability issues to consider when adding an additional insured on to your general liability policy. This decision should not be taken lightly and dismissed without noting potential consequences. Coverage is per the terms, conditions and exclusions of the General Liability policy. Consider increasing your General Liability limits or purchasing an Umbrella policy to protect against a catastrophic liability loss which may include the added costs and expenses of the additional insured.
This article is for informational purposes only and not to be construed as legal advice.