Let’s take the following scenario: Your agency is asked to provide a certificate of insurance naming an entity as an additional insured. You pull the file and note that the policy for your customer provides blanket additional insured coverage. There is no doubt that this scenario occurs with some degree of regularity in many insurance agencies. So are you all set?
Before commenting further, let’s take a look at the policy form, most notably the “Who is an Insured” definition. Typically, the following language is included: “Who is an Insured” is amended to include as an additional insured any person or organization when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured.
Thus, without a written contract, the Blanket Additional Insured coverage does not afford additional insured status. This is a common “error” by agencies, especially in the handling of Certificates of Insurance. In the past, some of the Blanket Additional Insured forms actually included language that stated if you noted the additional insured on the certificate of insurance, then coverage would apply. Handling it that way today will not provide the same outcome. Very clearly, checking the box on the Certificate does not automatically afford Additional Insured status.
As a result, it is highly recommended you always check your customer’s written agreement before issuing a Certificate of Insurance to ensure you are indicating the proper coverage.
From time to time, there may be situations where an entity requests coverage as an additional insured but does not have readily available a copy of the written agreement or they may not even know if there is a written agreement in place. What are your options? You can mandate that to provide a certificate of insurance (proof of their status as an additional insured); you need a copy of the written contract. Another option that some agencies have used is to include language on the certificate stating “coverage as an additional insured is provided if required by an executed written contract”. This puts the responsibility on the entity requesting additional insured status to verify the existence of such a contract.
If the policy form does not provide the necessary coverage, it will be necessary to have the policy endorsed to provide this coverage. Before you indicate coverage for an Additional Insured on a Certificate, verify with the carrier in writing that they will provide such coverage. There is no guarantee that they will always be agreeable to providing the requested coverage.
Other issues involving Additional Insureds that are causing some E&O headaches include:
Ensuring that the coverage provided meets the requirement detailing the degree of liability for which the Additional Insured is seeking coverage. This generally falls into a few categories:
~ Coverage for the sole negligence of the additional insured.
~ Coverage for the additional insured’s negligence, but only if the named insured shares in th negligence.
~ Coverage for the additional insured for vicarious liability due to the negligence of the named Insured.
It is important to realize that if the policy has been endorsed to provide coverage for an Additional Insured (or coverage has been afforded due to a written contract), with the exception of policy limits, the policy applies to each insured as if the insured is the only insured. So, the policy exclusions that apply to the Named Insured also apply to the Additional Insured or, for that matter, any insured.
It is also extremely important to realize that not all additional insured forms are the same. While some carriers may use the ISO version, many have developed their own policy language so be sure to examine the specific additional insured form pertinent to your customer. If you don’t have it, ask the carrier to send you a specimen copy of the form.
There is no doubt that proper handling of the Additional Insured issue requires tremendous attention to detail. They are not as easy and basic as one may believe. Be sure to provide your staff with the necessary training and education to keep this from becoming an E&O hotspot in your agency.
Curtis M. Pearsall, CPCU, AIAF, CPIA, President – Pearsall Associates Inc.
Contact Curtis at curtis@pearsallassociates.com.
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